(2016-02-26) Digital Therapeutics Vs Digiceuticals Defining The Software-Mediated Healthcare Landscape

Digital Therapeutics vs Digiceuticals: defining the software-mediated healthcare landscape

Chronic diseases are overwhelmingly behavior-mediated. For example, smoking status is the number one health predictor — smoking is addictive, but it is behavioral. Today, behavior change is the first-line treatment for many chronic diseases including smoking cessation, type 2 diabetes, heart disease, mental health.

It can take the form of therapy, of coaching, of check-ups, of sensors, etc. In fact, the biggest problem with behavior change is the lack of consistency and reproducibility of process and outcomes. Enter the new field of digital therapeutics and an era where technology is finally enabling healthcare.

Mike Payne, the CCO of Omada Health defined digital therapeutics as: “this new field of medicine consisting of immersive programs that act reliably and remotely to change individual’s behaviors in order to achieve positive clinical outcomes and ‘bend the curve’ of future medical cost growth.”

Digital Therapeutics is a different class of product than Digiceuticals

Hundreds of millions of dollars have been invested in digiceuticals: in “wellness,” including MapMyFitness, Strava, Diabetek, Fooducate, Cardiio, Luminosity, Pacifica, Headspace. These companies provide important tools. Some provide live one-on-one sessions with experts. They are often based on scientific findings or clinical practice. But, the efficacy has not been evaluated in prospective randomized clinical trials and found to be non-inferior to the control group. Thus, while the app usage data might show correlation with the end goal, it has not proven causation.

Consumers will pay for them and they need a traditional consumer acquisition marketing (B2C) approach. In healthcare, consumer businesses have a very different model: they are typically not reimbursed, not FDA cleared, and have much lower pricing and customer lifetime value (although they often have much larger customer bases).

This post will focus on Digital Therapeutics and will examine four different approaches to digital therapeutics trying to answer: what is the digital therapeutics business model?

Digital Therapeutics Business Models

Omada Health has transitioned from a digiceutical to a digital therapeutic as they’ve spent a lot of time and money generating clinical data to prove the value of their product. As a result, the company collects a per-member-per-month (PMPM) fee from self-insured employers and, importantly, also insurance companies. Omada could move to a much higher PMPM for the perfect patients

Other companies like Chrono Therapeutics, which is an app paired with a drug delivery system and embedded sensor, are focused on the power of digital modalities to supplement traditional pharmaceutical benefit. In this model, a physician prescribes the drug, which comes with the digital therapeutic. It will be reimbursed the typical way drugs are reimbursed

Pear Therapeutics is another digital therapeutic created to supplement traditional drugs. It is built on the foundation of our existing pharmaceutical distribution system, making payment/collections less problematic. Pear develops digital companions for approved drugs (initially CNS drugs).

But, wouldn’t the generic substitution also perform better with the digital therapeutic? If so, how would the doctor write for that? How would it be reimbursed? How would off-label use be treated or monetized?

Finally, Akili Interactive Labs is another interesting approach. Bringing gameified technology to cognitive assessment and therapy, Akili is pursuing a strategy that mirrors the drug industry. Specifically, they are patenting a digital approach to measuring and improving interference processing (a component of executive function), and will seek FDA clearance for the resulting product. While reimbursement pathways are unclear, Akili could price like a product (drug or device) or could charge the physician directly, who would cover that cost out of their revenue from reviewing the data (similar to the reimbursement for remote monitoring of devices). The former would yield more pricing flexibility, but requires negotiation with payers to get ‘on formulary,’ often a time-consuming and difficult process.