Memorandum

Abbott’s FreeStyle Libre hits major US pharmacies with ambitious pricing; cash-pay at CVS, Walgreens: ~$43-$53 per sensor, $85-$97 per reader – November 28, 2017

Executive Highlights

  • Abbott’s FreeStyle Libre is now available in major US pharmacies: Walgreens, CVS, Walmart, Rite Aid, and Kroger. This follows FDA approval in September and comes right on schedule for a US rollout by end of year.
  • FreeStyle Libre’s wholesale acquisition cost (WAC) is $36 per 10-day sensor and $70 per reader (one time cost). This is lower than we expected, and means that Abbott’s net price (what it receives) will be lower than $36/sensor.
  • Libre’s end-user cash price at pharmacies is roughly ~$4-$5/day for sensors, or ~$129-$159 per month (Walgreens, CVS). Readers are $84.99-$96.99 at the two major pharmacies. Pricing varies by outlet, so there is no one “cash” price in stores.
  • There is no reimbursement for FreeStyle Libre at this time. Abbott is currently in discussions with major US commercial payers and CMS. It’s unclear where FreeStyle Libre will be tiered and what copays will be. Given the low pricing, however, we assume out-of-pocket costs will be perceived very favorably relative to other sensors, though they are still high compared to traditional BGM.
  • How do Abbott’s FreeStyle Libre and Dexcom’s G5 stack up on pricing? We share what we know below, since this is nuanced! Abbott’s “net price” for sensors is <$3.60/day, or roughly ~38%-50% less than Dexcom’s ~$5-$7/day net pricing (assuming 10-14 day wear). However, the reimbursed price for Dexcom’s G5 (through our Aetna insurance) is ~48% less per year vs. Libre’s cash price in pharmacies.

Abbott updated its website and sent an email to announce that FreeStyle Libre is now available at major US pharmacies, exactly two months after FDA approved the 10-day wear, factory calibrated sensor as a replacement for fingersticks (prescription required). FreeStyle Libre is available at the big-name pharmacies – Walgreens, CVS, Walmart, Rite Aid, and Kroger – right on track with prior guidance for a rollout by the end of the year.

The official wholesale acquisition cost (WAC) is $36 per 10-day sensor and $70 per reader (one time cost), lower than we were expecting. What matters more in the US is the end user pricing, as the cash price at pharmacies is slightly higher and varies by chain – through our own calls, each 10-day Libre sensor at our local CVS costs $52.99 ($5.30 per day), and a reader goes for $96.99. At Walgreens, each sensor costs $42.99 ($4.20 per day) and readers go for $84.99. This comes out to roughly ~$159 per month (CVS) and ~$129 per month (Walgreens) for sensors, or roughly $4-$5 per day cash pricing. At ~$90 at the pharmacy, the one-time reader cost is separate. There is obviously no reusable transmitter for FreeStyle Libre, which saves a lot of cost over competitors. Overall, this end-user pharmacy pricing is in line with the cash-pay monthly prices in Europe for sensors (~120 euros per month) and readers (~60 euros).

Abbott is still in negotiations with commercial US payers and CMS, so US patients will be paying cash for now. There is no online ordering option like in Europe, as FreeStyle Libre needs a prescription.

A big question many are wondering is how FreeStyle Libre’s US pricing compares to Dexcom’s G5. In short, it depends on the framework. See the table below for what we know, since Dexcom focuses on “net price” and Abbott has only shared the WAC price, which serves as a starting point for payer discussions. Roughly speaking, Abbott’s net price for sensors (what it receives in revenue after discounts) will be less than $3.60/day, or ~38%-50% lower than Dexcom’s net price of ~$5-$7/day (assuming 10-14 day wear, ~$70/sensor). However, based on looking at our own Aetna insurance, the reimbursed price for Dexcom’s G5 is roughly 48% less per year vs. buying Libre with cash in pharmacies (without coverage). These pricing comparisons are naturally imperfect, since Dexcom is primarily DME and Abbott is pharmacy. More below!

Obviously, both products’ features differ too – connectivity, alerts/alarms, fingerstick calibration, sensor shutoff/restart. (See this table for a side-by-side comparison.) We’ll be fascinated to see how the US market evolves in 2018 with Abbott, Dexcom, and Medtronic all driving to expand CGM penetration in the US!

See our Q&A for thoughts on the CGM market overall –  if conversion in Medicare alone for people on insulin were anything close to 100% (which, on an individual basis, we hope it is so that they can actually benefit from personalized care), this would be billions in revenue for CGM (if you’d like our draft spreadsheet, let us know!)

  • The US FreeStyle Libre website provides a discussion guide for patients to use with their HCP, as well as a brilliantly straightforward prescription retrieval assistance program. The latter removes a lot of the legwork for patients, informing providers about Libre, requesting a prescription directly from the provider, and notifying the patient when the prescription has been sent to the pharmacy – a very smart move to make the acquisition process more frictionless. As a reminder, in Europe, Libre does not require a prescription. The site shares that there is already a high demand for prescription retrievals, such that it may take up to two weeks to “initialize processing” all requests. Both Adam and Kelly’s providers were already listed in the system, which had over 10,000 physicians in San Francisco alone.

How Does FreeStyle Libre’s US Pricing Compare to Dexcom?

  • Dexcom’s 3Q17 call maintained that “average sensor pricing” is ~$70 – as we understand it, this is “net price,” or revenue Dexcom actually receives for each sensor sold. In other words, as we understand it, this is the price of each sensor subtracting out rebates/discounts to payers. Dexcom’s “wholesale acquisition cost” is higher – roughly $141 per sensor, based on our research – which is the price before any discounts.
  • At roughly 2-3 Dexcom sensors per month (extending wear to 10-14 days), G4/G5 sensors come out to a net price of ~$5-$7 per day (~$70/sensor). Since Abbott has only shared “wholesale acquisition cost,” all we can say is the following – Abbott’s “net price” for each 10-day sensor will be less than $3.60/day (<$36/sensor), but we do not know specifics beyond this. 

 

Dexcom G5

Abbott FreeStyle Libre

Net Price
Manufacturer Realized Price – What Each Company Gets After Discounts

 

~$70 per sensor

~$800-$850 for starter kit with receiver, transmitter, and 4 sensors (~$520-$570 for durables, subtracting out sensors)

Unknown, but presumably:

<$36 per sensor

<$70 per reader

No transmitter

Sensor Price Per Day – Net Price

$5/day (14-day wear)
$7/day (10-day wear)
$10/day (7-day wear)

<$3.60/day (10-day wear)

Wholesale Acquisition Cost (WAC) – Price Before Discounts

~$141 per sensor

~$453 per 3-month G5 transmitter

~$794 per  G5 receiver

$36 per sensor

No Transmitter

$70 per reader

  • This analysis suggests that there is a gap between Dexcom’s wholesale acquisition cost (WAC) and net price, reflecting discounts – we underscore, as with insulin and other drug pricing, pricing analysis is far from Closer Look’s “sweet spot” and we are learning here what the landscape entails. As such, we assume Abbott will have a smaller gap than others between WAC and net price. Given that we have not had much experience on healthcare pricing dynamics, we emphasize that we are not sure how payers will interpret it. 
  • While presumably most payers care about the true cost, which would be the net (discounted) price, we also know we are hardly comparing “apples to apples” in two CGM products - one has alarms, which is important to some patients and not others, one is easier to insert (for now), etc. Bottom line, it’s challenging to compare the offerings but since readers will ask for it, we wanted to share as much information as possible. 

How Does Paying Cash for FreeStyle Libre In a Pharmacy Compare to Dexcom’s Out of Pocket for Someone with Reimbursement?

  • How does Dexcom’s out-of-pocket (with reimbursement) compare to paying cash for Abbott’s FreeStyle Libre? We’ve used our own Aetna insurance below as one example (only one! Illustrative only) to research reimbursed costs of Dexcom – see the table below. Based on this analysis, Dexcom is ~48% less expensive annually for a new patient. This is intended to be one example, not representative of Dexcom’s coverage at every payer. We acknowledge this analysis is highly imperfect and subject to change as Abbott secures reimbursement. Similarly, Dexcom’s out of pocket price will be higher or lower for those with different payers and coverage.
    • We’re not sure what Dexcom’s cash price is for those buying it without insurance. We assume Abbott has a clear advantage for cash-paying customers – we’d guess Libre is ~50% less and perhaps more. Of course, this varies on many issues, particularly how long the average cash-paying Dexcom sensor wearer is extending wear – likely significantly. 

 

Dexcom G5 with Reimbursement Example*

Abbott FreeStyle Libre Paying Cash Example

What A New Patient Might Pay Out of Pocket Per Year for 24/7 Use of Each CGM System

With Aetna insurance, mail order:

~$843/year

12 sensors = $191.18
($573.54/yr, assuming 10-day wear and 36 sensors purchased)

G5 Transmitters x 2 = $84.80
($168.80/yr)

G5 Touchscreen Receiver = $100.80 (one time)

Paying Cash in Walgreens Pharmacy

~$1,618/year

Libre sensors = $42.99 each (assume 36 needed)

Libre Reader = $70 (one time)

* See the screenshots at the end of this article for Dexcom G5 claims billed through our Aetna insurance.

  • As we said when FreeStyle Libre was approved, we believe the new sensor is a strong positive for the entire category in the US, including for Dexcom. See our previous coverage here for more details on the implications for the field and views on Dexcom’s stock. FreeStyle Libre should drive CGM awareness overall in a highly underpenetrated category – both in type 1 and type 2 diabetes. Plus, it could pave the way for payers to distribute CGM in pharmacies, which should be lower hassle for many patients – Dexcom is already at the start of this, which should be far easier for patients once the kinks are worked out.
  • What will FreeStyle Libre’s reimbursed price look like and how long it will take to get broad US payer coverage – what will copays look like? At which tier will the major payers cover Libre? Our local CVS, Walgreens, Rite Aid, and Walmart were not yet stocking the sensor, but Abbott told us pharmacies are currently ordering the system. (The pricing above is direct from Abbott and our calls to pharmacies – they were aware of the price but didn’t have the system in stock.)
  • Compared to traditional BGM, of course, CGM is still more expensive for patients in the US. Medicare lowered BGM pricing 70% (and then again) back in the day, putting the least expensive test strips at pennies for day for many who have no coverage otherwise. For someone to step up either to Abbott or to Dexcom is a major commitment, and we hope to see lots of support from payers as the benefits become clear particularly on helping avoid severe hypoglycemia. Getting Medicare coverage for CGM was a major step, of course!
  • Overall, we do point out that “list” pricing still is a bit of a black box from our perspective – “list” price for insulin is quite different from “list” prices for Libre, as one example. When we hear reference to list prices on the therapy side, that is traditionally before any rebates, patient assistance cards, other special programs applied. List price has traditionally reflected what patients pay at pharmacies, whereas “list” price in what Abbott is sharing does not reflect that. We will keep striving to learn more about this dynamic; feel free to be in touch and offer your opinions as we are not yet at the point of knowing as much about healthcare pricing relative to medical devices as we will in the future. 

Close Concerns’ Questions

 Q: How will patients naive to CGM choose between Dexcom and Abbott? What about between CGM and BGM? How much will the CGM category grow in the US in 2018?

Q: What will Abbott’s US reimbursement ultimately look like and how long will it take? How long will it take to get widespread commercial payer coverage? How long will it take to get initial coverage? What will copays look like? When will Abbott secure Medicare coverage for FreeStyle Libre? What is the progress on US reimbursement given that regulatory approval took longer than many expected? How is reimbursement improving further for Dexcom given progress over the last year?

Q: Will pharmacy vs. DME distribution make any difference to patient uptake of CGM? Will Dexcom move to the pharmacy channel, assuming Abbott paves the way? What will advertisements look like? (As a sidenote, we hope very much that pharmacists are learning about the benefits of CGM.)

Q: Will Dexcom be able to maintain its pricing, given the wider array of features in G5, particularly related to alarms, which are very associated with cost-savings? How will Abbott’s pricing evolve with the second-gen Libre that adds continuous communication? How will Dexcom’s pricing change with G6 and Verily gen one?

Q: How many patients want to get on CGM right now, but cannot get reimbursement coverage and/or cannot afford out of pocket? To what extent will Abbott’s FreeStyle Libre change this? How will type 1s in particular and type 2s on mealtime insulin perceive the lack of alarms? (We believe this will not be as big a deal to many patients on therapy like GLP-1 and SGLT-2s, but this is a small population and still remains to be seen.)

Q: How long will it take for US CGM penetration in T1D to get to: 30%? To 50%? Will it ever reach 75%-100%? What can be used to move CGM toward standard of care globally?

Q: How many years behind will T2D CGM penetration lag – could type 2s on insulin reach 5%-15% CGM penetration in the US in five years? What will be the biggest drivers – payer pilots, pricing, easier-to-use devices, coaching, clinical studies?

Q: What will Medicare coverage really look like? If a sizable number of Medicare recipients really got CGM, the CGM market would explode given that Medicare invests presumably about $0.20 to $0.40 cents per day for BGM for people on insulin and ~$8/day for CGM (based on Dexcom’s ~$250/month – clearly, we have no idea what the contracts really look like, but the magnitude of the difference multiplied by the number of type 1 and type 2 people with diabetes is enormous; our math says three million people on insulin on Medicare moving to CGM would increase the glucose monitoring market by $9 billion, depending on assumptions (this assumes 100% conversion). What did Andy Slavitt propose be moved in coverage of diabetes and how will this play out? 

Appendix: Screenshot from Aetna – Dexcom G5 Coverage

Bill for 12 Dexcom Sensors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bill for Two G5 Transmitters

 

-- by Brian Levine, Adam Brown, and Kelly Close