Digital Therapeutics (DTx) interventions are gathering momentum and are increasingly being integrated into clinical practice for a wide range of conditions ranging from asthma, substance abuse, mental health to cancer. The total DTx market in the US is expected to grow to $4.42 Billion by 2023 [i] and while it is still a fraction of the total healthcare spend, this emerging digital health sector is paving the way for new business models.
What is DTx?
While the DTx story is already on its way to primetime, there is still fog around a common lexicon to understand and critique DTx; it is commonly misconstrued with other digital health solutions, such as software applications, platform-based consumer health technologies, and wellness apps. As outlined in our recent IBM Institute for Business Value paper, How digital therapy benefits patients, providers, and the health ecosystem [ii], DTx is a subset of digital health solutions that offer therapeutic interventions for a specific scenario of conditions to deliver evidence of outcomes. The focus on evidence of efficacy, so that clinicians can confidently recommend or prescribe them, is a critical distinction that separates DTx from other digital health and wellness solutions.
What are the emerging business models?
DTx’s potential for disruption has not gone unnoticed; healthcare stakeholders – providers, payors, pharmaceutical companies and technology firms have entered the fray.
- Cigna began offering Omada Health’s digital behavioral change program to their plan subscribers to control costs through chronic disease prevention and led a Series C round of investment worth $50 million.[iii]
- Proteus Digital Health and Otsuka Pharmaceutical expanded their partnership on digital therapeutics with an $88m investment from Otsuka towards the continued development and commercialization of its ingestible sensor pill platform.[iv]
- Mount Sinai launched RxUniverse for physicians to digitally prescribe evidence-based mobile health applications, multimedia education, wearables, and DTx to patients at the point of care.[v]
However, healthcare stakeholders are still grappling with monetization strategies to realize value and early players are in the unique position of defining the emerging DTx business models. At this stage, business models focusing on either directly monetizing DTx via stand-alone therapies or realizing value through adjunctive Drug-DTx combinations are more common, but human-centric AI led enhancements that generate ancillary revenue streams are on the horizon. We see three distinct business models evolving that demand varying levels technical maturity and evidence of efficacy.
- Standalone DTx therapies offered by DTx companies such as Omada Health, WellDoc, Sleepio are intended as monotherapies for either replacing or introducing novel software-based therapeutic interventions. These treatments may be regarded as a threat to pharmacological treatments and have a higher burden to demonstrate clinical efficacy to prove comparative value against existing standard of care offered by drug manufactures since traditional reimbursements models are still the benchmark for value-based care.
- Drug – DTx Combination therapies are increasingly gaining traction with most major pharmaceutical companies announcing disease condition focused alliances or partnerships. Last month, Happify Health announced an agreement with Sanofi to advance the application of digital therapeutics to address key co-morbidities for individuals living with multiple sclerosis, including depression and anxiety.[vi] The opportunity to offer enhancement to existing pharmacotherapies is lucrative for both. Drug manufacturers are excited by opportunities for patent extension, truly real-world evidence (RWE) generation and stronger consumer connection that enhances understanding of context of adherence where as DTx companies can take advantage of established pharma pathways for faster validation and increased market access.
- Technology platforms or enhanced services Emerging business models focusing on technology platforms or enhanced services are still nascent. However, as this space matures, DTx business models will become more diverse and multifaceted with condition agnostic DTx Platform-as-a Service solutions, DTx Analytics as a Service solutions, AI dosing guidance algorithms, DTx focused advisory services, etc. finding their place in the ecosystem.
How to get it right
No matter the business model, there is emerging wisdom that DTx aspirers have to consider as they evolve their go-to-market.
- Regulatory strategy with drug-level rigor to take the product through the necessary approvals as a pharmacotherapy alternative is a must. Whether a DTx is sold as a product or as a service, revenue streams and a general willingness to pay will only be generated if a DTx therapy demonstrates showing evidence of clinical efficacy and safety in a randomized clinical trial. The higher the classification of the Software as a Medical Device (SaaMD), the more rigorous the evaluation by health authorities, and thus, the costlier the development of the product.
- Delightful, design-thinking led user experiences to engage consumers will make the critical difference between just another fad gadget or a life-saving device/drug that they use, as prescribed, over time and feel comfortable sharing their health data with their care ecosystem.
- Robust marketing and sales operation is needed to get physician buy-in, foster appropriate consumer usage to maximize the effectiveness of DTx. This includes educate clinicians on the product and its use, the data generated, and best way to prescribe DTx products.
- State-of-art data management and informatics capability to do value-based contracting is the promise of DTx. Currently, it is difficult to execute evidence-based contracts for adherence because data collection for evidence generation is an ongoing challenge. The data from digital therapeutics collected directly from patients through passive or near passive mechanisms brings us much closer to understanding and measuring adherence and enforcing underlying contracts.
- Laser focus on provider satisfaction, workload and implementation metrics is imperative to allow wider adoption of DTx therapies at the point-of-care.
As these commercial models evolve, we expect to see new and innovative go-to-market approaches. In this ever-changing landscape, our north star is the incentives and motivations of various stakeholders which we will talk more about in our next post.
Sources:
[i] “US Digital Therapeutics Market, Forecast to 2023,” Frost & Sullivan. May 2018.
[ii] “How digital therapy benefits patients, providers, and the health ecosystem: Evidence-based, personalized treatment can increase engagement and improve outcomes.” IBM Institute for Business Value. April 2019. https://ibm.co/digital-therapy
[iii] “Cigna to expand Omada partnership nationwide to employer customers.” MobiHealthNews. September 2018. https://www.mobihealthnews.com/content/cigna-expand-omada-partnership-nationwide-employer-customers
[iv] “Proteus, Otsuka expand their digital medicine collaboration with five-year, $88M deal.” MobiHealthNews. October 2018. https://www.mobihealthnews.com/content/proteus-otsuka-expand-their-digital-medicine-collaboration-five-year-88m-deal
[v] “Mount Sinai Launches RxUniverse for Physicians to Prescribe Health Apps to Patients.” HIT Consultant. February 2016. https://hitconsultant.net/2016/11/02/mount-sinai-launches-rxuniverse/
[vi] “Happify Health and Sanofi Sign Global Agreement to Bring Prescription Digital Mental Health Therapeutics to Individuals with Multiple Sclerosis.” Cision PR Newswire. September 2019. https://www.prnewswire.com/news-releases/happify-health-and-sanofi-sign-global-agreement-to-bring-prescription-digital-mental-health-therapeutics-to-individuals-with-multiple-sclerosis-300918901.html