ABBOTT PARK, Ill., and ALAMEDA, Calif. - The words the mainstream media used to describe Abbott Laboratories’ acquisition of TheraSense say it all: “Abbott splurges on TheraSense,” and “Abbott Laboratories plunked down $1.2 billion to buy [TheraSense] this week...”
Why did Abbott, which recently paid $622 million to resolve allegations that it helped providers bilk Medicare, pay a premium for TheraSense, a diabetes testing manufacturer?
Sure, Medicare paid about $750 million for diabetes test strips in 2002, and test strips and lancets are high on the list of Medicare’s greatest DMEPOS expenditures. But the Medicare Prescription Drug Act proposes that reimbursement for test strips and lancets be cut by 4% and 5%, respectively.
Rhonda Luniak, director of global communications for Abbott had this to say about why the $19.2-billion company acquired TheraSense:
Â¸ Abbott moves from No. 4 to No. 3 - behind Roche and LifeScan - in the blood glucose monitoring market;
Â¸ With double the resources, Abbott can increase R&D in a market that’s racing toward a viable, non-invasive monitor;
Â¸ Abbott owns TheraSense’s Freestyle brand of monitors, which require sampling sizes up to 90% smaller than conventional monitors; and
Â¸ Abbott can aim for a bigger piece of the $5-billion blood glucose monitoring market, which is growing 10% annually.
“We believe we paid a fair price for TheraSense,” Luniak said.
In addition, Abbott and TheraSense will have access to markets they didn’t have access to before. Abbott does business mostly with institutional settings worldwide while TheraSense does business mostly with retailers and wholesalers in the United States.
Abbott also has the Freestyle Navigator to look forward to. The Navigator, which could see FDA approval in 2005, is a three-day, implantable sensor that provides real-time data, hypo- and hyperglycemic alarms and trend analysis, according to Mark Tatro, vice president of finance for TheraSense.
“When we introduced the Freestyle, we improved what was already out there,” he said. “The Navigator is evolutionary.”
Mark Gielniak, vice president of Diabetes Plus in Warren, Mich., said he isn’t surprised by the acquisition, or its price tag.
“TheraSense’s technology is something that it would be too expensive for Abbott to start developing,” he said. “They’d always be behind - that’s why they paid a premium.”
Louis Belmonte, president of Neighborhood Diabetes Shoppe in Wakefield, Mass., agreed. He said Abbott eliminated a company that was fast on its heels when it bought TheraSense, No. 5 in the market.
“I think Abbott was worried,” Belmonte said. “TheraSense has done phenomenally well increasing its market share.”
According to the Center for Disease Control, 18.2 million people in the United States have diabetes.