July 8, 2008

Why Buy into Pumping

Not the idea of pumping Better is Better makes that case brilliantly. (5/16 editor note: Better is Better link has gone dead see the book.)

Why buy them?

In the next 4 years there will be a wholesale change in the insulin pump world. We have to be excited that the rate of change is accelerating. (See calculus geeks, we can love that second derivative too.) There is a lot of talk of more pod like products coming down the road. Amy has written about two, the nano pump and the behind the glass (you can't take a picture of it Amy!) MiniMed wearable pump prototype. MM would like us to believe that it is coming by 2010. NIH is sponsoring talks on the closed loop. The CGM market is expected by some to exceed the pump market in the coming years.

OK! OK! I know it isn't all roses, there were those who thought the Bong was a good idea too. Cool as it all may be it isn't Really Cool.

So why do we buy the actual pump? Is ownership the best financial model and if so who is it best for, patients, vendors or insurance companies?

Maybe we should lease them. It works for cars and office equipment.

Maybe we should rent pumps or as in the Omni Pod model throw them out with every set change. In the current buy-for-a-four-year-commitment we get stuck in a technological time-warp for 4 years. Unless we upgrade and upgrades are not typically covered by insurance. Even with insurance diabetes isn't cheap.

Anyone keep a cell phone for four years? I didn't think so. And no matter what any teen says, a cell phone isn't life saving technology.

About that insurance, the insurance company pays a large up front fee for a product it is betting will work for the patient. It may it may not. If the pump doesn’t work in a patients life style, it sits on a shelf un-used for years. The insurance company has already paid for all 4 years.

Renting or leasing would get rid of that big bump up front for the insurance company (OMG I just made a suggestion to save an insurance company money - hell must have frozen over.) If the lease term was less than 4 years pump patients could benefit from advancing technology faster.

The Pod people have an interesting model going. Every time you toss out a pod it is an opportunity to upgrade the functionality of the product. They have a lower up front cost but as I understand it have higher cost of consumables. This lowers the cost of entry that is good for expanding the market even with insurance. (Can you say lower co-pay?)

Lowering the barrier for entry also raises the need for customer service because changing becomes cheaper. If you read their conversations with the financial press (I do - so I must have no life) you will see that the Pod People are very aware of the importance of customer service. I have to think that people with diabetes can only benefit from increasing the priority of service.

Don't get me wrong, I am not saying service is bad in the pump business. Animas has provided great service from day 1. Yet regular YDMV readers know I still beat the heck out of them. We're talking about two of my kids' lives here - no good deed goes unpunished, sorry Audrey.

New business models would give the traditional pump users the opportunity to take advantage of new products faster. I would expect that there would higher consumable cost or possibly recognition (a word that here means benefit to the consumer) of the annuity value of consumables as part of the user / manufacturer relationship.

Hello? Insurance dudes? You can innovate and be creative - life isn't all actuarial calculations and denial letters.You can be part of a brave new world! Step up and create a pump rental payment plan.

If we are moving to more pod-like experiences where the technology is the consumable, why root the traditional pump in a different, traditional 4 year user cycle? In a YDMV world some folks are gonna like traditional pumps. Why can't they benefit from innovative business models as well as innovative technology too? Why do we have to wait for more pod people to land before overhauling the sales and service space?

So my YDMV friends, which is more innovative, the wear the pod pump or the business model that shortens the technology cycle for pump patients?
ps. Amy had a post on renting here. Thanks for pointing that out Amy.