Dexcom Spends Big on Super Bowl Ad to Hype New G7 Claiming "Feels Like Magic"; But Formulary Exclusions Aren't Magic

This month was the U.S. NFL's Super Bowl #57; the two teams which played one another were the Philadelphia Eagles and the Kansas City (Missouri) Chiefs, and the Kansas City Chiefs were the winners in a close game throughout. For a moment, let's just overlook that Kansas City's team name is rooted in the same racism against indigenous native Americans (after all, the team's logo is an arrowhead, which was created by native Americans) the same view ultimately forced the old Washington Redskins to change the team name to the Washington Commanders), and let's instead focus on this year's game advertising. 

While I had an ever-so-slight preference for the Eagles to win given that I once called Philly home, that team played in the Super Bowl in 2018 and it won that year, hence some of the Eagles already have Super Bowl rings. Likewise, Kansas City last played in the Super Bowl 54 in 2020 and won that year, so that team was more-recently awarded Super Bowl rings. But Missouri isn't Pennsylvania. Hence, I really didn't really care very strongly if either team won this year.

Anyway, Dexcom, Inc., a former med-tech startup which grew into a full-grown med-tech company spent an estimated $5.5 million to $7 million this year according to advertising industry estimates (technically, it may have paid for the ad in 2022 to get a better price) to run a Super Bowl ad starring a former pre-teen family boy band known as the Jonas Brothers' member Nick Jonas as spokesman. He's now a full-grown adult in the ad, in which he claims that Dexcom's new G7 model "feels like magic" for managing your diabetes.

Sorry, Nicky, but Dexcom G7 assuredly isn't magic, and most patients will actually have to pay something for the benefit that you claim "feels like magic". In fact, they may pay a hell of a lot more for Dexcom than they would for rival CGM systems like Abbott Freestyle Libre 3 (which, incidentally, is SMALLER than Dexcom G7 is).

It would be "magic" if Dexcom REDUCED the prices of its sensors. The reason is because they assuredly aren't cheap, and they have a shorter wear-time of less than two full weeks vs. 14-days compared to its biggest rival. And, cash-payers are indirectly paying for the $5.5 million to $7 million Super Bowl advertising via rebate kickbacks paid by Dexcom for exclusive PBM formulary placement.

Yes, that's happening, too. Do you like paying for kickbacks? You shouldn't. If you don't, you may want to have a conversation with your elected lawmakers in Washington about the pharmacy kicback problem pushing U.S. Rx drug and prescription medical device prices ever-higher.

Dexcom Is No Bargain; Abbott Freestyle Libre 3 Costs 30% Less Than Dexcom

I recently had a conversation with a Wall Street analyst about this. For example, while the prices of Dexcom sensors and Abbott Freestyle Libre sensors are very comparable with one another (according to Costco's Member Prescription Program https://www.costco.com/cmpp, the price for one box of three Dexcom G6 sensors; which is the only product sold as I wrote this was $183.64, which means the cost on a per-sensor basis was $61.21 per sensor. By comparison, Costco Pharmacy's price for a box containing a single Abbott Freestyle Libre 3 sensor was $61.78 so the net difference was just $0.50. I had a coupon for one Libre 3 sensor, which I bought at Costco Pharmacy, so my price was $0). 

In other words, the price difference between the two CGM brands is negligible at best. But, wear-time shifts that calculus a lot.

Its not simply the gross price of the CGM sensors themselves, but the length of time patients can wear them which determines cost differentials. Dexcom only permits patients to wear its CGM sensors for 10 days (or less than two full weeks per sensor), meaning if there are 31 days in a month, that box of 3 Dexcom sensors won't even last you for the entire month), while each of Abbott's Freestyle Libre 3 sensors permit patients to use three sensors for 14 days each, which means 3 sensors will last the patient 42 days, compared to 30 days for a box of three Dexcom sensors. Conversely, you can get 28 days out of just two Libre 3 sensors. Meaning: Libre 3 definitely save patients money over Dexcom G7. The net difference is about 30% less than Dexcom.

Of course, insurance introduces a new level of messiness to the cost equation. Allow me to explain.

You need to ask: Does insurance cover part of the cost? What percentage? If you're on a plan that has a deductible to satisfy, what percentage of the cash price you end up paying for the sensors actually reduces your deductible and by how much? In general, the lower that cash price you end up paying for a CGM sensor does tend to benefit your wallet, because remember: you aren't getting credit applied towards the deductible for what you actually pay for the sensor, but for the negotiated "net" price the PBM negotiates on behalf of your insurance company. Hence, Costco has pretty good prices on CGM sensors, and it may be worth buying them from Costco Pharmacy (although the savings will be only a few dollars over what CVS, Walgreens or Rite Aid might charge you). Some people can't be bothered to go to Costco to save only a few dollars since they wear the sensors daily.

But critically, the shorter wear-time for Dexcom's CGM sensors guarantees that Dexcom ends up charging patients 30% MORE money for its CGM system than Abbott charges for its newest Freestyle Libre 3 system (plus the new Libre 3 also includes full data sharing and alarms which weren't always readily available in older systems, although alarms of 55 mg/dL were included automatically as long as it was in-range of your smart phone). If you're paying out-of-pocket for sensors until a deductible is satisfied, then YOU the patient are picking up that extra 30% cost for Dexcom systems, and therefore indirectly paying for the Nick Jonas Super Bowl ads. That doesn't feel like magic to me, it feels like someone is pick-pocketing me and trying to do it in a way that we won't know what they're doing.

A somewhat less critical point is that Abbott sells Libre sensors individually, while Dexcom forces patients to buy 3 sensors at a time (although it may sell Dexcom G7 sensors individually as Abbott does with Libre 3; that's unclear to me right now). If you're close to satisfying a deductible, having the ability to buy a single sensor could also be enough to satisfy your deductible without having to pay for two more sensors out of your own pocket.

Translation on Formulary Exclusions for Rival CGM Systems: Dexcom Likely Bribes Two Large PBM's with Kickbacks

That said, it appears that Dexcom may be bribing (admittedly, such cash payments are considered [right now, anyway] to be "legally-exempt" kickbacks, but let's be honest: a bribe is still a bribe) several big, vertically-integrated (with health insurance companies) PBM's to prevent patients from having access to less costly rival CGM's such as Abbott's Freestyle Libre CGM system if they use insurance to pay for for CGM sensors. Adam J. Fein, CEO of Pembroke Consulting, recently wrote about big three PBM formulary exclusions at https://www.drugchannels.net/2023/01/the-big-three-pbms-2023-formulary.html which is worth a read.

Most notably, CVS/Aetna's Caremark PBM unit "prefers" Dexcom CGM's over rival CGM systems (meaning if a patient is covered by Aetna, they simply can't get Abbott Libre systems covered by insurance, even if that rival system IS 30% cheaper, unless the patient pays cash for it, so it really depends upon the particulars of your Aetna plan, but it could potentially be worth bypassing your insurance for at least part of the year if you're paying cash for everything until satisfying a deductible, and your insurance won't cover the cost of CGM's until the deductible is satisfied, because Libre 3 sensors last longer and you're paying cash for them anyway).

But sometimes insurance pays for a portion of your CGM sensors before you satisfy a deductible. That makes things less certain.

Personally, I'm covered (at the moment, anyway) by Aetna, which is owned by CVS Health which also owns the PBM Caremark and the CVS retail pharmacy chain. Prior to satisfying this year's deductible, Caremark/Aetna/CVS Health charged me a price of $122.54 for a box of 3 Dexcom G6 sensors, which is an out-of-pocket cost of $40.85/sensor, and that translates into a daily cost of $4.09/day. I saved my receipts from 2022, and to be honest, CVS changed the price I paid slightly practically every time I filled my Dexcom sensor script which was beyond weird. For example, on April 13, 2022, I was charged a price of $110.90 for the exact same quantity of the Dexcom G6 sensors, but the next refill charged me $114.75, so its anyone's guess what's really happening behind the curtain.

Costco Pharmacy Member Prescription Program A Decent Pricing Barometer for the Cost of CGM Sensors

I also turn to the Costco Pharmacy Member Prescription Program https://www.costco.com/cmpp to be a reliable barometer of prescription drug prices (its never the lowest-cost on ALL prescriptions, but it is forthcoming about its prices if it sells something), and its price was $183.64 for a box of 3 Dexcom G6 sensors. By comparison, GoodRx also reveals prices (but those are PBM-driven prices, and one doesn't know which PBM formulary they are using, or even which PBM is offering those prices) and the GoodRx price for a box of 3 Dexcom G6 sensors varies depending on where you buy the product.

According to GoodRx, Costco should be charging me $164.63 (and maybe it would be with a GoodRx coupon). By comparison, GoodRx's price at CVS was $180.88 for 3 Dexcom G6 sensors, although GoodRx is also partnering with Dexcom to offer cash-paying customers a manufacturer coupon to buy a box of 3 Dexcom G6 (or G7) sensors for $136.13. I had less luck with SingleCare. Its product description said Dexcom, but the text underneath said Freestyle Libre, so I was clueless what the hell it was talking about.

I also investigated a number of coupon-generating app alternatives, including drug wholesaler McKesson's coupon-generating app known as ScriptHero which is powered internally by CoverMyMeds (as well as SingleCare when CoverMyMeds can't offer a discount on a particular prescription), and its price at the CVS Pharmacy near me was $136.13 for 3 Dexcom G6 sensors, or a cost of $4.54/day.

The coupon low-price leader turned out to be MedImpact's (which is/was Kaiser Permanente's PBM; at least it was until Kaiser dumped MedImpact for Cigna's Express Scripts) ScriptSave WellRx which has a coupon to buy 3 Dexcom G6 sensors from Rite Aid pharmacy for a price of $127.34, or $4.24/day. The winner using a PBM coupon was from Rite Aid using a WellRx coupon, at a price of $127.34, or $4.24/day. But it was still cheaper to use my own insurance (albeit not by much), plus Rite Aid isn't conveniently located near me.

Current CGM Price Differential Was Implemented With Near-Surgical Precision

Today, I could alternatively just opt to buy a Freestyle Libre 3 sensor from Costco Pharmacy for a cash price of $61.78/sensor, which equates to cash cost of $4.41/day.

Curiously, the cash cost differential of Libre 3 just so happened to be 32% MORE costly for me personally, making it marginally more costly for me to switch to Libre 3 and pay out-of-pocket rather than by using my insurance to buy Dexcom G6, but not by much.

Its rather curious how that worked out in my case.

By that, I mean that Caremark made the price just cheap enough for me to stick with Dexcom and use my insurance to buy it, as opposed to me paying cash for the less costly Libre. I can only surmise that HAD to cost Caremark a fair amount out of its ordinary rebate spread, but not quite enough to persuade me to just bypass insurance. That cost differential was implemented with near-surgical precision; but it assuredly was no accident. Remember: Caremark would make zero rebate spread if I bypassed my high-deductible insurance plan to buy CGM sensors, so it walks a fine line.

Similarly, United Healthcare Group's Optum PBM business also excludes non-Dexcom CGM's from its formulary by Optum "preferring" Dexcom CGM's since it will not cover rival CGM systems.

No Express Scripts Formulary Exclusion on CGM Sensors ... For Now

Curiously, only Cigna's Evernorth business unit, which consists primarily of the PBM known as Express Scripts (a.k.a. "ESI", which stood for Express Scripts, Inc. when it was still an independent company), DOES NOT currently appear to "prefer" a particular CGM system. I certainly wouldn't put it past Express Scripts to try and pressure Dexcom to pay it legally-exempted rebate kickbacks to keep Abbott Freestyle Libre 3 off-formulary at some point in the future, but it's lawyers are likely watching the FTC PBM study and policy statements very carefully before it pushes Dexcom on that. Part of the reason is because ESI has been a PBM a LOT longer than the others, and the FTC likely has a lot more data on what ESI has done (the FTC effectively subpoenas info, and ESI needs to be worried about the data it sent to FTC).

Undoubtedly, that's a concern as to why ESI hasn't yet pushed for formulary exclusion kickbacks. We should see the FTC study conclude sometime in in Summer 2023, and depending on its findings, it could then be referred to the U.S. Department of Justice's Antitrust Division for litigation. Watch this space!

Dexcom's Super Bowl Ad Boondoggle

The Dexcom Super Bowl 57 ad "It Feels Like Magic" featuring a grown-up Nick Jonas can be seen below, or by visiting https://youtu.be/RpYzhCYaEIM

  

Now, while Dexcom's estimated $5.5 million to $7 million Super Bowl 57 ad featuring former boy band member Nick Jonas may CLAIM that the product is for ANY type of diabetes (he says so in the ad), but the reality is that Dexcom and its CGM rivals at Abbott, Medtronic, and Senseonics/Ascensia have not really done the work necessary to secure widespread coverage of their CGM's for non-insulin requiring patients with Type 2 diabetes.

For example, United Healthcare's Optum says a patient has to be using insulin or it won't pay for CGM's on commercial healthplans (it might if its a Medicare plan and the government is paying for it). Some commercial insurance plans will cover them (at least for certain plans; in general, insurance tends to deny coverage for patients with T2D who are not using insulin under the notion that those patients can live just fine without expensive CGM's).

In other words, Dexcom simply did not really finish its homework before spending that $5.5 million to $7 million on expensive Super Bowl ads with a message saying G7 is "for anyone with diabetes". I suspect the company is kind of aware of that, which explains why its currently doing a coupon deal with GoodRx to overcome that issue (more on that in a minute).

As I said, its rivals are in a similar predicament, but spending cash to generate demand among a patient population which may or may not be able to get insurance coverage of the device seems like pissing a lot of cash away in my view. For example, Abbott is mass TV advertising Libre (mostly ads for Libre 2 so far), but those ads tend to be cheaper than $5.5 million to $7 million for a single Super Bowl ad (depending on their ad-buyer). However, Abbott is still introducing itself to the market, Dexcom is not doing the same thing.

Rival Abbott, however, is currently targeting an older, more overweight demographic if FiercePharma's article is correct (see https://www.fiercepharma.com/marketing/dexcom-and-abbott-court-same-target-different-styles-new-spots for the article) which I would presume means that it sees opportunity in the largely untapped Type 2 market for CGM's. But demographic ad targeting aside, its still unclear whether either company's ads are expenses that are delivering for the companies.

Abbott spends a lot of money on ongoing TV ads running all the time in order to build awareness in a market Dexcom dominates right now (even if the messages presume that diabetes patients are newly-diagnosed patients who could easily get the exact same info. from far  less frequent fingerstick test after meals). That's why insurance coverage of CGM's for non-insulin users remains pretty weak. Compare that regular expenditure to Dexcom's occasional big splurge on Super Bowl ads which are forgotten about pretty quickly. Is either more effective? Advertising execs might claim yes (although big advertisers like P&G, Unilever Coca Cola and Pepsi would say that ad repetition is really key, not singular advertising at big events), hence others remain skeptical.

Dexcom Pays PBM's for Formulary Exclusions of Rival CGM's

However, given the Dexcom formulary exclusions at Aetna CVS Caremark and United Healthcare Optum means Abbott still has its work cut out for it. While Dexcom claims that 70% of patients with insurance have some form of coverage, that coverage varies widely. Patients with deductibles don't see nearly as much Dexcom coverage as others, which makes paying cash and bypassing insurance compelling for that audience. That explains why GoodRx has signed a coupon distribution agreement with Dexcom.

As I write this, GoodRx was offering an exclusive Dexcom coupon deal which enables patient to save $200 or more every month on the Dexcom G6 CGM System for eligible cash-paying patients. It enables those patients to get $200 off the monthly price for Dexcom G6 sensors, and $200 off the Dexcom G6 90-day transmitter, which over a 3-month period, patients could save up to $800 off the complete Dexcom G6 CGM system. I have so many G6 batteries I won't run out of them anytime soon. And, transmitters are going away with G7.  

Abbott Could Copy Dexcom's Strategy for the Un/Under-Insured: Coupons (GoodRx or Others)

Likewise, Abbott still has work to get its CGM system even covered by two of the three largest PBM formularies. 

That said, as noted, Abbott's biggest rival Dexcom has a coupon-offer with GoodRx may just be the type of work-around for the formulary exclusions Dexcom has worked out for itself. And, Abbott doesn't have to orchestrate a coupon deal with GoodRx, it can probably do a similar coupon deal with any of the many rival coupon apps.

Today, there are a whole bunch of rival coupon-apps in business, although Boston-based RxSense Prescription Management LLC (whose corporate HQ address is 99 High St Ste 2800, Boston, MA 02110, although it has a legal address of Rx Sense Prescription Management LLC, 5920 Odell St, Cumming, GA 30040) has a business model which differs slightly from most of its competitors including GoodRx in that its discounts come from the pharmacy margins/spreads themselves, rather than via third-party PBM's. SingleCare might be willing to offer coupons for Abbott Freestyle Libre CGM's if GoodRx won't because of its coupon deal with Dexcom.

Super Bowl: A Costly Experiment Which Might Not Deliver

Dexcom just used a svelte, youthful Nick Jonas apparently to try and retain Type 1 market share for Dexcom, whereas Abbott is paying for messaging in what appears to be aimed primarily to newly-diagnosed Type 2 patients. Dexcom boasts that it has negotiated insurance coverage of some sort for about 70% of Americans, although there are still even more than 30% who are covered by high deductible health plans, so the coverage isn't really 70%. That explains the GoodRx coupon distribution agreement Dexcom is currently doing. In other words, Dexcom still hasn't gained anything close to universal, pre-deductible coverage for its CGM system yet, so to offset that uncomfortable reality, its offering everyone else discount coupons.

Unfortunately for Dexcom, the average demographic profile for a typical Super Bowl viewer tends to look more like the people in Abbott's Freestyle Libre ads than the youthful picture presented in Dexcom's Nick Jonas Super Bowl ad, raising further questions about Dexcom's Super Bowl ad spend.

According to Ad Age, Super Bowl ratings for 18-to-49-year-olds — the prime demographic for advertisers, has been falling in recent years. More importantly, when you look at 18-to-49 "Sunday Night Football" ratings, which have been remarkably steady over the years, those have also been falling for the 18-to-49-year-old demographic. While there still are plenty of hard-core football fans who are tuning in each week, the game (including the Super Bowl) has seen fewer casual fans and non-sports viewers tuning-in. That is an NFL problem, but it directly impacts Dexcom if it's spending millions on the game's biggest night.

Meanwhile, Abbott CEO Robert Ford said at the J.P. Morgan Healthcare Conference in January (see the article at https://www.medtechdive.com/news/abbott-ABT-robert-ford-freestyle-libre/640088/ for more details) that Abbott aims to grow its Freestyle Libre continuous glucose monitors into a $10 billion product over the next five years. I remain skeptical of Abbott's strategy for delivering on that promise. 

Insurance companies still aren't persuaded they should spend millions paying for CGM's for Type 2's who don't use insulin. After all, many insurance companies still won't cover CGM's for non insulin using Type 2 patients, but they usually will for Type 1 patients (thanks largely to JDRF advocacy groundwork laid years ago). Ignoring the Type 1 user base is a foolish bet if you sell CGM's. I'm not sure any strategy that ignores that the core potential customer-base is a way to grow your product to a $10 billion business.

But neither company's strategy (Dexcom's retaining share of T1D CGM users or Abbott's converting T2D into CGM users) is ideal, and each faces significant barriers. Dexcom still enjoys name recognition as the first CGM on the U.S. market, but will it still work if FTC and U.S. DOJ sue PBM's over rebates and formulary exclusions and its rival is 30% cheaper out-of-pocket?

So instead, we are seeing companies like Dexcom collaborating with GoodRx to offset its evident weaknesses in the un/underinsured customer base. But Abbott can do the same thing (if not with GoodRx, then with a rival like SingleCare), then it will come down to price, and if Dexcom wants to win, its sensor prices need to come down which will eat into the company's margins. But spending $5.5 to $7 million on a Super Bowl ad likely won't shield it from that competitive pressure.