Despite new breakthroughs in manufacturing glucose test strips, the cost for diabetes supplies continues to increase. The global Blood Glucose Self-Monitoring (BGSM) market was worth 8.8 billion in 2011, and is continuing to explode. With demand continually increasing, there should be hundreds of manufacturers competing for market share, thus driving the prices down.
But over the last 20 years, four companies have managed to gain control over 90% of the BGSM market: Roche, LifeScan, Bayer, and Abbott.
Costs will continue to rise due to the lack of competition in the market, which concentrates power to a handful of manufacturers. With government collusion, they create an oligopoly and dictate prices. That’s why it’s nearly impossible for new companies to enter the market.
In a recent study at Clemson University, new medical equipment could reduce cost of blood-sugar testing for diabetics. I hate to be a pessimist, but that’s not happening anytime soon in the United States. Corrupt politicians and the scumbag lobbyists are in control. Or to say it more bluntly, the FDA will create some bullshit regulation to block out these new competitors.
Test strips aren’t like drugs, and it’s not that expensive to manufacture them. But reps from Roche Diagnostics and Johnson & Johnson have said there’s more to test strips than meets the eye. “The cost of our strips includes their research and development, state-of-the-art production, comprehensive quality processes, verification, clinical and analytical performance studies, continued process improvements, and ongoing compliance to all regulatory and government standards,” says Todd Siesky, group manager of communications and external relations at Roche.
All true. But it doesn’t account for the absurd rates we’re seeing today. According to David Kliff, founder of DiabeticInvestor.com, “To manufacture the most advanced test strip is no more than 15 cents per strip.” So why does it cost nearly $2 per strip? Manufacturers aren’t stupid; they understand the market for diabetes supplies. It’s why they’ll give meters away for free. Once you’re using their meter; you have to use their test trips.
Successful diabetes management requires continual monitoring at the very least. They know this. They know that if you don’t monitor, it will result in serious health consequences, including stroke, heart attack, and death. They depend on this.
Meters and test strips are similar to printers and ink cartridges. Once you commit to a certain model of printer, you need to buy ink from the same company… again and again. The same goes for meters and test strips… the obvious difference being that you won’t die without ink. That explains WHY the cost is so high… but the more important question is HOW?
In a normal free market, costs are driven down through competition. With demand continually increasing, there should be hundreds of manufacturers competing for market share, thus driving the prices down. Unfortunately, the Blood Glucose Self-Monitoring (BGSM) market is anything but normal.
Individual choice is replaced with a kind of forced sacrifice. You pay or you suffer. If you need to test 12 times a day and can’t afford the artificially high cost per strip, too bad for you. And that’s where they get the leverage. They use their market power to take advantage of people’s dependency on a life-sustaining product.
In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly where the decision of a few firms to collude can significantly impact the market as a whole.
If you’re wondering why a box of strips costs $150-$200. There you go.
Oligopoly: ol·i·gop·o·ly [ol-i-gop-uh-lee]
Wikipedia: An oligopoly is a market form which a market or industry is dominated by a small number of sellers.