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High-tech’s business model didn’t work for the cue Covid test

“I got this,” coos Gal Gadot in Cue Health’s Super Bowl TV ad. Cue hired the Wonder Woman actress to voice the company’s new high-tech Covid-19 testing device. The ad expresses the notion that the at-home Covid test will provide results that match a laboratory-based PCR test in accuracy and surpass it in convenience.

What isn’t mentioned is the price: $249 for the reusable device and $195 for a pack of three tests.

Even as the number of Covid cases dropped over the winter, many people who saw the ads wondered if the device – no matter how practical or technologically amazing it might be – had the right approach. High-tech startups bent on disrupting the healthcare industry rely on a proven marketing strategy: price up early adopters, then price down as the market grows.

To perform 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-shaped reader. Within 20 minutes, the results are transmitted to Cue’s smartphone app via Bluetooth. Those who purchase a $900 annual subscription can access a doctor through the app to confirm results as valid for travel or other purposes.

A highly accurate at-home Covid test certainly has its benefits. And Cue, a publicly traded company based in San Diego, says its test results matched 97.8% of the time with a positive PCR lab test result, which is still considered one of the most accurate. (The price of a PCR test varies, but can be $100 or more, and results typically take at least 24 hours, although faster results can be had for more money.)

But even the cheapest prices — annual subscriptions that start at $480 for 10 tests (and a discounted device for $149) — are significantly higher than the cost of less accurate antigen tests that Americans can often get for free today.

Cue’s price makes it unaffordable for most consumers. But it fits an elite business model that wants attention and assumes that the price will eventually go down as the market grows and demand increases.

Until employers provide them, consumers will have to foot the bill for the cue tests for now, as health plans, which generally cover lab-based PCR tests and rapid antigen tests, won’t reimburse policyholders for the cue system. “We are proactively working with health insurance companies to obtain coverage for Cue Health solutions,” said Dan Bank, a spokesman for the company. However, the company has yet to announce an agreement with an insurer.

Although Cue’s Super Bowl commercial hints that its test product is intended for home users, its biggest customer was the Department of Defense, even though its government contract has expired. The test has also been picked up by sports leagues and retail companies that 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 revenue, or $175.8 million, from a total of $179.4 million. Net income for the quarter was $2.8 million, compared to $13 million in the same quarter last year, as the company increased spending on human resources, marketing and product development. Also in the second quarter, sales are expected to drop to about 50 million US dollars, the company said.

The company, which sold shares to the public last year, has fallen to around $5 from $22 when it debuted in September (enviable stock symbol HLTH).

The company’s other, even more fundamental problem is that fewer people are interested in getting tested regularly for Covid. “There was enthusiasm when Covid was in full swing, but now that people are feeling that the Omicron strain isn’t that bad, the focus on testing has shifted,” said Charles Rhyee, an analyst at Cowen. (Cowen, a Wall Street investment firm, helped bring Cue to the public but has no financial relationship with the company.)

It’s possible, he said, that Cue is like other companies that have zoomed during the pandemic, only to fall to earth. “The company already looks like Peloton, and a lot of that sentiment is already burned into the stock’s price,” Rhyee said.

Cue points out that Covid testing is just the first use of his product. It wants to develop and get FDA approval for other tests that can use the $249 device, including for flu; respiratory syncytial virus or RSV; Fertility; and pregnancy. If a flu test comes back positive, Cue officials said, the smartphone app may be able to connect the patient to a doctor early enough to benefit from taking an anti-flu drug like Tamiflu.

“Just as home pregnancy tests forever changed the way women get answers and glucose meters changed the way diabetics monitor their blood glucose levels forever, we believe the paradigm for home infectious disease testing is changing forever has, and Cue is well positioned to meet those needs. ‘ Bank said.

But none of these tests will be available or generate revenue in 2022. The company expects to submit tests for influenza A and B in late summer or fall. The company has cautioned that the speed at which it can evaluate new types of tests it can offer the FDA could be impacted by the prevalence of Covid, potentially limiting its ability to find testers or staff at its facilities to have.

To boost revenue, the company reduced the cost of its monthly subscription and individual trials by $15 in February.

But Charles Rhyee believes much bigger price cuts are needed to succeed. The short-term solution, he said, is for Cue to offer its reader at little or no cost and make its money from testing, employing a classic marketing technique that predated the high-tech era nearly a century: the razor blade model, where the real money is made from high-priced blades after selling customers a cheap proprietary handle to hold them.




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

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