High-tech business model doesn’t work for cue covid testing

“I have this,” Gal Gadot said in Cue Health’s Super Bowl TV commercial. Cue has hired the “Wonder Woman” actress to be the face of the company’s new high-tech covid-19 testing device. The ad promotes the notion that at-home Covid-19 tests produce results that are as accurate as lab-based PCR tests and surpass it in terms of convenience.

What it doesn’t mention is the price: $249 for the reusable device, $195 for a pack of three tests.

Even as the number of Covid-19 cases dwindled during the winter, many who saw the ad wondered if the device—no matter how convenient or technically wonderful—had the right approach. High-tech startups eager to disrupt the healthcare industry are relying on a proven marketing strategy: Price early adopters high, then lower prices as the market grows.

For the Cue test, users wipe their nostrils with a special wand, insert the wand into a cartridge, and then insert the cartridge into a white cube reader. Within 20 minutes, the results were transferred via Bluetooth to Cue’s smartphone app. Those who buy a $900 annual subscription can access a doctor through the app to certify that results are valid for travel or other purposes.

A highly accurate home COVID-19 test certainly has its advantages. San Diego-based public company Cue said its tests matched PCR lab tests 97.8 percent of the time, still considered the most accurate. (The price of PCR tests varies, but can be $100 or more, and results usually take at least 24 hours, although faster results can be paid for more.)

But even the cheapest price— one-year subscription10 tests start at $480 (and $149 for a discounted device)—much higher than the cost of less accurate antigen tests, which Americans generally get for free now.

Cue’s price puts it out of the reach of most consumers. But it fits into an elite business model that seeks to attract attention and assumes prices will come down at some point as the market grows and demand increases.

Currently, consumers must pay for the Cue test unless an employer provides it, because health insurers that typically cover lab-based PCR tests and rapid antigen tests don’t reimburse policyholders for the Cue system. “We are actively working with health insurance companies to obtain coverage for Cue Health Solutions,” company spokesman Dan Bank said. But the company has yet to announce arrangements with any insurers.

While Cue’s Super Bowl ad suggested its beta product was aimed at home users, its biggest customer is the Department of Defense, even though its government contract has ended. The test is also used by sports leagues and commercial enterprises to buy units for their employees, including Major League Baseball, the National Basketball Association, Netflix and Google.

In the first quarter of 2022, non-government revenue grew to 98% of sales, or $175.8 million of the $179.4 million. Net income for the quarter was $2.8 million, compared with $13 million a year earlier, as the company increased spending on people, marketing and product development. The company said it expects revenue to decline in the second quarter, too, to about $50 million.

The company sold shares to the public last year, and its share price (an enviable ticker HLTH) fell to around $5 from $22 when it debuted in September.

Another, even more fundamental, problem for the company is that few people are interested in getting tested regularly for the coronavirus. “There was a lot of enthusiasm when the coronavirus was in full swing, but now that the omicron strain isn’t that bad, the focus on testing has changed,” said Charles Rhyee, an analyst at Cowen. (Cowen, the Wall Street investment firm that helped Cue go public, but No financial relationship with the company.)

It’s possible, he said, that Cue, like any other company, expanded rapidly during the pandemic, only to end up on Earth. “The company already looks like Peloton, and a lot of that feeling is baked into the stock price,” Rhyee said.

Cue noted that the covid test is only the first use of its product. It hopes to develop and gain FDA approval for other tests that could use the $249 device, including influenza; respiratory syncytial virus, or RSV; fertility; and pregnancy. If a flu test comes back positive, a smartphone app may be able to connect a patient with a doctor early to benefit from taking an anti-flu drug like Tamiflu, Cue officials said.

“Just as at-home pregnancy tests have completely changed the way women get answers and blood glucose meters have forever changed the way people with diabetes monitor their blood sugar levels, we believe the paradigm of at-home infectious disease testing has changed permanently, and Cue is well positioned to meet those demand,” the bank said.

However, none of these tests will be available or generate any revenue until 2022. The company expects to submit tests for influenza A and B in late summer or fall. The company noted that the speed at which it evaluates new tests for delivery to the FDA could be adversely affected by the covid epidemic, which could limit its ability to find test subjects or staff its facilities.

To boost sales, the company cut its monthly subscription and personal testing costs by $15 in February.

But Charles Rhyee believes that to be successful, it will need to cut prices significantly. The short-term solution, he said, is for Cue to offer its reader devices at low cost or for free, and profit from testing using a classic marketing technique that predates the high-tech era by nearly a century: the razor blade model, in which the real The money is on high-priced blades after selling cheap proprietary handles to customers to hold them.

Kaiser Health NewsThis article is reproduced from khn.org With permission of the Henry J. Kaiser Family Foundation. Kaiser Health News is an editorially independent news service, a project of the Kaiser Family Foundation, a nonpartisan health care policy research organization not affiliated with Kaiser Permanente.

Leave a Reply

Your email address will not be published. Required fields are marked *