Platinum Equity Plans to Reorganize LifeScan Diabetes Testing Business in Chapter 11 Filing

Remember how back in 2017, Johnson & Johnson (J&J) decided to exit the diabetes business? 

J&J began quietly exiting the diabetes business. First, it shut down Animas Corp., its insulin pump division, after failing to find a buyer. Then it sold Calibra Medical Inc., which had been developing a wearable insulin patch aimed at Type 2 diabetes insulin users, to CeQur. Finally, in 2018, J&J agreed to sell LifeScan — the maker of OneTouch meters and test strips — to Platinum Equity for $2.1 billion. The move was part of J&J's effort to focus on more lucrative pharmaceuticals and medical devices, while divesting itself of more commoditized products such as blood glucose testing supplies and Band-Aids.

At the time, LifeScan was still the dominant player in traditional fingerstick blood glucose monitoring (BGM) with an estimated 45% of industry sales, only with competitors Roche, Abbott and Bayer (now Ascensia) trailing behind. But the writing was on the wall: traditional BGMs were commoditized, and Continuous Glucose Monitors (CGMs) were gaining traction, hence fingerstick testing was no longer a growth business.

Fast forward to 2025, and Platinum Equity's LifeScan business is in trouble. 

On July 7, 2025, Platinum Equity announced plans to reorganize LifeScan through a Chapter 11 bankruptcy filing https://www.bloomberg.com/news/articles/2025-07-14/platinum-backed-lifescan-in-talks-to-hand-control-to-lenders. That's behind a paywall, but a July 15, 2025 press release found at https://www.businesswire.com/news/home/20250715827575/en/LifeScan-Reaches-Milestone-Transaction-to-Improve-Financial-Flexibility-and-Enable-Future-Focused-Investments contains most of the same information.

The company's Restructuring Support Agreement (RSA) had near-unanimous backing from first and second lien lenders, allowing Platinum Equity to retain control without investing another penny. But third lien lenders and more specifically Pharmacy Benefit Managers (PBMs) — who are owed $600–$700 million in unpaid rebates — are still negotiating (see https://9fin.com/insights/lifescan-deal-platinum-equity for more) on what they would be willing to accept in a bankruptcy filing. According to Bondoro Insights (see https://bondoro.com/lifescan/ for details, view the chart under the heading "Top Unsecured Claims"), the big three PBMs (and their respective GPOs) happen to be LifeScan's top three unsecured creditors, to whom LifeScan reportedly owes $244,689,400 to CVS Caremark, $234,926,000 to United Healthcare's OptumRx, and $196,301,600 to Cigna's Express Scripts which totals $675,917,000. But, consider an uncomfortable reality: the big PBMs might end up with nothing.

Max Frumes of the firm known as 9fin who happens to oversee global coverage of what is referred to as "distressed debt and restructuring" described LifeScan's BGM business as a "melting ice cube," with declining revenues in developed markets. The thing is that in the U.S., most commercial healthcare insurance companies still do not cover CGMs for non insulin-users. Hence, while CGMs dominate headlines, fingerstick testing isn't completely dead — it's just not growing anymore. For example, doctor's offices still rely on fingerstick readings for triage, not CGM data. I once got charged $55 for a test I could've done myself with my own meter and I have tested myself in my doctor's office to avoid those charges since that time!

Meanwhile, Roche — which once considered selling its own BGM business — held on and made a bold move (it did not really have a choice; no buyers with that much cash existed so they were unable to sell the business to anyone). In 2022, Roche partnered with Mark Cuban's Cost Plus Drug Company to offer Accu-Chek supplies directly to consumers (you might also check out the coverage I gave that on this blog in a post accessible HERE). That turned out to be a lucky move which was prompted by a heated discussion with patients back in 2009. 

I was among a group of patients who was there when that heated discussion with Roche Diabetes Care took place, and the company seemed a bit surprised that patients were actually concerned about prices because I think it presumed most people had insurance coverage of blood glucose monitoring supplies, failing to acknowledge the rapidly-growing number of people who had coverage, but with big deductibles to satisfy before insurance covered anything. But it prompted Roche to reconsider commercialization methods other than the "rebate-contracting" sales model promoted by the biggest Pharmacy Benefit Managers (PBMs).

The Mark Cuban Cost Plus Drug partnership completely bypassed profiteering PBMs and their legally-exempted rebate kickbacks, giving patients a cheaper option. I blogged about this shift https://blog.sstrumello.com/2025/05/cvs-caremarks-preferred-brand-switch.html in May 2025 when Aetna (via CVS Caremark) announced its plans to switch its preferred brand from OneTouch to Accu-Chek.

The irony? 

PBMs may now get nothing from LifeScan's unpaid rebates. Some lenders argue PBMs should be prioritized in bankruptcy because they're essential to the business — but I'm quite skeptical. PBMs are a money pit, and Roche's cash-pay model might be the smarter path forward. For example, Medicare no longer covers test strips for CGM users (which I covered HERE).

For those of us who attended Roche's 2009 social media summit, it's gratifying to see patient feedback lead to real changes — like redesigned test strip containers and more affordable pricing. My post from that event is still up at https://blog.sstrumello.com/2009/07/my-spin-on-roche-summit.html.

So, what's next for LifeScan? 

To be sure, there is little doubt that the private equity firm Platinum Equity paid J&J too much money for the LifeScan business. In a way, I wish that LifeScan had been spun-off as part of Kenvue (which also sells Band-Aids, Benadryl and Tylenol among other things) because that way, we would not need to worry if LifeScan will survive. On the other hand, it is a little late for LifeScan to try and enter to the CGM game. Abbott and Dexcom now dominate that space with Ascensia offering an implantable version being an alternative, albeit not a widely-used alternative. Perhaps there are CGM brands used domestically in South Korea and in China which could theoretically be approved more quickly and sold in the U.S. if LifeScan was truly serious about entering the U.S. CGM market, but that would likely come at a cost to LifeScan's profit margins which are already thin. But for now, LifeScan's future hangs in the balance, and patients should keep an eye on how this bankruptcy restructuring plays out.