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The market for self-monitoring of blood glucose (SMBG) approached $8.8 billion worldwide in 2008. Yet despite dramatic double-digit growth in sales of SMBG products since 1980, the business is now facing declining prices and slower dollar growth. Given that SMBG meters and test strips are viewed by consumers and insurers as essentially generic products, it will be extremely challenging for new market entrants to displace well-entrenched existing competitors without a truly innovative technology. Also, in the face of declining glucose test strip prices, market expansion can only occur through identification of more of the undiagnosed diabetes population and convincing existing diabetes patients to adopt glucose testing or to test more frequently. Ultimately, a combination of technology innovations, patient education, and economic incentives may be needed to significantly expand the SMBG market and build sustainable long-term dollar growth for SMBG vendors.
Self-monitoring of blood glucose (SMBG) is big business and is getting bigger every year. Since 1980, the market for blood glucose monitoring products has undergone phenomenal growth. While the United States is the single largest market for SMBG, with about 40% of the global market, there has been dramatic growth in demand for these products across the globe. To provide some perspective, Enterprise Analysis Corporation estimates that the world market for SMBG testing supplies was $1.7 billion in 1994. By 2000, the market had reached approximately $3.8 billion, and by 2008, worldwide sales of these products climbed to an astonishing $8.8 billion (Figure 1). This represents an approximate 12.5% compound annual growth rate since 1994. In fact,the SMBG testing market, which barely existed in 1980, now accounts for approximately 22% of the entire $39 billion in vitro diagnostics industry.
Given the obesity epidemic and the virtual explosion in diabetes, there is likely to be continued growth in demand for SMBG products in the foreseeable future. However, the nature of the SMBG business is changing from a high-growth market to a maturing, commodity type of business, where consumers and insurance payers view all products essentially as the same. Thus, while unit volume sales may continue strong growth, dollar growth is slowing. It seems likely that the days of rapid double-digit dollar growth rates are in the past. As evidence, consider the worldwide market growth since 2006. From 2006 to 2007, the world market grew approximately 8%, and from 2007 to 2008, the world market grew only approximately 6% (in dollars). Moreover, growth in the U.S. market has been flat or nearly flat since 2006. In fact, the first quarter sales figures for 2009 show that some SMBG vendor sales actually declined.
In the context of understanding the future growth potential of SMBG market, it is useful to examine some of the key market drivers and constraints. These opposing market forces are described as follows.
From a competition perspective, four companies dominate the SMBG business, controlling approximately 90% of the market: Roche Diagnostics (Hoffman-LaRoche, Basel, Switzerland), LifeScan (Milpitas, CA, a Johnson & Johnsoncompany), Bayer Healthcare Division (Tarrytown, NY), and Abbott Laboratories (Abbott Park, IL). The “big four” offer a wide variety of SMBG products and have dominated the market since the late 1990s (Table 1). Numerous second-tier and third-tier competitors, including several in Asia, hold the remaining 10% of the market. Among the most notable are Arkray (Kyoto, Japan), Home Diagnostics, Inc. (Ft. Lauderdale, FL), and AgaMatrix (Salem, NH).
Although company market shares have shifted somewhat, the same vendors still dominate the market as in 1998, illustrating the challenge of breaking into this market. With respect to the U.S. market, the principal barriers to entry can be summarized as follows:
One example of the challenge of entering the SMBG market is that of BD (Franklin Lakes, NJ), which entered the SMBG market in 2003 but failed to gain any substantial market share despite having an already strong presence in the retail pharmacy with its insulin syringe business. After several unprofitable years, BD finally announced its withdrawal from the market in 2007.
There has been a striking evolution in glucose monitoring technology since the first blood glucose tests for self-monitoring were introduced around 1980. Technology innovations have been an important aspect of the SMBG market in that they have allowed the SMBG vendors to remain competitive with each other and have contributed to the inevitable fluctuations in market share gains and losses among these vendors over the years. Consider where SMBG technology was in 1980 and where it is today:
Perhaps one of the more significant recent technology trends is the emergence of continuous blood glucose monitoring (CBGM), where a sensor implanted under the skin provides continuous glucose measurements. Three companies, Abbott, Medtronic, and DexCom, have recently introduced CBGM products. While the reimbursement situation for CBGM remains uncertain and the current CBGM products are “pricey,” clinical evidence suggests that such products offer diabetes patients a means to achieve much better glucose control through minute by minute glucose measurements.
Arguably, these technology innovations have facilitated more frequent blood glucose monitoring among some diabetes patients, primarily the insulin-dependent diabetes patients. Yet it is somewhat ironic that, despite the remarkable advances in glucose testing technology, the vast majority of diabetes patients, particularly type 2 diabetes patients, still do not test nearly as frequently as they should and some still do not test at all.
Given the increasingly competitive nature of the SMBG business and the declining prices, it will very likely be difficult for a new entrant to succeed in the SMBG market in the absence of a truly major technological innovation. With prices likely to decrease, yet another “me too” glucose meter/strip manufacturer has little chance to succeed.
For the existing players in the market, the key question becomes how to sustain strong growth while still maintaining adequate profit margins in the future. Given that raising test strip prices will be difficult, if not impossible, and that newly diagnosed diabetes patients entering the pool are essentially offsetting the price decline, two sources of growth are left for vendors:
On point 1, it seems abundantly clear that technology alone is not the answer to expanding the SMBG market pie and that educational efforts have had only a limited impact to date. So if technology and education are not effective, what are the other options? One obvious first step is for SMBG vendors to simply sponsor or support programs (e.g., local health fairs) to identify the millions of undiagnosed diabetes patients and try to push as many as possible to adopt glucose monitoring (not unlike cholesterol-screening programs). A second way to expand the U.S. market, albeit more controversial, may lie in some kind of a health economic “reward/punishment” approach employed by the insurance payer or the patient's employer. As a possible example, if the patient does not reduce their hemoglobin A1c level below 7%, then he or she is hit with an insurance premium increase (essentially, a fine). Such economic incentives may be a way to change the behavior of diabetes patients just as raising prices on tobacco reduced the number of smokers. On the other hand, the notion of levying a fine on a 75-year-old diabetes patient on a fixed income who already has difficulty in paying for drug prescriptions may be a “nonstarter.” In any case, such a health economic model would need to be driven by insurers, disease management firms, and possibly even the employers paying the insurance premiums. However, the SMBG vendors would clearly benefit, and there may yet be ways for the various stakeholders to work together creatively to make such a model a reality.
On point 2, taking market share from competitors often relies on product differentiation as a result of technological innovations. If the technological innovation is significant enough, it can yield both market share gains and an expansion of the market. Noninvasive blood glucose testing is an example of such a revolutionary technology, but no product is likely to be available in the market for many years. In the near term, the emergence of CBGM technology may represent the best opportunity to reinvigorate market growth with a premium priced technology that could yield substantial market share gains and possibly expand the overall market size. Ultimately, the health outcomes and cost-savings data will dictate how successful CBGM technology will be and how much insurance companies are willing to pay for such technology.
In conclusion, SMBG remains a sizeable and growing market. However, it faces some challenges ahead in sustaining the kind of growth and profits it has enjoyed in the past. Technology innovation alone is probably not the sole solution for strong, sustainable market growth. But from an SMBG vendor perspective, the best near-term opportunity to reviving dollar growth may lie in CBGM technology.