Cutting the Costs of BG Testing—Analyst Predicts Industry Changes

| Sep 1, 2000

Scott King: We have been reporting on the GlucoWatch since 1995. Can you tell us how the industry is viewing this product?

David Kliff: The perception on the street is very different from the reality of the product.

King: Why don't you tell us what that perception is?

Kliff: Well the perception on the street is that someone will walk into a Walgreens, Dominique's or any pharmacy, get the product, slap it on their wrists, and then 10 minutes later they're starting to get continuous readings of their sugar levels. The reality of the product is that there is a three-hour warm-up time. The readings are not as accurate as a conventional blood glucose meter. The product does shut down for unexpected, unexplained reasons. It is what I call a very good first-generation product and I'm very glad that it's moving to approval because it shines a whole new light on the noninvasive or minimally invasive glucose-testing market.

King: People still need to test with their regular meters and enter that reading into their GlucoWatch two times per day. It's very appealing though, a Dick Tracy-like watch.

Kliff: Exactly. It has all the bells and whistles that people want, yet it is a little bit ahead of itself. So in a way, their biggest problem is they have to scale down expectations and say, "We are not really replacing your meter. We're using this as a supplement." I think that eventually it will be successful.

King: What can you tell us about the new emerging meter companies? Who will be successful?

Kliff: That's really hard to say. Amira Medical came here last year (to the ADA conference) and the AtLast meter was probably the most talked-about and sought-after meter. The buzz was amazing. The AtLast was an alternate-site meter, which is a big thing this year. Now TheraSense has the Freestyle meter, another alternate-site meter. They say it's pain-free, because you're taking the blood sample from your arm rather than your fingertips.

King: Right, because the arms have less nerve endings.

Kliff: Then it so happens that the FastTake, by LifeScan, also has alternate-site testing capability because they've developed a new strip. One of the things people don't realize is that the technology is not in the meter-it's in the strip. The meter companies don't really care about the meters themselves. They want to sell the strips. That's where the profits are.

Out of the new companies, I believe TheraSense has a very good product. I just think their hurdles are tremendous to overcome. You've got a huge company like LifeScan, which is owned by Johnson & Johnson. You have Roche, which makes the Accuchek. You've got Bayer, which makes the Glucometer DEX. Then you have MediSense, which is owned by Abbott.

All of these meters are going to compete for shelf space and the problem right now is that there's very little differentiation between the products. So you go into a pharmacy and you ask, "Which one is the best meter?," and the pharmacist either says this brand or that brand. If you ask him if there is any accuracy difference between the brands, he's going to tell you "no." Then comes the price question. They ask, "Which is the cheapest?" I think that goes along with what I believe the trend is-that meters are going to become a commodity and the price of test strips will lower.

King: I saw there's a new Walgreens brand meter.

Kliff: Right. It's a co-branded meter. It's made by Home Diagnostics. Walgreens sells the meter for $9.99 along with about 12 test strips. If you buy a box of 50 test strips which are...

King: Wait, the meter is $9.99?

Kliff: The meter is $9.99.

King: This must be the cheapest meter out there.

Kliff: Well actually it's going to be free. The promotion they run is if you buy a box of their test strips, which sell for $24.99 for 50, you get the meter for free.

King: That is a significant reduction. Test strips are normally...

Kliff: Test strips are normally about $35, $36 or $38 for a box of 50. Walgreens is a tremendous marketer. They have positioned the product in the middle of what I call the Diabetes Care area. So everybody can sit there and say, "I can buy a leading brand meter for $50 and their strips are $36 or $38 for a box of 50, or I can get a Walgreens brand meter.

King: Strips are the most expensive thing a person with diabetes buys. Testing four times each day can cost over $100 per month. The last number I saw suggested 45 million Americans, which is like one fifth, have no insurance and it's growing at a million per year. Having diabetes is very expensive. These people are basically out in the cold with regards to Standards of Care, and with preventing complications. Companies that work to lower strip prices are also helping out the uninsured.

Kliff: Just wait a few months when WalMart comes out with their co-branded meter.

King: Is it a Home Diagnostics meter as well?

Kliff: We don't know yet. WalMart has definitely indicated they are going into the private label, co-branded meter market. When they do that, it's going to have a significant impact on the market. WalMart sells more meters than anyone else.

King: I believe everyone should have the right to get whichever meter suits them best.

Kliff: I think insurance companies have made a conscious decision that they are going to lower costs. As you know, diabetes is a very high-cost disease. I mean, there are tons of disposables. The disease does not go away. Unfortunately, the vast majority of people with diabetes are not under good control and 85 percent are treated by their primary care physicians. Anything the insurance company can do to lower the cost they are going to do. So that's why they are cutting these deals.

King: Do you think insurance companies might start distributing the less-expensive co-branded meters as well?

Kliff: Oh, it's very possible. I would say that it is likely in the future.

One of the things you're going to see happening in the future is that not only are they going to tell you which meter to use, they are going to start supplying you themselves. They're going to become the supplier and you will order through them, rather than going through a third party and being reimbursed. Also, with the advent of the Internet, it would not surprise me if they would want you to download your BG levels. That way they can start sending you information saying, "Hey! You are high. You are low. You should be doing such and such."

King: Then they might offer you educational material selected specifically for your problems?

Kliff: Exactly. That is not too distant in the future. Because everyone knows if you are not well- controlled, it leads to terrible and expensive problems. This is something the insurance companies would love to avoid.

King: David this has been very informative. I really appreciate you coming down for an interview.

David Kliff is editor of Diabetic Investor ( He can be contacted at (800) 783-3712 or via email at

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