Sigh.
There are three grounds upon which CIC may reject your application for medical reasons:
(1) "People with a health condition that is likely to be a danger to public health [A38(1)(a)]"
(2) "People with a health condition that is likely to be a danger to public safety [A38(1)(b)]"
(3) "People with a health condition that might reasonably be expected to cause excessive demand on health or social services [A38(1)(c)]"
Tuberculosis and syphilis are usually cited for the first two examples, but I'm sure there are others as well.
Some conditions may be covered by the third example. For example, someone cited AIDS - "they only worried about transferable disease , like TV and AIDS". This isn't even correct, since it's not deemed to be a danger to public health or safety.
Diabetes is not considered to be a public health or safety issue. Thus the only issue is around excessive demand.
A condition such as diabetes is evaluated based upon the cost of treatment. As long as the cost of treatment is less than the allowed value (currently ~ $6100 per year) then you would not be medically inadmissible due to excessive demand. So one question would be to ask what the cost of the diabetes drugs you are taking are in Canada and if they are covered by the medical plan in the province where you will be landing. Finding out drug costs in Canada is a bit challenging - I usually use the Quebec RAMQ manual, since it is available online and lists the price the province pays. Finding out coverage usually requires understanding the coverage in the province where you intend on landing.
If the medical service decides you are excessive demand, you will receive a fairness letter that explains their finding. You may challenge their medical opinion and you may provide a cost mitigation plan. I would suggest coming back and asking if you need help in this area and are unwilling to hire one of the handful of lawyers who have serious solid experience in this area.
I serious doubt your diabetes will cause a problem, unless the cost of the drug is very high and you would be eligible for provincial drug coverage for it.
For the record: I have been through this whole process - from having an issue turn up in the immigration medical, to receiving a follow-up letter, to receiving a fairness letter, to putting together a comprehensive response, including a strong mitigation plan, a rejection and then applying for JR and being granted leave. In fact, it's only last week that I agreed to withdraw my JR application once CIC agreed to issue a PR visa on my second application - and I believe they did so because they were very likely to lose.
On the positive front, I can tell you that CIC doesn't do well in court on medical inadmissibility cases in the FSW application area - they lose something like 75% of the JR applications.
Good luck!
