Abbott executives said the increase in manufacturing capacity will
begin in the second half of this year and make room for the expected
U.S. launch of the FreeStyle Libre 2. This next-generation device
has been approved in Europe and is now under U.S. regulatory review.
Abbott's plans for Libre, its fastest-growing diabetes product, used
by 1.5 million people worldwide, will be in focus when the company
reports quarterly earnings on Wednesday.
Jared Watkin, Abbott's senior vice president for Diabetes Care, said
in an interview that scale is a "huge part" of the company's
strategy for its glucose monitors. "When you're making disposable
diagnostic products, the more you can make, the lower the cost you
can produce them at."
While the Libre 2 has more features, including alarms for when blood
sugar levels swing too low or high, Abbott plans to keep the U.S.
price the same as its predecessor, Watkin said.
Abbott started in diabetes care as a maker of inexpensive test
strips and glucose meters. More recently, the company has sought to
expand access to its so-called continuous glucose monitoring (CGM)
devices - traditionally sold to type 1 diabetics in markets with
generous insurance coverage.
"It's not good enough to bring this to a small, wealthy population.
Diabetes is such a global epidemic that you need to bring products
that can really make a dent in that," Watkin said.
Launched in Europe in 2014 and in the United States three years
later, the FreeStyle Libre allows people with diabetes to track
blood sugar levels without multiple daily finger sticks.
A sensor attached to the back of the upper arm uses a thin filament
under the skin to measure glucose every minute. Users check their
blood sugar levels throughout the day by waving a reader, or
smartphone, over the sensor. Major competitors Medtronic Plc and
Dexcom Inc critique the current Libre's lack of automatic alerts
that can help diabetics manage their disease. Yet they also are
taking steps to introduce cheaper models themselves, executives told
Reuters.
Libre's sales are expected to reach $1.5 billion this year, the
company said. In April, Goldman Sachs estimated the global CGM
market could reach $5 billion by 2021, up from $3.7 billion in 2019.
Goldman projected Abbott's 2021 sales at $2.7 billion compared to
$1.7 billion for Dexcom and $894 million for Medtronic.
'SCRATCHING THE SURFACE'
In the past, CGMs were used almost exclusively by type 1 diabetics,
whose bodies do not make insulin and who must inject themselves with
the blood-sugar regulating hormone to survive.
Increasingly, people with type 2 diabetes - the kind driven by
obesity, lack of exercise and genetics - must also closely monitor
their blood glucose and use insulin to manage their disease when it
is not controlled by other medications and lifestyle changes.
For now, Libre users include 1 million type 1 diabetic patients and
half a million type 2. That's a tiny sliver of the 425 million
people with diabetes worldwide.
Although not all diabetics need glucose monitors, "there is an
element of scratching the surface at this point," Watkin said. "The
need to invest and bring up capacity is, we believe, going to be an
ongoing activity for us."
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Two 14-day Libre sensors, a month's supply, retail for $109. Abbott
says most of its patients are commercially insured, and many pay as
little as $10 out of pocket.
In the United States, the company says, more than half of people in
commercial health plans are covered, as well as any eligible
diabetic person on Medicare, the federal program for the elderly and
disabled. The device is also approved in 45 other countries,
including Germany, Japan, Brazil, China and the United Arab
Emirates.
Medtronic told Reuters it offers a discounted price of $345 per
month for uninsured patients. The company estimates that the typical
insured patient pays $50 a month. Medicare does not cover the
device.
Dexcom's G6 sensors retail online, with a discount, at around $350
for a month's supply. Dexcom says 98 percent of all U.S. private
insurers cover the device, and patients covered by commercial
insurance pay an average of $50-$80 per month for sensors through
pharmacies or durable medical equipment suppliers. It is covered by
Medicare.
Libre's 14-day sensor is also longer-lasting. Dexcom's sensors work
for 10 days, and Medtronic's for up to 7. Abbott was also the first
company to introduce a product that can be used without routine
finger stick tests to validate the sensor's readings – a feature
Dexcom later matched and Medtronic has not.
Dr. Roy Beck, an endocrinologist at the Jaeb Center for Health
Research in Tampa, Florida, said that Abbott's FreeStyle Libre is
"an excellent sensor" but not as accurate at detecting very low
blood sugar as the devices from Dexcom, Medtronic or an implantable
CGM made by Senseonics.
That makes it less desirable for patients for whom this is a major
issue, he said. Beck's center has received research funding from
Abbott and Dexcom.
Medtronic and Dexcom executives say the current Libre does not
compare with their devices when it comes to features such as
alerting users to dangerous blood sugar changes and providing
comprehensive trend data.
"It's the cheapest, but it's not exactly in the same category," said
Mike Hill, vice president and general manager of Medtronic's sensor
business.
Abbott countered that its sensor has best-in-class accuracy, and
noted that the next-generation Libre 2 does have optional alarms.
Still, Medtronic is considering making a cheaper sensor for patients
who don't need all the features of its current continuous monitor,
Hill said. And next year, Dexcom plans to launch a cheaper, smaller,
14-day sensor developed in partnership with Verily, Alphabet Inc's
life sciences division.
Dexcom Chief Executive Kevin Sayer acknowledged that Abbott's
pricing strategy will affect the global market over time, and that
Dexcom expects its own prices to come down. "We've planned for
this," he said.
(Editing by Michele Gershberg and Julie Marquis)
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