Beyond the Test Strip

In the movie The Graduate, main character Benjamin gets a bit of advice on the industry of the future — “Plastics.” If Benjamin were a home medical equipment provider in early 2004, the response would be completely different: “Blood glucose meters,” HME experts would say. “Lancets and test strips. Footwear, skincare and sugar-free medicines.”

In short, diabetes is big business, and, sadly for the American population, the market is expected to grow.

Big Numbers

As of 2002, more than 17 million Americans had been diagnosed with diabetes — an increase of 61 percent since 1991 — and that number is expected to double by 2050, according to the U.S. Department of Health and Human Services’ Centers for Disease Control and Prevention. Another 5.9 million Americans are unaware they have the disease, while 16 million U.S. adults aged 40 to 74 have prediabetes, an elevated blood sugar level that is not yet high enough to be classified as diabetes. A full 20 percent of adults over age 65 have diabetes, the CDC reports.

“As far as [market] size, the potential for [diabetic] patients is relatively unlimited,” says Richard Basch, national sales director for Deerfield Beach, Fla.-based software vendor Noble House, whose Noble Direct PreQ allows suppliers to prequalify diabetic patients for supplies and to track diabetics before they actually become patients. “Diabetes is fast becoming the No. 1 disease in America, and this is related to the types and amount of food we eat, lack of exercise and the overall health of our population. I don’t see that changing any time soon, so it bodes well for the diabetic supply business.”

Obesity clearly plays a big part in the development of type 2 diabetes. According to data collected by the Medical Expenditure Panel Survey Household Component, a survey co-sponsored by the Agency for Healthcare Research and Quality and the National Center for Health Statistics, adult diabetics are more than one-and-a-half times as likely to be obese, and more than three times as likely to be extremely obese than non-diabetic adults.

According to the survey, diabetics are also more likely to have asthma, hypertension, heart disease and stroke than non-diabetics. And diabetes is directly linked to blindness, heart disease, stroke, kidney disease and amputations of the leg, foot and toe, according to the CDC.

These ancillary conditions have double significance for HME providers. First, diabetes patients may require more medical equipment than just diabetes supplies; they may also need blood pressure monitors, vision enhancement products or mobility devices. Second, customers who already are buying equipment to offset the damage from stroke, kidney disease or blindness may be diabetic patients; thus, providers already have a base of customers from which to derive diabetes business.

“Your diabetic patient isn’t just a diabetic; they’re having hypertension, circulatory problems, eye problems,” says Scott Robinson, director of specialty programs for AmerisourceBergen, Chesterbrook, Pa. “It takes four to five regular customers to [account for the business of] one diabetic patient, who usually spends about $3,500 a year in the pharmacy.”

According to The Weeks Group, Melbourne, Fla., over the next five years the diabetes supplies market will grow at a rate of 19 percent annually. The average rate of growth across the entire industry will be closer to 3 percent, the company predicts.

The consulting firm’s five-year HME forecast (see HomeCare, December 2003) shows growth from $2.7 billion to $4.7 billion in diabetes product revenues from 2004 to 2008.

Compare this to the traditional biggies in HME — the respiratory market, which will grow from $4.5 billion to $4.9 billion, and the mobility market, which will grow from $1.3 billion to $1.6 billion — and it’s clear the diabetes supplies market could benefit an HME operation.

Test strips alone represent almost 10 percent — about $740 million — of total HME Medicare expenditures in 2002, according to the Centers for Medicare and Medicaid Services. CMS spent more on only oxygen concentrators and K0011 power wheelchairs.

“Diabetes is a growth market,” says Lynne Brown, director of U.S. sales and marketing for HDI Diagnostics, Fort Lauderdale, Fla., which manufactures blood glucose monitors and has recently developed software to help HME providers assess the profitability of their diabetes business. “With reimbursement cuts and competitive bidding looming, [providers] need to diversify.”

A Range of Products

As diabetes products manufacturers respond to the needs and preferences of end users, providers can expect to see products that are fast, less painful and easy to use.

“Suppliers need to keep in mind that any product that will make it easier for a patient to test and to stay within healthy blood glucose limits is a benefit to the patient and to the supplier,” says Noble House’s Basch. “If a piece of equipment comes out that will make it easier for the patient to test and be compliant, providers should supply it.”

One technology that is becoming increasingly available is alternative site testing. New blood glucose meters can test blood drawn from the upper arm, forearm, base of thumb and thigh, as opposed to the fingertips.

Other new technologies include minimally invasive and non-invasive blood glucose meters that promise pain-free testing by avoiding finger-pricks. Two companies, Alameda, Calif.-based Therasense (acquired in January by Abbott Labs) and Northridge, Calif.-based Medtronic, have developed products that combine the functions of a blood glucose meter and insulin pump in one device. The pumps determine the correct amount of insulin needed based on the blood glucose reading performed by the monitor. Therasense’s CozMore Insulin Technology System, developed in conjunction with Deltec Inc., is scheduled to launch this spring. Medtronic’s system, developed in conjunction with Becton, Dickinson and Co., and comprised of Medtronic’s MiniMed Paradigm insulin pump and Paradigm Link blood glucose monitor, became available in July of 2003.

Another area of diabetes products making strides is foot care, including shoes and socks specially made for diabetic needs. For instance, seamless socks won’t rub blisters or irritate fragile diabetic skin.

“The diabetic shoe business is booming. There [is] still some money to be made with that part of the business — as well as providing a better lifestyle for the patient,” says Robinson of AmerisourceBergen.

However, Robinson cautions, providers must be willing to expend extra effort. “They can’t just set up an area in their stores and sell shoes,” he says. “It takes a lot of effort to teach the consumer why he or she needs, or would want, the shoe, including having a conversation about foot problems and then consulting with the consumer about the types of shoes that are available.”

Growing with the Demand

For providers interested in getting into or growing their existing diabetes supply business, HDI’s blood glucose monitoring category management program, SmartMarketing, is designed to provide an objective perspective on diabetes business strategy. As part of the program, the firm’s proprietary SmartView software focuses on two product areas: meters, specifically the costs of carrying inventory; and test strips, specifically the difference in contribution each brand has on the retailer’s bottom line.

The software generates business performance calculations for all brands within a category, highlighting business-building opportunities. One unique function allows retailers to conduct “what if” scenarios by moving market share from one brand of test strips to another.

“A lot of people don’t understand … that diabetes can be a profitable category,” Brown says. “This helps providers really understand their business down to the bottom line.”

For providers who are ready to expand beyond diabetes testing supplies, AmerisourceBergen offers a specialty program called Diabetes Shoppe (online at www.diabetes-shoppe.com). Through the program, providers, most of whom are pharmacies, can supply 300 specialty products, from meters, test strips, lancets and syringes to sugar-free cookies, cake mixes, jams and jellies or footcare, skincare and sugar-free cough syrup — “everything a diabetic patient would need to help manage his or her disease state, as well as things that would make the patient feel good,” says the company’s Robinson.

“We want [Diabetes Shoppe] to be the community resource for diabetic patients,” Robinson says. “Anybody can have product. But, if your customers know that you not only have the product but that you are there for them, you will sell product. If you educate the community and are that resource, the patients will come in.”

According to the American Diabetes Association (ADA), 46 states require state-regulated insurance plans to cover diabetes equipment, supplies and education. (Alabama, Idaho, Ohio and North Dakota do not require coverage.)

Diabetes supplies, however, did not escape the reimbursement cuts mandated by Medicare reform. Beginning in 2005, reimbursement for testing supplies will be reduced based upon the median Federal Employees Health Benefits Program (FEHBP) price, as reported in the Office of Inspector General’s 2002 testimony before the Senate Committee on Appropriations, or in any other subsequent report by the OIG.

Despite the cuts, experts are emphatic that the diabetes market will remain profitable. “Providers will be healthier if they plan for the cuts. It’s those that aren’t planning that are going to be in a bind,” says HDI’s Brown.

One bright spot in the new Medicare law for diabetes suppliers and patients is the provision that Medicare cover an initial physical exam and regular diabetes screenings for at-risk beneficiaries. These exams could increase the number of beneficiaries diagnosed with the disease, which would mean not only better care for beneficiaries but more business for diabetes products suppliers.

To Learn More

The National Diabetes Education Program (NDEP), sponsored by the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health (NIH), is a network of more than 200 public and private partners that increase awareness about diabetes and its control. Information about this program and educational tools are available at www.ndep.nih.gov.

Diabetes Expo, sponsored by the American Diabetes Association, is a trade show and health fair with volunteer and exhibiting opportunities for HME providers who want to offer services to potential diabetic customers. Expos are scheduled in 16 U.S. cities this year. For more information, visit www.diabetes.org. Click on “Community & Local Events,” then “Diabetes Expo.”