Go-To-Market Considerations for Digital Therapeutics

Executive Summary

One of the fastest growing subsectors in MedTech/Digital Health are technologies that have come to be known as “digital therapeutics” (“DTx”) (by some, “prescription digital therapeutics,” or “PDTs” as well).FN1 DTxs represent a new subsector of the larger digital health sector – an increasingly mature market of regulated and unregulated products and services (~10,000+ companies)FN2, across both healthcare and wellness industries.

As further discussed below, although there remains some disagreement in the U.S. as to how digital therapeutics properly should be defined, there is an emerging industry consensus that these products should be differentiated from other innovations in the broader digital health technology space. For purpose of this report on U.S. go-to-market considerations, DTxs are distinguished essentially by three features:

1. Rx supervised (but patient-facing and used in the home);FN3
2. supported by evidence-based clinical data for both device performance and real-world outcomes; and
3. subject to premarket review by the Food and Drug Administration (“FDA”) for safety/risks, performance, and intended use claims.

DTxs may be used as standalone treatment alternatives to drugs and biologics (e.g., certain DTxs for substance abuse), or they may be used adjunctively to improve use of medications, devices, and/or other clinically-based treatments.FN4

Digital therapeutics have begun to be developed for a wide variety of indications, especially non-communicable diseases (“NCDs”) – diabetes, respiratory diseases, mental health disorders, substance abuse, stroke, cognitive disorders, cancer, heart failure and other cardiovascular diseases, and more. The clinical value of DTxs is directed at an area of disease management where traditional pharmacological therapies and device monitoring have been unable for the most part to fill adequately: that part of care where the patient him- or herself is needed to ensure optimal disease management. Given the severe global gap in chronic disease care management solutions, TEAMFund views this emerging category of technology as broadly serving “Unmet Needs” and “Underserved populations,” whether in Mumbai, Mbarara, or Minneapolis. According to a recent Deloitte report, digital therapeutics are one of five forces that “will have a disruptive impact on the future of biopharmaceutical companies and the patients they serve.”FN5

Although the U.S. is the current global leader in number of companies seeking to develop and market DTxs, China, Europe, India, South Korea, and several other countries, are also helping to grow this space.FN6 The primary focus of this report, however, is more limited: DTx companies, wherever based, that wish to pursue U.S. market opportunities. Although other countries have regulatory systems and markets adapting to this new class of technology,FN7  for purposes of brevity, we have focused on US go-to-market considerations for two reasons:

• Much of the innovation in this space began, and is advancing fastest, in the U.S., making DTxs and their pathway in this country highly instructive as a case study. Relatedly, much of the rest of the world has looked to US industry norms for guidance;FN8 and
• Much of this sector, regardless of location, believes that marketing in the US represents an important opportunity for scaling and impact success.

The DTx subsector, while very new, is slated to hit $9B in the US by 2025, and $56B in global opportunities by that time.FN9 A number of converging factors are helping to drive this significant growth, including:

• the urgent need globally to find new ways to manage escalating NCD/chronic disease burdens, since traditional forms of medicine all too often have been unable to do so effectively, affordably, and with sufficient access for all populations in need;
• relatedly, the unsustainable growth in NCD-related costs and complexities

for our aging global populations;

• the alarming lack of access to NCD specialists in many parts of the world, including in the U.S. (e.g., in rural and low-income areas, as discussed in our White Paper here). Further worsening access challenges, aging populations often require more than one type of specialist because they suffer more than one NCD;FN10
• SARS-CoV-2, which has accelerated both the need and the desire for virtual care, prompting regulatory and policy changes to loosen historical restrictions on telemedicine;
• a larger healthcare paradigm shift towards more decentralized, personalized care, as we have written about in various reports. The DTx sector is well poised for this shift. In contrast to costly “intervention-heavy” NCD management historically offered, DTxs provide proactive, patient- facing care that focuses on prevention, improved outcomes, and ultimately greater affordability and access;
• the emerging published evidence, reviewed by FDA, demonstrating that DTxs have the capacity for improved outcomes in chronic disease management; and finally
• the increased interest from investment sectors, including in low- and middle-income countries, as reflected by a number of newsworthy DTx- related financings and acquisitions.FN11

Given the growing importance of this subsector around the world, this White Paper provides a high-level overview of DTxs, in the following order:

• We summarize in Section A, evolving definitions for digital therapeutics here in the US;
• In Section B, we offer a broad overview of key regulatory premarket review considerations, and finally;FN12
• In Section C, we discuss other important issues for US marketing and impact, addressing both challenges (e.g., current payor-side uncertainties and the need to gain consumer/physician trust); and opportunities (e.g., the potential of these innovations to improve access for underserved populations).

One final introductory note on the objectives of this report. This report is different from most of our other White Papers insofar as it is more technical and detailed on the regulatory side. Although not intended to serve as regulatory advice, a number of companies with whom we have spoken, have registered a desire to go to market in this area, and/or have asked generally about the space. For these reasons, we felt that a report with greater specifics would be helpful to interested companies and their regulatory/technical teams.FN13 For companies and our other stakeholders that do not require such detailed regulatory guidance, a general perusal of the report will nonetheless be helpful, since DTxs represent an important force in the future of HealthTech innovation.

Please email c.haynes@teamfundhealth.org to request access to the full report.

Footnotes

FN1 Although these terms may be used interchangeably, we rely on “DTx” or “DTxs” for consistency in this report.

FN2 Vassev, Nikolai. How Digital Therapeutics Platforms Are Revolutionizing Healthcare Delivery. Forbes. February 17, 2022. https://www.forbes.com/sites/forbestechcouncil/2022/02/17/how-digital-therapeutics-platforms-are-revolutionizing-healthcare-delivery/?sh=2f3c74415a28

FN3 Although the Rx requirement remains an issue of debate, we rely on this distinction for purposes of discussing U.S. market considerations, since claims to treat non-communicable diseases will require Rx labeling, and reimbursement will generally not be available for over-the- counter (“OTC”) products.

FN4 See generally, Deloitte. GAIA. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-digital-therapeutics.pdf

FN5 Deloitte. Digital therapeutics. Catalysing the future of health. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-digital-therapeutics.pdf Deloitte identifies other disruptors, including: (a) customized, personalized treatments; (b) prevention and early detection; (c) greater attention to curative therapies; and (d) precision interventions such as robotics, nanotechnology, and tissue engineering. These disruptors, while applicable to high-income countries, may not represent short- or near-term drivers in the space that we occupy: the global health digital health/MedTech landscape. In the coming months, we will prepare a separate report on future forces driving digital health/MedTech innovation in global health.

FN6 As part of our ongoing landscaping efforts, we have prepared a proprietary Appendix of ~110 examples of DTxs by country.

FN7 Countries with quicker adoption include China, South Korea, and certain countries in Europe, including Germany. In Germany, the Digital Healthcare Act 2019 (Digitale-Versorgung-Gesetz, DVG) paved the way for reimbursement for digital therapeutics (Digitale Gesundheitsanwendungen, or “DiGA”), enabling doctors to prescribe digital therapeutics to publicly-insured patients and receive payment in the same way as for traditional treatment. The criteria for listing as DiGA are aligned with the European Medical Device Regulation (“MDR”). The DVG also introduced the “Fast-Track Process,” an accelerated regulatory pathway for digital health applications. Digital therapeutics can undergo a streamlined review in order to be included in a central registry of apps that can be prescribed by healthcare practitioners (“HCPs”) and psychotherapists, and be reimbursed by Germany’s statutory health insurance providers. Deloitte. GAIA. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-digital-therapeutics.pdf

FN8 In the U.S., the Digital Therapeutics Alliance (“DTA”), together with regulators, payors, and legislators, is taking the lead in advocating and helping to frame out the space on behalf of the global industry – not just US-based companies. This is evidenced, for example, by DTA’s unique multi-country membership. In contrast to other US-based Life Sciences Industry Associations, the DTA has member companies from all over the world, including a number of Chinese-based companies.

FN9 Digital Therapeutics: DTx market trends and companies in the growing digital health industry. Insider Intelligence. March 15, 2022. https://www.insiderintelligence.com/insights/digital-therapeutics-report/. See also Deloitte. GAIA. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-digital-therapeutics.pdf

FN10 See, e.g., Beattie, Linda, et al., and other references included in our White Paper cited above. Physician shortages in medical specialties in 2021: An inside look. Merritt Hawkins. March 16, 2021. https://www.merritthawkins.com/news-and-insights/blog/healthcare-news-and-trends/physician-shortages-in-medical-specialties-in-2021-an-inside-look/.

FN11 Examples of investment interest include: (1) the US $18.5B merger of virtual care solution provider Teladoc and chronic health management solutions provider Livongo in 2020; (2) large MNCs acquiring digital health innovators (e.g., Roche’s 2017 acquisition of diabetes management app mySugr, and ResMed’s 2019 acquisition of digital respiratory health company Propeller Health); (3) Pause Labs $50M Series A financing; (4) Woebot’s $9.5M strategic alliance with Bayer just this month (March 2022); and (5) Akili’s $160M funding to treat acute and chronic cognitive disorders. DTA. Digital therapeutics alliance [homepage on the Internet]. Available from: https://wwwdtxallianceorg/. See also, Deloitte. GAIA. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-digital-therapeutics.pdf.

FN12 As noted above, countries like South Korea and Germany also have created regulatory frameworks to facilitate market entry of DTxs.

FN13 For companies that do use this White Paper for jumpstarting go-to-market efforts in the US, we caution that the DTx subsector is still rather new and, for that reason, remains somewhat in flux. Companies are advised to monitor for further developments in the coming months and years.