Digital Health Innovation: key stakeholders empowering the ecosystem

Technology is becoming an integral part of our lives, making its way into every industry from pharma
to aviation. Thus, it is no surprise that it has also gained a strong foothold in driving decisions for
better health. The application of digital health is widespread with well-being and fitness apps found
on all our phones, from calorie tracker and meditation apps to guided exercises and medication
adherence reminders.

The umbrella of digital health has 2 specialized sections: Digital Medicine and Digital Therapeutics
(DTx). Digital medicine caters to the branch of software used along with hardware devices, for eg:
blood glucose sensors and heart-rate monitoring tools. Digital therapeutics is a specialized branch
where software is responsible for delivering therapeutic benefits either in conjunction with a drug or

Digital therapeutics offers new ways to treat and manage diseases using software often inspired by
gaming techniques that engage patients to modify their behavior and thereby affecting the
progression of disease and treatment, for eg: Akili’s FDA-approved EndeavorRx for ADHD treatment
in kids or Sivan’s Moovcare for management of lung cancer. This newest area of digital health is
evolving rapidly and is being shaped by all its stakeholders- patients, payors, physicians, pharma, and
regulatory bodies. The digital health companies developing these apps will have to work in tandem
with each of these stakeholders to increase the adoption of their products.

1. Patients:

Today, individuals have become invested in a holistic approach to their health and disease
management. According to a recent global survey in the US,
 ~50% download a DTx app after seeing a relevant ad.
 ~40% of patients look for clinical evidence before downloading a DTx app.
 ~50% of patients confer with their doctor about the solution before
downloading the app.

This survey is a clear indication that patients today are well-aware and doing their due diligence
before blindly accepting and adhering to any therapy.

However, patients ultimately depend on their doctors for suggestions, and clinical proof is
necessary for physicians to trust the benefit of these apps. The majority of the approved DTx
products used randomized clinical trials for evaluation with the adoption of parallel-group
designs and statistical hypotheses. Additionally, retrospective analyses and digital biomarkers
are also used to improve the objectiveness of the endpoints.

Reimbursement is a key challenge as patients are not likely to pay for downloading an app when
the value proposition is not clear to them. Digital therapeutics companies are in the evolving
phase and therefore exploring multiple business models such as-

i. direct-to-customer or an employer as a customer,
ii. healthcare providers and payors and
iii. collaboration with pharma.

A look into the commercials of companies like Dario Health (D2C as the business model) paints
the picture of how only the D2C model is unlikely to become successful as it includes high
marketing and sales cost, and consumers hesitate to subscribe without insurance coverage. In
2022, Dario Health’s revenue from the D2C business model was stagnant as compared to 2021
whereas the B2B model launched in 2020 accounted for more than 50% of revenue and showed
considerable growth.

The next challenge is the patient’s attention and effective use of the app. Personalization and
conscious inclusion are key to patient adoption and engagement. The DTx solution must be
integrated into their daily habits, a feat obtained through either gamification, benchmarking
with peers, or positive reinforcement.

2. Physicians:

Effective clinical data along with real-world evidence of patient engagement, satisfaction, and
positive feedback play a crucial role in the acceptance of DTx by providers. These factors further
encourage physicians and healthcare providers to prescribe DTx to their patients.
Currently, there are around 40 approved prescription DTx. The fact that prescription-based DTx,
a segment of digital therapeutics is making its way into the market highlights how DTx
companies are catering to healthcare systems.

However, the adoption by healthcare providers is in the nascent stages and therefore limited. To
accelerate the process, DTx manufacturers need to educate physicians and integrate with
existing EHRs. This will not only facilitate decision-making for improving patient outcomes but
will also offer cost-benefits by managing footfall and reducing burden through remote

3. Pharma:

DTx companies and pharma focus on similar key stakeholders- patients, physicians, payors,
and regulatory bodies. As a result, DTx-pharma partnerships form one of the most scalable
and sustainable business models for DTx companies as pharma already have an established
understanding of the disease areas, trust and relationship with providers. Approximately
75% of the pharma-digital health partnerships involve either a DTx or a prescription DTx,
primarily in areas like mental health, chronic diseases, and oncology. This shows that
pharma is investing in partnerships based on clinical evidence generated or in progress.
Currently, the majority of the deals are focused on companion DTx. However, in the next 5
years, the value proposition of stand-alone products targeting anxiety, depression,
respiratory disease management, and diagnosis will become pronounced as they will offer
pharma to diversify their portfolio.

With each deal being unique, pharma is not only evaluating the immediate return on
investment, but also intangible benefits such as the ability of the product to gather patient
data for market intelligence and to further R&D in multiple therapeutic areas.

Early partnerships with pharma can significantly accelerate the journey to market. A clear
path showing how the DTx is addressing an unmet need, PoC studies, demonstration or
route to clinical and regulatory success, and the opportunity towards reimbursement is the
checklist that pharma is looking for.

4. Payors

Reimbursement is the key roadblock in DTx adoption and since 60% of the payors in the US
are private, they form a very important stakeholder. With DTx becoming mainstream, clear
guidelines and reimbursement policies will facilitate the reach of this valuable technology,
particularly in underprivileged communities.

The adoption of a DTx solution resulting in its listing in formularies by payors is majorly
dependent on 3 factors- proven economic savings, clinical and real-world evidence, and
scalability and engagement. A few initial examples of DTx being listed in PBM (pharmacy
benefit management) formularies-Express Scripts and CVS Caremark are present. However,
a clear standard contract for their adoption is still under construction.

Additionally, the adoption challenge lies in the fact that the Centers for Medicare and
Medicaid Services (publicly funded payor) do not currently have a benefit category for
prescription DTx. However, with the rise in awareness of DTx, payors will opt for a mix of
pharmacy benefits and medical benefits for short-term contracts. As the field grows further,
a new category most likely will be introduced by payors to facilitate the reimbursement of
DTx solutions.

DTx presents innovative business models to payors, such as pay-for-performance, value-
based agreements, and short-term contracts. However, as the generation of RWE takes a
while, DTx companies are exploring other avenues to increase adoption such as approaching
employers and D2C business models.

5. Regulatory bodies

The collaboration between Pear Therapeutics and FDA in 2015 for its PDTx reSET called for a
paradigm shift. The FDA understood and acknowledged the need for modernizing its
processes. Consequently, Congress passed the 21 st Century Cures Act in 2016, and the Digital
Health Innovation Action Plan was published by the FDA.

Currently, digital therapies are considered within the “Software as a medical device”
category, a traditional approach by FDA to approve devices for medical purposes. FDA has
also published guidance such as the 510k and de novo pathway to clinically evaluate DTx
solutions, however, a common regulatory framework is still in the working. Additionally, to
modernize its approach and adapt itself to the agile, iterative nature of software
development, the FDA along with 9 companies formed the Pre-cert pilot program in 2017.
A critical aspect for DTx companies is that while they adhere to the existing guidelines, they
must not ignore the evolving DTx regulations. In fact, regulatory bodies encourage
companies to initiate a conversation for approvals while the product is still in development
to mitigate risks.

Digital therapeutics presents a huge opportunity as they can drive behavior changes at scale and
lead to a better lifestyle. However, to achieve scale, all the stakeholders will need to collaborate and
work together seamlessly. Also, for DTx companies to succeed, they need to be working with all the
stakeholders from the very beginning to carve out a sustainable and scalable business model.

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