Insurers hold key to diabetes device sales

By Susan Kelly - Analysis

CHICAGO (Reuters) - Companies that make continuous glucose monitors to help diabetics manage their blood sugar will see an upturn in demand for the devices in the next few years as more private insurers agree to pay for them.

Medtronic Inc (MDT.N), DexCom Inc (DXCM.O) and Abbott Laboratories (ABT.N), a recent entrant to the market, make the devices, which allow diabetics to keep a tight watch on their blood glucose levels. But until recently, lack of widespread insurance coverage had limited their appeal, and most diabetics continue to use finger-stick meters to test themselves.

"There's an aching need for these technologies. It's incredible, the demand. But there are obstacles to people getting this technology," said Aaron Kowalski, research director at the Juvenile Diabetes Research Foundation.

Those barriers are starting to lift as more insurers recognize the benefits of the devices, company executives and analysts said.

Last month, No. 3 U.S. health insurer Aetna Inc (AET.N) became the second national plan to issue a formal policy providing coverage for continuous glucose monitors in certain circumstances. That followed a similar decision in April by WellPoint Inc (WLP.N), the largest U.S. health insurer by membership.

Other large health insurers are expected to follow suit.

"You are seeing the clinical community and now the insurance companies say, OK, this should be the standard of care, and this should be covered," said William Blair & Co analyst Ben Andrew.

Tight blood sugar control reduces the risk of long-term complications from diabetes such as blindness, kidney failure, heart disease, or amputation.

Continuous glucose monitors provide blood sugar readings every few minutes via a wire-like sensor inserted under the skin, alerting patients when their glucose levels are headed toward a potentially dangerous spike or dip.

The monitors cost about $500 to $1,000, and the disposable sensors, which must be replaced every few days, cost about $250 to $350 for a month's supply.

The technology also moves diabetes treatment a step closer to the so-called artificial pancreas that researchers hope someday will automatically regulate a diabetic's blood sugar, eliminating the need for both insulin injections and multiple daily finger pricks to test glucose levels.

Most national insurers will come out with policies covering continuous glucose meters over the next six to 12 months, or risk being at a competitive disadvantage, Andrew predicted.

A large study by the Juvenile Diabetes Research Foundation comparing continuous glucose monitors to finger sticks is expected to serve as a catalyst for more insurer reimbursement decisions. The foundation said it is analyzing six-month data from the study and will release results "as quickly as possible."

As insurance coverage improves, so will sales of the devices.

"We think the market's going to accelerate as we get broader coverage in 2008 and really pick up speed in 2009 and 2010," Andrew said.