In this week’s blog, guest author Ahmed Albaiti (Principal, ZS), makes a case for why the recent wave of bad news in digital health may just be the focused push that the industry needs.
With a year’s worth of ill omens for digital health culminating in the implosions of Silicon Valley Bank and Pear Therapeutics, the digital health industry faces its first big “Uh oh” moment. So, what do these unrelated but easily conflated events mean for the future of an industry that so recently looked poised to skyrocket?
To put it succinctly: I believe a period of sustained austerity marks an inevitable and healthy development for the digital health industry. Put differently, all this bad news is actually good news. To understand why, let’s take stock of the past 10-ish years.
The evolution of digital health
First, prescription digital therapeutics crawled out of the primordial Health IT soup to stake its claim as a new distribution and commercial vehicle for digital health innovation. Then, the U.S. Food and Drug Administration codified software as a medical device (SaMD) regulations, offering clarity to product developers and opening up new opportunities for patient impact. Finally, the COVID-19 pandemic fueled unprecedented adoption of virtual care products and services.
But all the money that flowed into digital health led to massive fragmentation and an explosion of innovations that haven’t been adopted and never will be. This has been bad for everyone. To position their companies for sustained competitive advantage in the future, digital health leaders must leverage the learnings of the past decade by following five principles:
- Focus on core ingredients only
- Leverage progressive regulatory pathways
- Lead with integrated evidence programs
- Rethink the “who” and the “how” of digital health partnerships
- Rethink how (and with whom) to partner
- Practice extreme commercial agility
Focus on core ingredients only
Up until now, many healthtech companies have had the luxury to manage their full end-to-end offering thanks to the robust funding environment. While this may work elsewhere in tech, healthcare is a team sport with more referees than you can count. Whether developing an algorithm, an interface, a telehealth service or data set, leaders should focus on core ingredients only and offload the rest to partners, platforms and vendors.
Companies that follow this advice will reduce their cash burn, spend less time on dead-end ideas, unshackle innovation teams and reduce fragmentation by consolidating digital health offerings.
Leverage progressive regulatory pathways
Time to market and regulation have traditionally been at odds with each other. Yet we have every reason to believe that SaMDs are poised to drive massive growth moving forward, thanks to new regulatory clarity, the accelerating liberation of new data and efforts in some markets, such as Germany, to create reimbursement pathways that predetermine regulatory clearances.
The shift from wellness to clinical offerings is projected to grow the SaMD market to more than $5 billion over the next decade (from its current $1 billion), a figure that’s probably conservative given the rapid advances of generative AI. It will become increasingly imperative that digital health leaders incorporate SaMD components into their solutions to remain competitive.
Lead with integrated evidence programs
Leading with integrated evidence may sound painfully obvious, but this practice is often in conflict with managing a company’s cash burn—an increasingly acute requirement these days. Healthtech companies that build an integrated evidence program can benefit from fewer studies, shorter timelines, production of evidence outputs for multiple stakeholders, and acquisition of potential customers and early adopters as a natural byproduct of this work.
Traditional evidence generation can be prohibitively expensive while limiting a company’s growth potential. Yet insufficient evidence can render an otherwise solid business case dead on arrival. An integrated evidence program should include the following:
- A pre-randomised-controlled-trial evidence strategy
- Evidence planning and partnership development strategy
- Stacked (rather than sequential) study design
- Integration with third-party data sources
- Novel channels for patient identification, activation and recruitment
By collecting both clinical and economic benefits upfront, companies can home in on their product’s unique value story early and using it to influence provider and payer adoption and reimbursement decisions.
Rethink the ‘who’ and ‘how’ of digital health partnerships
Partnerships in digital health aren’t new, and they’re not going anywhere. But differences in culture, operating models and expectations have caused many a budding partnership to fray and falter. In our experience, the most common culprits are misaligned incentives and poor partnership structures.
Companies looking to explore going to market with partners should consider:
- Prioritising partners (even non traditional ones) where the health economics align
- Ensuring partnerships align on shared problems, not just shared solutions
- Investing in partner ecosystems that can co-create, validate and scale
- Sharing both the risks and the upsides
Like everything else in healthtech, successful partnerships will be those that follow an agile and progressive life cycle, allowing them to fail fast and evolve with stage gates in place.
Practice extreme commercial agility
Commercialising digital health solutions is by far the hardest stage of the journey, as evidenced by the past several years of uneven-at-best results. Patchy reimbursement and incomplete evidence that fails to prove outcomes from solutions are just two culprits among many. But bright spots do exist, including:
- Direct-to-consumer models
- Statutory reimbursement pathways, especially in the EU
- Remote patient monitoring and virtual care reimbursement, especially in the U.S.
- Value-based care and benefit-coverage arrangements, especially in the U.S.
The healthtech companies that experience the most success commercialising their products will be those that embrace an ethos of experimentation with multiple business models and markets before arriving at the one—or the combination—that works. With market conditions changing as rapidly as they do, agility is paramount.
From digital health fragmentation to focus
The healthcare ecosystem doesn’t need more products and solutions. Innovations can and should be revisited, repackaged and redeployed—only this time, with better evidence, commercial agility, regulatory progression and single-minded focus on digital health products’ core features. Less is not more, but it just might be better. And everything the industry does today to make itself more successful tomorrow advances the mission not only to improve wellness but to treat disease through increasingly personalised therapies.
Interested in what’s next for digital health in the pharmaceutical sector? Get an expert opinion for what the future of digital health looks like for the industry. Download HealthXL’s latest report on Pharma 3.0: Doing Digital Health Better.