August HealthXL Meeting Snapshot
Our meetings create a space for industry experts to connect and discuss the most current and evolving topics in the digital health space. This segment highlights key learnings and ideas cultivated by our network of payers, providers, pharmaceutical companies, health care and technology organizations.
DTx Employer Partnerships - August 5th, 2021
We have seen a significant number of employers starting to incorporate DTx products into their benefits plans (e.g. Pear Therapeutics reSET, Freespira, etc). Employers are an attractive market entry route as they tend to demand lower evidence thresholds than others, favoring case studies over RCTs. This is a strong market entry route in the US, particularly in the advent of brokering agencies helping employers select specific, best-in-class solutions for their employee base.
However, this route is not without challenges. In the EU this market entry route is next to non-existent as companies focus much more strongly on regulatory frameworks such as NICE and DiGA. We have also seen DTx predominantly addressing tier one therapeutic areas being selected by employers. These include diabetes, weight control and behavioral health solutions. This market entry route is more difficult for those addressing other areas such as respiratory disease. Additionally, employers are generally extremely risk averse and can be slow to get on board with new technologies or systems. Pricing models are also still in development for employers choosing to offer DTx as a benefit. What we’re seeing is a rise in consolidation, with major players such as Teledoc acquiring smaller DTx companies and then going on to offer their services to employers in the form of bundles.
DTx Overview of Market and Deals - July 21st, 2021
The DTx market is estimated to be worth between 7 and 9 billion US dollars in the next 5 to 7 years and Prescription Digital Therapeutics (PDT) are expected to be the future of the DTx industry, representing 57% of total DTx investment in 2020. Just over the past few months we have seen a lot of exits in the form of IPOs and SPACs. For DTx companies that become too big to get acquired (e.g. platform-based companies), IPOs are a great exit strategy. SPACS have become the trend lately, however, this exit strategy can be challenging for companies that aren’t yet ready to become public and may ultimately lead to some failures in the next few months/years.
Of the companies they invest in, trait investors expect scalability, potential expansion to other therapeutic areas, clinical evidence and scientific foundation, prescribable and reimbursed solutions and user engagement. For some investors it is also important that companies have had real partnerships with relevant impact.
Pharma-DTx partnerships are also still a work in progress with strategic alignment between the two parties being critical to success. As many of these partnerships are still in the early stages, ROI is hard to define and is not expected in the near future for pharma. The ROI also varies across departments as the KPIs are different depending on the department that leads the partnership (e.g. marketing, business development, R&D, etc). We may likely see pharma move from the partnerships model to the acquisition model in the next few years. This is not an entirely new model; traditionally, biotech companies have taken this path as they don’t have the capacity to commercialize themselves. However, there are still some doubts about pharma being the right stakeholder to acquire DTx companies.
The volume of competitor solutions may be a blocker to patient and physician adoption. To combat this we will likely see the DTx industry evolve to a branded unique platform model that provides multiple digital health solutions.
Best Routes to Market for DTx in the US - July 20th, 2021
What are the most scalable and sustainable routes to market for DTx companies in the US? Beyond clinical evidence, the right commercialization model is key to drive adoption of DTx. A number of DTx companies have chosen pharma partnerships as their route to market, but is pharma the safest and most efficient commercialization model for DTx companies? Employer and payer partnerships have proven to be great options in the US and D2C can also be a valuable approach, especially for new players that aim to gain traction faster and easily collect RWD to improve the product. An unexplored potential path is via medtech companies that are also seeking new ways to reach their customers. Perhaps routes to market undergo iterations as the product gains traction.
Several factors were identified as key considerations for approaching Payors with digital health solutions:
1) Demonstration of economic savings
2) Therapeutic area
3) Demonstration of scalability
4) Treatment duration period with a preference for finite interventions
There is a diversity of health plans in the US and the truism is that when you know one plan, you know one plan. IDNs are likely to be more receptive to digital health solutions as they are economically aligned to manage the total cost of care for patients. Larger, national health plans are also keen to support innovation and can be a good target. Regional plans are likely to be followers of national plans as opposed to taking the lead on innovation in this area.
Self-insured employers have been a successful route to market for digital health businesses, especially where therapeutic area interests align and there is sufficient data to support efficacy. As this segment of the market evolves, the role of platforms such as Solera Health and Virgin Pulse should be noted as they can be gatekeepers for access to employers who want to move from point solutions to platform solutions for their employees where data/efficacy between applications can be monitored.
Bear in mind that Payors seek to manage their costs and historically this has meant designing policies with restrictions rather than incentives to access therapies. This mindset can inform how they design the promotion of DTx programs in the future. While you may consider reduced pricing for early adopters, be aware that reference pricing is out there already and depending on the maturity of the app, further price rises may be difficult to execute. Starting with an “at risk” pricing model to prove efficacy can be a successful way to gain traction and allow for better pricing negotiations at a later stage.
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