In bid for diabetes market, Medtronic, among others, talking money

In their quest to make care better for people with diabetes, medical device companies are doing lots of innovating — in prices.

Medtronic is rolling out an offer to pay up to $25,000 if patients using its most advanced insulin pump end up in the hospital. Abbott Laboratories debuted its latest continuous glucose monitor at prices designed to be low enough to foster quick worldwide adoption. Most radically, Bigfoot Biomedical plans to offer its upcoming insulin devices for a monthly subscription price instead of an upfront fee of thousands of dollars.

The changes are driven by the realization that the traditional med-tech pricing model — invent a better device, then charge more for it — could undermine the latest technical innovations. Diabetes may already be the most expensive chronic condition in America, but that doesn't mean insurers are going to attack it by paying for more-expensive devices.

"Diabetes is a huge cost driver for insurers, and so they are looking for ways to better meet the needs of their members and keep costs low," said Russ Montgomery, a vice president with consulting firm Discern Health who has studied value-based pricing in devices. "When new technologies come out that are more expensive, it kind of runs counter to that. So, they [insurers] are trying to extract as much value as they can."

In recent weeks Minnesota-run Medtronic announced a program that would pay insurers up to $25,000 if patients using the company's most sophisticated insulin pump, the MiniMed 670G, are hospitalized for diabetes-related problems. That announcement followed news from Minnetonka-based insurer UnitedHealthcare that Medtronic insulin pumps reduced hospitalizations among members during the first year of a four-year study.

Meanwhile, Abbott Laboratories — another major device supplier in the diabetes market with a significant business presence in Minnesota — recently unveiled a lower-cost, disposable device that can continuously measure glucose without a finger stick. The device, called the FreeStyle Libre, was rolled out with an emphasis on pricing by immediately releasing it with a cash-pay option and similar pricing around the world.

"It is immediately priced for value, right off the bat. … The focus of the product is really on one thing, and that is access," said Vicky Assardo, a spokeswoman in Abbott Labs' diabetes-care division. "It's not truly innovative if people don't have access to it."

California's Bigfoot Biomedical is developing a subscription model for its insulin-management devices that appears to be unique in the industry.

Though Bigfoot is still developing and testing key components of its technology, the company has already announced that insurers and/or patients will be able to pay for it under a monthly subscription service. The monthly prices could even change depending on patient outcomes, like staying out of the hospital or hitting measurable insulin-management goals, Bigfoot CEO Jeffrey Brewer said.

And if patients want to switch to a different device, they can just return the durable Bigfoot components without any risk of wasting the money spent upfront purchasing the device, he said. (The company is aiming to get permission from the U.S. Food and Drug Administration to sell its automated, pump-based delivery system and its insulin-injection system by 2020.)

In each case, the medical device makers are trying to invent new ways to overcome the same obstacle, which is that high upfront prices undermine the ability of insulin management to create long-term health benefits, even when the potential value of the technology is proved out in clinical studies.

"Without the business model innovation, we wouldn't be able to deliver the technology innovation," Brewer said. "There is such a bias against new things that bring cost to the system, because mostly in the past, they haven't worked. They just add cost."

Payers are watching diabetes warily. The blood-sugar disorder is a growing public health problem, accounting for $237 billion last year in direct health care spending in the U.S. Roughly 29 million Americans have one of the forms of the disease, including 24.7 million who are diagnosed. Worldwide, roughly 422 million people had diabetes as of 2014, according to the World Health Organization.

That translates into a potentially huge market for device sellers: Analysts with Grand View Research estimate that the global market for insulin-management devices will grow 7 percent a year and surpass $35 billion in annual sales by 2024.

Insulin is a natural hormone that allows the body to extract energy from sugars in the blood stream. When the body doesn't produce enough insulin or doesn't effectively use the insulin it does make, high blood sugar ("hyperglycemia") can set in and cause or contribute to long-term problems like nerve damage, increased stroke risk, and kidney disease. Very high blood sugars can lead to acute problems requiring a trip to the hospital.

Injecting too much insulin is also bad — it causes blood sugar levels to drop too low ("hypoglycemia") and can trigger problems from irregular heart beats and shakiness to seizures and blackouts, also contributing to falls and car crashes.

Medical devices for insulin management aim to give users the ability to accurately administer themselves the right amount of insulin, whether through manual injections calculated from glucose meters or sensor readings, or through small electronic pumps worn on the body that can communicate with a continuous glucose monitor.

The American Diabetes Association said continuous glucose monitors can be a useful tool in lowering average blood sugar in type 1 diabetes patients, although their long-term effectiveness still needs to be determined.

Company-run studies tend to show that patients stay healthier when they get more frequent information about their real-time blood sugar readings. Abbott unveiled study results last month that showed people who used its continuous glucose monitors had an average 0.56-point reduction in a measure called A1C, which looks at glucose control over time, and spent $120 per month less than if they had done six finger-stick tests per day at standard prices.

Medtronic and UnitedHealthcare announced that members using Medtronic insulin pumps from 2016 to 2017 had 27 percent fewer hospitalizations than members who didn't use those pumps.

That kind of stat is particularly important for devices with higher upfront price tags, like advanced insulin pumps, which may contribute to long-term health benefits even though patients may change insurance companies every few years.

"If any insurance company is going to make an investment, they've got to feel like there's some benefit for them in the short term," said Suzanne Winter, an executive with Medtronic's diabetes division. "What we want patients to do, and what we want insurance companies to do, is invest in therapies early enough in a patient's life to get the benefits of reducing complications that may happen 10 to 15 years down the line."

Joe Carlson • 612-673-4779