Abbott ($ABT) announced FDA clearance of its FreeStyle Precision Neo Blood Glucose Monitoring System as an over-the-counter product, and said it is the cheapest device in the diabetes meter and test strips arena.
It isn't too often that price is the main focus of a new product launch in the device world. Abbott's focus on cost is an attempt to adjust to the new era of basic diabetes devices and supplies, where the feds have forced prices lower by introducing a new reimbursement program in July 2013.
The FreeStyle will cost between $14 and $17 for 25 strips, with a one-time payment of $22 to $28 for the meter. The company points out that diabetics have medical costs greater than twice as high as those without the disease, citing the American Diabetes Association.
"People with diabetes depend every single day on trusted, high-quality tools to monitor their glucose levels," said Abbott's senior vice president for diabetes care, Robert Ford, in a statement. "This dependence makes it even more important to ensure people have affordable access to accurate, fast, and easy-to-use systems such as FreeStyle Precision Neo system. Today, more than ever, consumers have more influence on their healthcare decisions, and Abbott is focused on offering products that provide the highest standard of accuracy, and are also affordable and easily accessible over the counter."
Other features of the FreeStyle monitoring system include the monitor's memory (it can hold up to a 1,000 readings), thin profile and 5-second test time, according to Abbott's release.
But the announcement understandably focuses on its over-the-counter availability and low price. That's because under the federal Centers for Medicare & Medicaid Services' competitive bidding program for mail-ordered diabetes supplies, Medicare beneficiaries can only choose from the suppliers that have agreed to offer their diabetes care devices through the mail at the lowest price. It is one of the more striking examples of toughening reimbursement rules across device categories that have left industry in a tizzy.
During the fourth quarter, Abbott's diabetes device business was its worst performing segment--falling 9.6% to $313 million. It isn't alone. Johnson & Johnson's ($JNJ) $500 million-plus diabetes device segment last year experienced an 8.7% decline in sales. Unfavorable exchange rates abroad have also played a role.
Meanwhile, Bayer is looking to exit the business altogether. It was rumored to have reached an agreement with private equity giant KKR to divest its Contour blood glucose meter for as much as $2.3 billion, but the deal did not come to fruition.
Abbott's moves means it is committed to the now challenging market for basic diabetes meters and test strips. Consumers look set to benefit from the government's tough stance toward reimbursement.
- read the release
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