Exploring the Digital Therapeutics Landscape

Fall was a busy conference season for digital health experts across the globe. Over the past four months, we’ve been fortunate to attend events large and small, including DTx East in Boston, MA, Frontiers Health in Milan, Italy, DTx Asia in Seoul, South Korea, HLTH in Las Vegas, NV, and wrapping up with CNS Summit in Boca Raton, FL. All were impacted by logistical challenges and last-minute dropouts of panelists due to the seasonal increase in COVID-19, influenza, and RSV cases across the globe. Yet for those who were able to attend, they were insightful. Each event sparked new ideas and concepts as we close out 2022, and look ahead to 2023 and beyond.

Most notable was the explosion in activity and the elevated profile of digital health. Digital health had a massive profile at HLTH, Frontiers Health, and CNS Summit, with digital health executives sitting on various panels to discuss the contributions of digital tools to behavioral health, drug efficacy, drug development, and virtual care. They also spoke to challenges in reimbursement and scalability, health equity and accessibility, patient engagement, and technology overload for providers. DTx East was the largest digital therapeutics-focused conference to date with over 400 in-person attendees, representing both an increasing level of activity in the DTx space and an increasing breadth of DTx-adjacent solutions including digital patient monitoring and digital prognostic apps. DTx Asia was the first-ever international conference to be held on digital therapeutics, symbolic of the rapid growth of digital health across the Asia Pacific region.

Looking ahead

So, what’s on the horizon for 2023? Here are a few observations.

1. Funding is still available. After a record-breaking year in 2021 where $29B was invested in digital health ventures, VC funding totaled only $12.6B through Q3 this year across 458 deals, according to Rock Health. But as with every downturn, quality rises to the top and digital health ventures that can demonstrate real value and impact on health outcomes in 2023 will still gain investor attention, as many VC funds are still sitting on significant dry capital raised during the boom of 2021.
2. Pharma is organizing around digital medicines. There is increasing experience and internal alignment within pharma companies on digital health and a shift from the use of digital tools solely within clinical trials to the adoption of digital products to support the commercial rollout of drugs. The sophistication is clearly above the false starts of digital partnerships with pharma in the recent past. As a result, standalone digital therapeutics and digital disease management solutions are being seriously implemented to complement more traditional medicines, and planning is underway for more complex, and perhaps more impactful, drug-digital combination products. However, digital medicines are still misfits with the commercial models of most pharma companies. Many large pharma companies such as Pfizer, Biogen, Roche, Otsuka, and others have created new business structures to better focus their efforts on developing and growing digital health assets.
3. Reimbursement for digital medicines in the US continues to emerge. The revenue model is still a work in progress. Considerable progress has been made with provider codes, such as for remote therapeutic monitoring, digitized behavioral therapy, and even virtual reality. This has led to the broader adoption of the “virtual care” model in which the software manufacturer also serves as a provider. Device-specific HCPCS codes are expected to continue to roll out in 2023, but reimbursement for these specific codes and claims adjudication is still challenging. In the near term, many digital health companies will continue to gain traction through a variety of go-to-market approaches, including digital formularies, direct-to-employers, health plan programmatic spending, and bundled as part of larger virtual care or value-based offerings. We also expect to see more direct-to-patient/telehealth approaches to prescribe/onboard patients, particularly with prescription digital therapeutics and diagnostic aids.
4. Reimbursement in Europe is growing. DiGA is not a perfect reimbursement solution, with many early companies being de-listed because they underestimate the time and rigor required for post-market clinical evaluation. However, this model, which so far has seen the three largest German health insurance companies hand out 40,000 DiGA access codes, seems to be good enough for most other European countries to replicate, with considerable progress expected in Belgium, France, the Nordics, and other markets in 2023. At the same time, delays with MDR-notified bodies are starting to paralyze innovation, particularly as the deadline for the Class I to Class IIa transition nears. The impact of the MDR transition was highlighted when the Swiss government announced that it would accept FDA-approved medical devices in order to expedite the time to market.
5. Uptick continues in Asia Pacific. There is a lot of activity and considerable funding for digital health in the Asia Pacific region. Regulatory pathways are being created for digital health throughout the region, with government reimbursement pathways emerging in Japan, South Korea, and Australia. At the same time, direct-to-consumer models are on the rise for digital health in India, China, Southeast Asia, and the Middle East.
6. Regulatory pathways in digital health are becoming increasingly clear in the US. Fall 2022 provided considerable clarity on regulatory oversight of digital health products. The FDA dropped a bombshell during their presentation at DTx East, when they signaled the end of the FDA’s digital health pre-certification pilot program, due to political and implementation challenges, and announced updates to several highly anticipated digital health-related guidance documents. The most notable change was a stricter interpretation of regulatory oversight of clinical decision support software, which has already received considerable pushback from the industry. Additional clarification is expected in 2023 on software documentation, cybersecurity, breakthrough devices, sunsetting of COVID-related enforcement discretions, and – hopefully – change control plans for artificial intelligence/machine learning (AI/ML)-enabled software. Unfortunately, the real-world data (RWD) opportunity from digital health solutions will remain largely untapped, particularly since it is still unclear how FDA, let alone payers, will accept RWD. The continuing backlog that we have seen at CDRH in 2022 will likely continue to clear in 2023, and additional approvals of products based on virtual and augmented reality, digital pathology, and digital biomarkers, as well as additional digital therapeutics, should be expected to provide additional clarity on clinical and regulatory requirements, further paving the way for other innovators in the space.

The year 2023 is shaping up to be an exciting time to be developing and launching digital medicine products that could transform the way care is delivered on a global level. Many lessons have been learned from the recent past, and attitudes from providers, payers, regulators and large pharma are moving in the right direction globally as evidenced by recent actions by all stakeholders. We can’t wait to see how quickly progress continues across the industry.

About the Authors

Scott Snyder, PhD (left), is Chief Digital Officer, and Martin Culjat, PhD (right), is the Senior Vice President and Global Head of Digital Medicines & Regulatory Innovation, both at EVERSANA.