Digital health is transforming the way pharmaceutical companies, payers, healthcare providers (HCP), and patients interact and extract value from one another. This article briefly explores the shape of the digital healthcare ecosystem, the role of digital therapeutics in terms of both outcomes and the market, and the ways in which digital healthcare is likely to evolve.
The Digital Health Ecosystem
Definitions in the digital health ecosystem are still quite loose due to the evolving nature of digital health technology and the eagerness of disruptors to create value out of novel technologies and solutions. This is compounded by a general resistance to change in the healthcare space.
But broadly speaking, digital health refers to companies, products, services, and concepts that exist at the intersection of technology—notably information technology—and healthcare.
It can be separated into two categories: digital therapeutics (DTx) and digital care. The former refers to evidence-based interventions, made available through some device or application, to help patients and providers prevent, diagnose, manage, and treat a specific disease.
In addition, DTx providers are expected to engage end-users in product development and usability, feature robust patient privacy and security, respond to regulatory bodies as necessary, and collect, analyze and apply real-world evidence and product performance data.
Finally, digital care loosely refers to businesses that offer care solutions to patients for a variety of health troubles, much in the same way a clinic or hospital might.
Outcomes in Digital Health
Especially in disease prevention and long-term disease management, statistically significant positive outcomes have been found.
For example, Omada Health, a digital care solution with personalized programs for diabetes, musculoskeletal disorders, prediabetes and weight management, hypertension and behavioral health, features in 16 peer-reviewed studies with demonstrable positive outcomes.
Virta, which operates in the diabetes-management space, reported reversal of diabetes in 60% of patients and reduction of insulin usage in 94% of patients.
Finally, Pear Therapeutics, owners of reSET (substance abuse), reSET-O (opioid abuse), and Somyrst® (insomnia) released real-world data from its applications demonstrating improved clinical outcomes for patients.
The Evolving Digital Health Market
The majority of DTx applications tend to be focused on management—of diabetes, of substance abuse disorders, of body weight—and prevention—such as for heart disease. In other words, it relates to the management of chronic diseases and behavioral conditions, which make up a large part of US healthcare spending.
The market is growing quickly and, for the most part, year-on-year. It increased from $1.1B in 2011 to $9.4B in Q3 of 2020, with the only dip (10%) appearing in 2019. The market is evolving so rapidly, in fact, that a 2020 forecast by Insider Intelligence placed 2025 DTx market value at $9B, while a 2021 forecast has adjusted this to $56B—a 600% increase.
A variety of DTx business models exist. According to a McKinsey report, 67% of companies “reported having a digital solution as a core asset, … while approximately 20% reported having data or hardware as a core asset.” Despite the fact that 85% of DTx companies have the “technical and legal ability to monetize data”, many find it doesn’t fit with their current model or presents too many challenges.
Digital solutions, like an app or software, make up 67% of core assets for DTx companies, while unique (and patented) algorithms and a platform connecting stakeholders make up 40%. Only 20% go to market with a device, and likewise, only 20% market a data set as their primary asset. (The values exceed 100% as many providers work in a combination of two or three spaces.)
McKinsey report five business models used by most DTx companies: as a prescription digital therapeutic (PDT), as a solution marketed to employers, as a solution marketed to payers (who offer it to policyholders), as a solution marketed to HCPs or pharmaceutical companies and, of course, as a solution marketed directly to consumers. The latter is the least common among main players as there are a number of related challenges.
Partnerships also vary widely in the DTx space. Many providers, of course, choose to collaborate with incumbents who can offer experience, funding, and a strong reputation.
Some of these are device providers, such as the partnership between uMotif, a “patient-centric platform powering site-based to fully decentralized clinical, real-world and post-marketing research” and Fitbit. Unsurprisingly, pharmaceutical companies also make for strong partners. Noom and Novo Nordisk are one well-known example, as are Happify and Sanofi.
Novartis has invested in a number of projects, including Proteus Digital Health, which makes an ingestible sensor. Others, however, decide to move forward without partnering. DarioHealth, for example, built a smart glucose meter from scratch, preferring the agility in this approach to partnering with an existing device.
In the years to come, reimbursements are likely to be an important topic for DTx companies as many of the telehealth benefits provided by Covid-19 emergency are rolled back or rethought. According to one article in Forbes, leaders will need to demonstrate the value of the data produced and work towards establishing long-term government payment contracts. Meeting regulatory requirements will be an important first step for DTx companies—something pharmaceutical companies can provide guidance on.
Value-shift Models Seen by Pharma in Digital
The “digital” in DTx has unsurprisingly brought with it many of the business model attributes of technology companies, including a focus on patient outcomes and value, as well as proactive management of disease—an area, as we’ve seen, where DTx is very active. Pharmaceutical companies will need to (and have already) embrace such models, especially as digital incumbents like Google and Apple move to market with digital healthcare products and services, bringing with them all their experience and expertise in customer-centric models.
Fortunately, some are already making great strides in this area. Novo Nordisk, for example, is making good use of the BrightInside digital healthcare platform to extend the benefits of its next-generation insulin pens. In a rather unique move, the company has also taken a non-exclusive approach to its partnership. “By safely and securely enabling data integration across Novo Nordisk’s partner ecosystem, the BrightInsight Platform supports Novo Nordisk’s goal of helping more people realize the full benefit of their innovative medicines.”
Big Pharma in Digital Health
So what role does (and might) big pharma play in digital health? As already noted, there is some hesitation. Pharmaceutical companies obviously see the benefit of new technologies (and the data that tends to come with them), but are wary of the risks associated with the high barriers to access inherent in their own, tightly regulated space. While evidence-based outcomes certainly aren’t rare, as we’ve seen, neither are they the norm, which raises other questions about compatibility. Finally, there are cases where the technology is simply unable to capture a sufficiently significant portion of the market to make it viable. This was the case with Proteus, who filed for Chapter 11 Bankruptcy (and was snatched up by Otsuka for a relative pittance of $15M) when it failed to secure customers for its ingestible chip.
Nonetheless, big pharma will want to collaborate with big tech to reap the benefits that are obvious to both, even if it isn’t clear how to go about it. Both will need to play to their strengths, with tech and data companies providing technologies that customers enjoy using and in the production of which they’ve played a central role, with drug-makers providing regulatory and empirical research support.
The Importance of Embracing the Future of Digital Health
There’s no question that pharmaceutical companies will need to embrace digital health to maintain relevance. The age of generalized molecules is coming to a close. The future lies with earlier diagnoses, thanks to always-on monitoring from smart devices like smart watches, smart homes, and smartphones; treatments with fewer side-effects, including DTx treatments focusing on successfully modifying behaviors; managing disease successfully through data-driven lifestyle changes; and highly personalized medicine (including drugs).
All of these will mean less demand and weaker markets for traditional, general-subscription drugs, meaning that pharmaceutical companies will need to embrace digital health or fade into the background. This is especially true as the barrier to FDA approval has already been cracked not once, but twice, by Pear Therapeutics and Proteus, and digital health startups are unlikely to remain as hesitant about seeking regulatory approval on their own.
Already, pharmaceutical companies have made important strides in embracing the inevitable future of digital health. Beyond the investments mentioned above, for example, innovation challenges are proving to be a low-risk, high-return approach for companies. Eli Lilly and Company’s “Transforming IBD” innovation challenge brought clinicians, patients, and innovators together. The winner, Health Voyager, won $50,000 and aid in developing their solution.
How to Get Started with Digital Health
After examining a number of digital health businesses, there are several steps for successfully working in the digital health and DTx space.
Defining a clear value proposition to address customers’ unmet needs is key, as is the design of a satisfying and good customer experience, something tech companies are particularly good at.
Healthcare companies can provide support by adding their experience to technical expertise to develop robust, compliant products with a proven value that opens the doors to the most appropriate regulatory pathway.
Finally, digital health stakeholders must develop a core asset that creates a sustainable advantage and scalable model, exploring any of the different business models mentioned above.
Conclusion
Digital health and DTx are gaining momentum. The top 150 start-ups in 2020 received over $20B in funding, and the market continues to grow at a steady rate. Pharmaceutical companies are making headway in this space, but are already working at a disadvantage in many ways. That said, the experience in key aspects of empirical research, regulatory compliance, and going to market are invaluable. But very few pharmaceutical companies have a strong, innovative digital health strategy, confusing this instead with digital marketing.
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For more information, contact Dr Andree Bates abates@eularis.com.