Medtronic takes on risk in payer and employer contracts tied to insulin pump use

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In a bid to expand into the larger, more lucrative type 2 diabetes market, the medical device maker offers a performance guarantee to payers and employers tied to its Minimed 670G insulin pump system.

Value-based care and paying for performance are not the order of the day yet, but incremental moves are being made to move away from a fee-for-service world.

The latest evidence of it comes from medical device maker Medtronic. On Friday, the Dublin, Ireland company announced that it is launching a guarantee program for payers and employers in conjunction with the use of its 670G hybrid closed-loop insulin pump. That is the first automated insulin delivery system that the Food and Drug Administration approved two years ago. Under the program, Medtronic will reimburse up to $25,000 per pump over a four-year period for “qualifying diabetes-related inpatient hospitalization and emergency room admissions for eligible in-network patients” in the United States.

“This new program demonstrates the strong confidence we have in our ability to deliver improved clinical outcomes with our MiniMed670G system and our commitment to value-based healthcare that not only improves outcomes but drives down the enormous burden of diabetes-related healthcare costs,” said Alejandro Galindo, president of the Advanced Insulin Management division within the Diabetes Group at Medtronic, in a news release.

The company touted the insulin system’s ability to reduce a sometimes lethal effect of diabetes — hypoglycemia, where blood glucose levels drop sharply often overnight —  by 44 percent. It can also stabilize glucose to recommended levels and minimize its ups and downs. Medtronic will work with payers and employers to identify the patients who would benefit from the MiniMed 670G system.

The move is interesting as Medtronic seeks to bring its overall insulin pump technology — originally meant for Type 1 diabetes patients — to the much-larger type 2 market. Meanwhile, payers and employers who are contending with high costs of chronic diseases such as diabetes will likely be attracted by anything resembling a performance guarantee.

Still, it’s worthwhile to drill down a bit to what makes up the cost of diabetes-related complications and what Medtronic is willing to reimburse for. A 2002 study looking at the lifetime costs of diabetes-related complications found that the management of macrovascular disease takes up the lion’s share of the overall costs accounting for 52 percent; nephropathy took up for 21 percent, neuropathy 17 percent while retinopathy accounted for 10 percent of the costs of complications.

Macrovascular complications include coronary artery disease, peripheral arterial disease, and stroke while microvascular complications include diabetic nephropathy, neuropathy, and retinopathy.

A Medtronic spokesman responded a trifle vaguely that the conditions that qualify for reimbursement “could include hyperglycemia, hypoglycemia, diabetes ketoacidosis (DKA), and other diabetes-complications.” (emphasis added)

The definition of what constitutes a diabetes-related complication — at least in the way the Medtronic spokeswoman put it in the email — raises questions. While the American Diabetes Association lists diabetes ketoacidosis as a complication, it doesn’t list hyperglycemia or hypoglycemia, which appear to be less a complication and more a direct cost of treating diabetes.

Still, efforts to reduce any costs associated with diabetes is likely welcome news, and for device companies to take on risk in contracts bodes well for the future of value-based care.