Though the concept of digital therapeutics (DTx) has been around for the past 10 years, it has only gained prominence in the last 2–3 years. DTx is a concept of delivering technology-driven, evidence-based care and interventions that can prevent, manage, or treat a medical disease or disorder. The concept is developed with the right objective of enabling predictability in therapeutic output, speeding up recovery, and preventing disease progression (see Figure 1).
Like other technologies, DTx must overcome several internal and external hurdles to achieve widespread acceptance and market. This article discusses the status of technology development, current DTx market ecosystem and technology promoters (technology developers, users of care service providers, regulators, payors), obstacles in the development and marketing of DTx, and suggestions to overcome them.
What Is DTx and How Does It Work?
The DTx care system comprises:
- A device for sensing the patient’s metabolic or systemic vitals (HbA1c, blood urea nitrogen, essential minerals, heart rate, O2 saturation, ECG, etc.).
- An edge device (e.g., smartphone) to communicate with the database and display alerts or recommendations.
- A database to store the sensed parameters.
- An artificial intelligence (AI)-enabled software.
- A care team to analyze the patient’s conditions and suggest or coach suitable interventions.
The device could be based on a biosensor or optical, acoustic, or conductance/impedance-based principles. It could be realized in the form of a wearable unit, a tattoo, an implantable chip, an ingestible pill, or a point-of-care device. The software or care team would monitor or analyze patient parameters continuously or intermittently.
Interventions could include suggestions on a healthcare regimen, medicinal prescription, and medicine dosage; coaching on lifestyle, diet pattern, exercise, and yoga; or improvement in mental/behavioral health. DTx companies may further provide services such as delivering pharmaceuticals, setting up a nursing team, and referring to physicians/hospitals for further treatment.
DTx Market Ecosystem
With the global market for digital therapeutics estimated to grow ~3x and to be valued at more than US$ 7 billion by 2025, this space is witnessing interest from financiers. A research note by PitchBook states that VC investments into DTx companies have increased from $134.3 million in 2015 to $1.2 billion in 2016. Also, the first eight months of 2020 saw a funding flow of $709.7 million across 32 deals (see Table 1).
The DTx market ecosystem mainly involves the following four types of entities that are engaged through multiple partnerships models and designed based on mutual business benefits:
Technology Developers and Care Service Providers. Currently, there are about 21 companies listed by the Digital Therapeutics Alliance (DTA). Founded in 2017, DTA is an association of industry leaders engaged in evidence-driven advancement of DTx.
DTx companies (Liva, Vida, Virta, Lark, Well-doc, etc.) typically adopt the B2B or B2B2C model. Liva, Dario, RMS, and Oculocare have adopted uniform business models across geographies. Welldoc has formed multiple partner-ships for market entry. It has leveraged Dexcom’s distribution channel and integrated device offering to venture into the Canadian market. For entry into Asia, Welldoc has inked a joint development and commercialization agreement with Astellas. As per the terms of the agreement, Astellas has made an upfront payment and would be entitled to certain product rights, milestone payments, and royalties.
In addition to core services, companies such as Liva, iHealth, Better Therapeuticc, Lark, Vida, and Welldoc offer functionalities that encourage medication adherence, mainly focusing on medication reminders and dosing records (see Table 2).
DTx Revenue Models. DTx service providers generally work with payors on the following revenue models:
- Flat Annual Subscription Fee: Payors pay a flat fee negotiated with the DTx provider while signing the contract. The annual fee covers all patients that are onboarded, irrespective of the number of patients detected with risks or the stage of disease.
- Per Member Per Month (PMPM): The payor pays for the number of patients enrolling on the platform provided by these companies in the PMPM model.
- Shared Saving/Outcome-Based Additional Payment: This model depends on the achievement of health key performance indicators (KPIs)/outcomes agreed beforehand between the payor and the company.
Patients/Service User. Most companies within the B2B space are targeting public and private sector clients. However, companies are shifting focus to corporate businesses (employers) owing to higher margins and lower customer acquisition challenges. DTx offers patients the following benefits:
- Awareness of medical crises.
- Fewer visits to hospitals/clinics.
- Access to a system for quick referral.
DTx Promoters. DTx companies either approach patients, employers, and pharmacy chains directly or approach them through pharmacy benefit managers (PBMs) or payors by establishing contacts, positioning themselves on relevant platforms, and attending conferences. For instance, Vida targets Fortune companies, especially members of the Employer Health Innovation Roundtable (EHIR) Cohort I. EHIR is a coalition of large and progressive employers seeking health benefits for their employees. DTx offers payors the following benefits:
- Identification of high-risk and high-cost patients.
- Scouting of upcoming high-cost medical events and modeling of risks.
- Lower medical loss ratio.
- Tailored plans for employees.
- Improved data sharing between payor and provider.
Providers. As an integral part of the DTx ecosystem, providers would benefit in the following ways:
- Improved patient risk stratification.
- Common platform for patient engagement; personalized continuous care.
- Alerts for remote monitoring of high-risk patients with chronic diabetes, arthritis, asthma, renal, neuro, or cardiac conditions.
- Unified payment system for practitioner.
Obstacles to DTx Development and Possible Solutions
There are five key obstacles to DTx development, but there are ways to overcome them.
Readiness and Integration of DTx Technologies. Further research is required to improve the sensitivity and selectivity of biosensors and other sensing principles. Researchers are also trying to make sensing continuous without any intervention (such as changing the analyte or battery) and to minimize patient discomfort.
Ideally, researchers should aim at developing a sensing system that can make patients feel “as if they are not wearing anything.” Realistically, implantable sensors, tattoos, or wearable sensing textile could become a game changer.
Underdeveloped Partner Ecosystem. Partnerships between care service provider companies, promoters, and providers have been observed in the last few years. However, technology developers are apparently working in silos.
DTA is expected to play an important role in bridging the gap between technology developers (especially biosensors and data analysis AI-based software developers) and care service providers to accelerate the development of the technology ecosystem.
Lack of Patient Confidence. Due to absence of convincing success stories and lower trust on health outcomes, patients and employers are reluctant to make a buying decision. This is a time-consuming process that would gradually evolve. Players and investors should invest in promoting the concept of DTx and building confidence before expecting returns on their investments.
Patient Compliance. Even if technology and a strong DTx ecosystem are developed, health KPIs/outcomes cannot be achieved until the patient complies with the suggested regimen. Currently, there is no definite mechanism to address patient noncompliance. Researchers and care service companies may adopt multiple approaches to tackle the issue of non-compliance such as:
- Technological: Through trackers, schedulers
- Incentive: Through heath scoring, informing gain in performance over peers, or even financial incentives, if possible, etc.
- Care Team Training: Training could be provided to the care team on clinical and emotional aspects to get the patients ready and engaged to follow the suggested regimen over the entire therapeutic period, with confidence.
- Engagement Programs: Engagement programs could help patients interact with peers, and discuss their outcomes, while also providing companies an opportunity to promote their products and services.
Regulatory. Regulatory processes for DTx are still evolving and clear guidelines are yet to be established. For instance, the UK classifies DTx based on functionality, which is then stratified into evidence tiers based on the potential risk to the user. In other EU countries such as Italy, DTx are classified as medical devices and must comply with ISO standards. Although DTx are covered by EU regulation 2017/745 on medical devices (May 2021), the guidelines contain no specific provisions for DTx, and further clarity on the subdivision into risk classes is needed to determine the most appropriate route to market.
Meanwhile, US FDA regulates DTx as a Software as a Medical Device (SaMD) that is subject to medical device regulations. Section 3060 of the Cures Act excludes certain SaMD depending on their applications (admin support, lifestyle maintenance, EHR, i.e., anything not directly used for diagnosis, cure, or treatment).
The infancy of regulations in key markets has had a restraining effect on growth, as companies must expend more resources on demonstrating clinical outcomes and gaining regulatory approvals. The pace of regulatory evolution also has downward impact on business models of DTx companies. Until recently, CMS had no guidelines for DTx coverage, forcing over 70 percent of DTx companies to partner with self-insured employers. However, the bill for the Access to Prescription Digital Therapeutics Act of March 2022 aims to establish a new Medicare and Medicaid benefit category for PDTx. If passed, this act would establish a payment methodology for PDTx manufacturers, product specific HCPCS codes, and a DTx manufacturer reporting process to CMS. Uncertain regulatory and data transmission and storage policy would affect the penetration of DTx companies in the international market, especially in developing and underdeveloped nations.
Despite the current structural drawbacks, we anticipate that the DTx market will exhibit strong growth in the next few years.
As the transitory impact of regulations and reimbursements fades, new business models would emerge to offer evidence-based therapies and manage the health profile of patients with chronic conditions. This shift in business models would have a multi-pronged impact across the healthcare ecosystem with:
- Hospitals and service providers being able to serve a greater number of patients more efficiently and effectively.
- Patients witnessing better clinical outcomes and payors incurring lower expenditures.
- Pharmaceutical and medtech companies being able to collaborate by combining digital strategies with traditional therapeutics. Every technology has its limits. Before moving forward, the boundaries of DTx should be defined and beyond those marginal returns would be achieved. It could be easily anticipated that the scope for DTx would be restricted to chronic conditions. The outcome of a DTx regimen would depend on human compliance and the body’s natural response.
Since DTx involves a human element, DTx has a noble objective of providing technology-driven evidence-based care to prevent, manage, or treat a medical disease or disorder. Players should also consider the human emotional angle while developing DTx technology, associated business models, and the regulatory ecosystem.
This article was written by Arpit Sharma, Senior Manager, Technology Research and Advisory, and Vibin Theril, Senior Manager, Growth Advisory, Aranca, Mumbai, India. For more information, visit here .