Diabetic Nephropathy is Kidney disease or damage. Diabetic nephropathy is damage to the kidneys caused by diabetes. In severe cases it can also lead to kidney failure. The causes of diabetic nephropathy include high blood sugar, advanced glycation end product formation. The problem is tests that check for a protein called albumin in the urine. Urine does not usually contain protein. But in the early stages of kidney damage some protein may be found in the urine.