Digital Therapeutics Should Take A Playbook From Big Pharma

Digital therapeutics — digital treatments that produce measurable positive outcomes for patients — have emerged as a fast-growing category. The bourgeoning market is predicted to total more than $14.5 billion by 2028. But the sector got a shock to the system earlier this year when Pear Therapeutics filed for bankruptcy. A pioneer in the space, Pear in 2017 became the first company to receive de novo clearance by the Food and Drug Administration for its product to treat substance abuse.

Pear’s bankruptcy generated a lot of handwringing about the viability of digital therapeutics. Although elements to Pear’s collapse are unique to the company, some of the contributing market dynamics offer a cautionary tale for the industry. Uptake of digital therapeutics has failed to keep pace with expectations. That is largely due to a lack of an effective commercialization strategy towards healthcare providers, payers, and end-users.

Going forward, DTx companies must build strong markets for their products. Doing so requires educating and enabling physicians, pharmacies, and patients; differentiating products; building effective support networks and integrated care pathways.

Regulatory Environment

In the US and European Union, digital therapeutics are reviewed under each region’s medical device framework. But the regulatory path continues to evolve. One prime example was regulatory flexibility in the US during the COVID-19 public health emergency, ending this year. In Europe, there are varying approaches, with countries like Germany, Belgium, England, and France developing assessments tailored specifically to DTx, whereas Denmark, Norway, and Sweden do not follow a similar process.

Similarly, there are divergent reimbursement models. Some European countries have national reimbursement schemes in place. Germany, Belgium, Denmark, and France are the most advanced with national reimbursement structures for prescription DTx. That compares to England and the Netherlands where reimbursement is delegated to the local level, with individual trusts or clinical commissioning groups making decisions.

In the US, the Centers for Medicare and Medicaid Services has yet to include coverage for prescription DTx under Medicare. The agency in April 2022 implemented a new code aimed at making it easier for commercial payers to reimburse for DTx but digital companies still must go payer to payer to get coverage. The same is true for Medicaid, where companies must reach reimbursement deals with individual Medicaid managed care plans. This leads to a patchwork of coverage across the nation. A bipartisan bill pending in Congress would create a dedicated benefit category for DTx but the Access to Digital Therapeutics Act has yet to gain traction and there are concerns that it would add costs to Medicare.

Increasing Market Penetration

Since 2017, the FDA has reportedly cleared roughly 40 digital therapeutics for use. The market has the potential to grow rapidly over the next few years, with one estimate suggesting a 23% compound annual growth rate through 2028. To achieve that level of market penetration, DTx companies must overcome significant barriers related to physicians, patients, and payers. Since DTx is still a relatively new modality, barriers to more widespread uptake include figuring out how to incorporate DTx into treatment flow and managing patients remotely, assessing and understanding clinical benefits, and mapping out proper usage and prescribing patterns. This contributes to a leaky funnel: For example, there were more than 45,000 prescriptions written for Pear Therapeutics’ products in 2022, but only around half were filled and the company was able to collect payment for only 41% of those.

Pharmaceutical companies have mastered many of these strategies and could prove to be useful learning opportunities for DTx companies. In general, DTx companies need to realize what it takes to build an essentially new market, and accordingly invest much more resources, build capabilities, and develop a sustainable go-to-market model to be able to compete.

Below we highlight some selected key tactics from the pharma repertoire that DTx companies need to adopt and execute consistently for each segment:

What’s Next?

To gain a larger foothold with patients, physicians, and payers, we predict DTx companies will pursue more joint efforts with pharmaceutical companies. DTx companies can leverage the impressive sales and training channels already in place at pharmaceutical companies, as well as other parts of their existing infrastructure to boost the presence. Pharmaceutical companies, for instance, have expertise in navigating the regulatory and reimbursement environments. They also have more cash reserves to help bolster commercialization strategies.

To learn more contact Matthew Weinstock, Senior Editor, Health and Life Sciences.