HME has built-in patient base for diabetes supply

Saturday, April 30, 2005

Not only are the baby boomers getting older, they're also getting heavier. Consequently the well-documented national obesity epidemic is linked to a host of other conditions, especially diabetes.
Many diabetic patients are already being served by the HME industry, so it's not a big stretch for providers to diversify into diabetes supply. Even so, there are a lot of considerations to entering this market, such as learning the clinical aspects of the disease, deciding which products to carry, understanding the thorny insurance coverage issues, forging vendor arrangements and developing referral marketing strategies. If providers can rationalize putting those elements together, vendors say they will be poised to handle a swelling diabetes population.
"Over the past 20 years, the number of people in the United States with diabetes has more than doubled," said Lynne Brown, director of U.S. sales for Fort Lauderdale, Fla.-based Home Diagnostics. "The catalyst for growth rests with the sheer numbers of newly diagnosed cases. An estimated 41 million Americans are already living with pre-diabetes -- people living with elevated blood sugar level, but not quite high enough to be classified as diabetes. If dietary and lifestyle trends don't change dramatically, the number of new diabetes cases will continue to explode."
In fact, the population is expanding so fast that it is rapidly outstripping the number of sales outlets available to serve it, said Nancy Clark, director of marketing and sales support for Hypoguard in Minneapolis.
"Diabetes is such a prevalent disease state right now that resources are scarce when compared with demand," she said.
Vendors working in diabetic supply, like Holliston, Mass.-based Invacare Supply Group, confirm that the mushrooming patient base has translated into bigger revenues over the past few years.
"We have seen our business grow in double digits due to the significant increase in obesity among baby boomers," noted Greg Bosco, director of merchandising and marketing for the national distributor.
Suejene Levin, Invacare Supply Group's category manager for diabetes, points out that providers need to be aware of how the patient base is stratified and the types of products designed specifically for each group. Type 1 is juvenile diabetes and occurs at birth. Type 2, also known as adult onset diabetes, constitutes the bulk of the population and is typically brought on by obesity. The third type is gestational diabetes, which afflicts pregnant women and puts them at risk for diabetes later in life.
"They will all use blood glucose meters and strips, but the biggest difference is whether they use insulin," Levin explained. "While it may be used by patients in any category, those with juvenile diabetes always use it. Type 2 may also require oral medications."
Invacare Supply Group carries "a couple thousand" SKUs in its diabetic line, a number that has doubled in five years, Bosco said.
Therapeutic shoes for diabetics are also a major product line and one of the fastest-growing segments in the market. Marietta, Ga.-based Pedors Shoes has experienced nearly 25% growth per year due to escalating demand for its neoprene stretch shoe and prefabricated inserts. Medicare beneficiaries diagnosed to be at risk for foot ulcers are entitled to one pair of therapeutic shoes per year, due to a bill passed by Congress.
"Foot care is now recognized across the medical spectrum as a vital part of a patient's overall healthcare," said Pedors president Steve O'Hare.
There is some private insurance coverage available for shoes as well, but O'Hare maintains that cash sales are predominant. Moreover, because of the product's specialized nature, independent HME providers don't have to contend with competition from mass merchandisers.
"You won't find our shoes at Wal-Mart or Payless and never will," he said. "Our shoes are all about the fit and it takes someone who knows how to do the fitting."
That means becoming a qualified pedorthic fitter, which requires certification through the Pedorthic Footwear Association. Referral sources, such as podiatrists and therapists are also more likely to send patients to a provider that offers pedorthic fitting, O'Hare added.
There are six criteria diabetic providers must meet in order to "do it well," Levin says: Prompt, efficient delivery to the end user; marketing programs to increase cash sales; manufacturer support for education of the product; thorough personnel training; marketing materials for referral sources and co-op advertising.
Getting into the diabetic market requires some investment and can be service-intensive, vendors concede. Further, the margins can be slim if providers aren't careful about the products they choose. But under the right circumstances, the business is profitable.
"A few years ago people were getting out of diabetic supply because it was seen as a low-money business," Levin said. "But we have introduced a line of private label products that allow the margin to come back into it."
Likewise, Home Diagnostics considers itself to be a "value player" in the industry, offering products that are equivalent to premium brands at a lower cost.
"A recent HME News poll asked providers if they are switching to less expensive brands to counter the Medicare-FEHBP reimbursement reductions that began Jan. 1 and more than 40% claimed they had already switched to less expensive blood glucose strips to cope with the cuts," Brown said. "The data also pointed out that most providers aren't willing to sacrifice high quality products but still want a low price. Those are the folks that are finding their way to our door."


Category: Diabetes

Key products: Blood glucose meters, test strips, lancets, syringes, insulin, oral medications, nutrition, therapeutic shoes. Some vendors say that there are "thousands" of SKUs for the category.

Key referral sources: Family practitioners, dieticians and nutritionists, podiatrists, hematologists, dermatologists, endocrinologists, case managers, consumer self-referrals.

Sales channels: Retail, mail order, pharmacy, wholesale distribution, Internet.

Third-party insurance coverage: Medicare ($250 million in billing for test strips-third in volume behind concentrators and power chairs); managed care.