Roche Holding Onto Struggling Diabetes Business
By Jof Enriquez,
Follow me on Twitter @jofenriq
Swiss pharmaceutical and diagnostics company Roche is reportedly keeping its struggling diabetes testing business in expectation of a turnaround in sales by next year.
Roche Diabetes Care makes the Accu-Chek brand of glucose monitoring systems and is a market leader in diabetes management. The business contributed 17 percent of Roche's first quarter diagnostics sales, which amounted to 443 million Swiss francs, a 13 percent drop attributed to "a continued spillover of Medicare prices to commercial plans" for blood glucose monitoring products in the United States, where sales plummeted 49 percent, reports GenomeWeb.
The latest quarterly decrease in sales continued a downward trend for the business. Since the U.S. Medicare and Medicaid systems cut reimbursement rates for tests by 72 percent in 2013, Roche's diabetes care sales have declined to 2.13 billion Swiss francs ($2.19 billion) in 2015 from 2.39 billion in 2014, according to Reuters.
Still, Roland Diggelmann, head of Roche diagnostics, expressed optimism on what's ahead for the beleaguered business, especially as demand continues to rise for glucometers due to a concomitant increase in the incidence of type 2 diabetes worldwide.
"You shouldn't expect growth this year, but next year I think it will go back to growth. That's definitely our vision," he told Reuters recently. "It's still a good business. We don't disclose the margins but it is a cashflow-generating business and it's a business with a future."
"When we do look at the volumes for testing and the demand for testing, we see these in line with our targets. So we do think that the second, third quarter will be better, and second-half will also be better than the first quarter," Diggelmann added in the company’s first quarter earnings call.
Despite dismal sales in diabetes care, diagnostic sales grew 5 percent overall to 2.61 billion Swiss francs in the first quarter due to "strong growth" in Roche’s immunodiagnostic, molecular, and tissue diagnostic businesses, according to GenomeWeb.
Falling reimbursements for diabetes-care products in North America have resulted in a greater volume of lower-priced products in the market, putting more pressure on companies to divest their business interests in the large but competitive diabetes care segment.
Poor performance of Roche's diabetes unit has prompted speculation that the business will suffer the same fate as Bayer's diabetes care business, which the German conglomerate last year sold to Panasonic Healthcare (KKR/Panasonic joint venture) for $1.13 billion.
For now, however, Roche looks committed to the diabetes care market, in which it holds a substantial 23 percent market share in diabetes testing, ahead of its three big rivals — Johnson & Johnson's LifeScan unit, Abbott Laboratories, and KKR/Panasonic — according to Reuters.
Amid price pressures and fierce competition, Roche said the company is managing costs and optimizing efficiencies.
In addition, regarding innovation, the company is preparing the launch of new products this year, including a universal strip gold guide designed to work for all its glucometer products, a new continuous glucose monitoring (CGM) sensor, and a new insulin pump scheduled to roll out in 2017, Diggelman said in the earnings call.
Roche's pipeline seems to indicate an iterative approach to existing diabetes testing technology.
“While a non-invasive way to measure glucose levels is the "holy grail" of diabetes diagnostics, Diggelmann believes it will not be easy or quick to develop an accurate alternative to finger-prick tests,” notes Reuters.
Roche also entered into a digital health deal recently with mobile health solutions company mySugr. Under the agreement, users of Roche's Accu-Chek Connect glucometers can upload blood glucose data into the mySugr mobile app, which features gamification and other fun elements to make daily diabetes management more engaging.