Memorandum

UnitedHealthcare to cover Tandem’s t:slim X2 with Control-IQ, ending “preferred” insulin pump agreement with Medtronic – June 30, 2020

UHC to begin covering Control-IQ starting July 1; UHC CMO Dr. Richard Migliori says relationship with Medtronic is “special” and outcomes-based arrangement will continue

Starting on July 1, 2020, UnitedHealthcare will begin covering Tandem’s t:slim X2 with Control-IQ. This marks the end of a four-year “preferred” insulin pump agreement UHC had with Medtronic, in which users went through a “Clinical Review Process” in order to get non-Medtronic insulin pumps covered. Ultimately, although this has been a big partnership with >50 million covered lives under UHC, the main change will be that it will be easier for those on UHC to get a Tandem pump; there will be less admin and paperwork required and Medtronic will no longer have a “sole-source” deal, which had been unpopular with patients. This change also represents a win for patient advocacy, as many, especially JDRF, had long fought against it under the idea that no payer should make available only one pump. (In the future, this will matter far less as all pumps will be AID – for now, they are fairly heterogeneous and UHC was smart to make more choice available.) There was no accompanying press announcement for the change; we spoke to both Medtronic and UHC about this change and we found the conversations valuable – the market for AID is going to explode, in our view, and although Medtronic’s percentage of wins of “new patients” will go down, near-term, the market for new and ongoing pump patients will continue to expand due to CGM and AID.

Big picture, we are not surprised at the UHC decision – it makes sense for it to make more choices available now that Tandem has documented, dramatically improved outcomes. We imagine that UHC pricing for Medtronic pumps is staying the same even without “sole source” and that there will now be less admin for UHC on Tandem. As noted, soul-source deals are not popular with patients, and although patients often have followed the preference of the practice or HCP in the past, some have gone to great lengths with lots of paperwork to get a different medical device than what was “preferred” or in this case, allowed.

There was lots of controversy with this partnership when it was originally formed, though our past coverage shows that Medtronic has strong outcomes data backing the deal, which was always the reason for the deal. Now Tandem has much stronger outcomes itself due to the closed loop Control IQ pump (as shown through better time in range data compared to older Basal IQ TIR data), this change would be expected. Medtronic’s data will also improve when the 780G is approved in the US, which is forecast for 2021 (technically April though we’re estimating sometime in the calendar year). The 780G has already been improved in the EU, and we understand that the algorithm is far better – while the 780G still needs a better sensor, the 780G gets considerably more raves than the 670G and when it is approved in the US, we believe it will be very competitive with other AID systems.

It was great to speak with UHC CMO Dr. Richard Migliori, who took some time to explain both the initial “preferred” agreement with Medtronic and the choice to begin covering Control-IQ starting in July. It is always nice to speak with such leaders – while we certainly view the change as positive for patients, who now have more of a choice, we also see it as fairly neutral for Medtronic, since Medtronic has a competitive system coming next year and since UHC will not have the unpopularity now associated with forcing patients to choose a specific pump. While we see that the outcomes backed up that decision in the past, a narrowly defined sole-source deal will never be popular with patients. Patients and HCPs alike complained at length about the extensive paperwork needed to get another pump – this will no longer be a factor characterizing patient opinion. As a reminder, those on the 670G will not be able to simply change to the Control IQ – they will be allowed to change if they choose to at the four-year mark.  

In an interesting conversational turn, Dr. Migliori characterized the state of the landscape before 2016: people on insulin pumps saw higher rates of hypoglycemia-related hospitalizations, and many believed that hybrid closed loop systems could help pump users achieve low A1cs without increases in hypoglycemia. Given Medtronic had the first-to-market AID system in MiniMed 670G (approved in 2016), UHC “was compelled by the difference in safety” to only cover Medtronic pumps in 2016. This was true, as we saw with outcomes data shown after the partnership was inked. No doubt, they also benefited from better pricing and it’s unclear if the benefits were ever passed along to patients – we don’t believe they were. In 2019, the two companies expanded the preferred pump agreement down to ages 7+ years as Medtronic received FDA approval for MiniMed 670G for ages 7 and up. As Dr. Migliori explained, and as we remember, in 2016, UHC was most focused on safety, specifically on threshold suspend and predictive suspend to prevent hypoglycemia, which Medtronic’s competitors did not have for over two years into the UHC/ Medtronic preferred agreement.

While some would point out that the Tandem t:slim X2 was integrated with Dexcom G5 by 2017 and Tandem’s Basal-IQ was approved in 2018, the major change (all have been meaningful!) came with the Control IQ in late 2019 and pediatric approval for the Control IQ earlier this month. While some saw tradeoffs to the MiniMed 670G (Auto Mode exits, calibration requirements, etc.), and the 2016 decision to only cover one manufacturer’s insulin pumps, and while we certainly saw it as negative from a patient-choice perspective (see here as well), it was also clearly a very outcomes-driven decision – Medtronic’s comparative safety data was incredibly strong. The importance of emphasizing safety first (as was done with the first hybrid closed loop) was understandable and so it would now be a major controversy if Tandem’s Control IQ were not covered by UHC, given the strong outcomes data with Control IQ! Overall, we are glad that patients will now have positive multiple options that are covered by UHC, now that safety and better time in range are more available with Tandem’s fully closed-loop pump compared to the 670G. We are moved also that patient voices have won out; we had been concerned for some time that the system would move toward more sole-source deals as has been seen in categories like insulin and DPP-4 and SGLT-2 inhibitors. We see this change as a big win not only for patients who want the best performing AID but also for HCPs who will no longer have to deal with administrative hassles that were required for patients to get the pumps they wanted.

Dr. Migliori emphasized in our talk that the decision to cover Tandem’s Control-IQ came from a recognition of Tandem’s work around AID. As noted, it would have been surprising had UHC not opted to change its policy, given the strength of the Tandem data. The Control IQ system already has at least 40,000 users and as of this month, pediatric clearance. As one of the largest private insurers in the country, UHC has been mentioned on several of Tandem’s recent quarterly conference calls. In 2019, we heard that ~88% of UHC members on pumps used Medtronic – while that’s a high percentage, it’s also meaningful that 12% clearly got approval for other pumps, and these approvals were likely more costly for UHC given the bureaucracy, required paperwork, etc. While Tandem did already have a meaningful number of patients on its pump, we would expect even more to change now given that hassle will be lower. Some will be glad to stay with Medtronic as some HCPs (who influence some patients) prefer Carelink software and will point out that it’s likely less than a year in the US until the 780G emerges. That said – Tandem’s Control IQ is here now, and has received rave results, including a NEJM article (virtually unprecedented for medical devices for diabetes) and editorial. UHC and Medtronic’s preferred pump deal has never had a direct impact on Insulet, who has in-network coverage for Omnipod through the pharmacy, although all the focus on Medtronic likely had an indirect effect – we expect even more patients covered by UHC to opt for insulin once it has a true AID system as well, forecast for 2021.

Medtronic and UHC clearly have a strong relationship – though the deal terms were always confidential, we imagine that for a number of years, UHC paid less for insulin pumps that were associated with Medtronic’s very strong hypoglcyemia and hospitalization data. Notably, as we understand it, the two organizations have now updated their outcomes-based agreement for reimbursement for Medtronic pumps, switching the primary outcome metrics from reduced hospitalizations to time in range and time below range. Both Medtronic Diabetes head Sean Salmon and UHC’s Dr. Migliori appear to be satisfied with the companies’ outcomes-based arrangement (“this is [Medtronic’s] largest and most successful”). Mr. Salmon also told us that Medtronic has seen some shift towards value-based arrangements with other payers, though “where it falls down is agreeing on metrics.” Hopefully over time this will become more clear – we see greater time in range as a key metric in the future, along with other metrics associated with AGP, particularly “time above 250 mg/dL,” a metric we believe will become more important over time.

  • Notably, in our call with Medtronic and UHC, we heard some further positive and very interesting data on the companies’ outcomes-based agreement. A three-year analysis of UHC members on Medtronic pumps (“almost 5,500” users) matched with UHC members on MDI showed a 27% lower rate of “preventable hospital admissions” for Medtronic pump users in the first year of the agreement, 33% in the second year, and 38% in the third year – it’s particularly impressive to see this upward trend - perhaps this is because patients have become even better “power users” of the advanced technology or perhaps it is because some patients on MDI are using less stable insulin. Presumably, the increasing adoption of MiniMed 670G over that three-year period accounts for a meaningful amount of the increasingly lower rates of preventable hospital admissions – although the 670G was approved in 2016, it took some time for patients to upgrade. We anticipate that the Control-IQ as well as Medtronic’s own MiniMed 780G will improve these outcomes further, given the power of automated insulin delivery, particularly the “soft landings” that so dramatically reduce the hypoglycemia and reduce hyperglycemic rebounds. Far higher “time in range” has been seen with both the Control IQ (pediatrics) as well as the 780G results shown at ADA – we look forward, moving forward even further, to even greater outcomes in patients when the percentage of time “above 250 mg/dL” falls – reduce “significant” hyperglycemia, in our view, is the next frontier for automated insulin delivery.

 

--by Albert Cai and Kelly Close