contributed by Chris Taylor

Sally’s story (and how it tells us DTx distribution is broken):

Sally has been looking forward to (for quite some time) her first granddaughter’s first birthday. You may be a parent or relative who has participated in this type of celebration and can attest to the fact that it is a memorable experience. For Sally, being around family, seeing her granddaughter open her first present, and experiencing the hilarity of watching her eat birthday cake for the first time, really brought her joy. That was until she bent over to pick up her granddaughter. That’s when the pain shot through her lower back.

Now you need to know that a decade prior, Sally got into a small car accident and sustained a minor injury to her left big toe. This injury caused a change in her walking gait, which put slight pressure on the iliotibial band (IT band) that runs on the outside of the thigh. This caused instability and a downward pull of the gluteus medius and Quadratus Lumborum (QL) muscles. It cascaded to create a pull on the lumbar region of her spine and a corresponding compression of the nerves—all resulting in lower back pain. The back pain didn’t start for almost eight years after the accident, and it never occurred to Sally or others that the pain she was experiencing was related to the wreck. Her body was experiencing a chain reaction of breakdowns.

As you would expect, she sought treatment through her employer group health plan. This meant she was going to an in-network physical therapist (PT). The specialist guided her through a standard series of lower back pain stretching and strength exercises. At first, these exercises seemed to help… until the birthday incident.

After that, her back pain escalated quickly. She was prescribed more intensive pain medications and was referred to both an orthopedic and neurosurgeon for surgery. A single-level posterior lumbar-fusion surgery was recommended that would have cost Sally her max $4,400 in total out of pocket spend and $26,000 [1] to the self-funded group health plan that covered her procedure.

Still over a decade away from retirement, and desperate for alternatives to what she viewed as an “old person’s” surgery, she was introduced to a digital solution through a friend. This digital application incorporated motion capture technology with artificial intelligence and trained PT’s to look at whole body mechanics as a way to treat pain. It wasn’t covered by her group health policy, but Sally decided to pay the fee and give it a try. It was only through this solution that the core issue was identified, which tied her lower-back pain to the big toe injury she sustained 10 years ago. The outcome was a more appropriate and non-invasive treatment protocol to be prescribed and monitored through the digital application.

Within 60-days of being introduced, Sally was virtually pain-free and more productive. These results represented a big win for her and her employer. She avoided a major surgery, paid a fraction of the total out of pocket that was coming her way if the surgery was elected, and the employer avoided a major expense.

Unless you are cold hearted, it’s difficult to not feel a degree of empathy for Sally. For those of us in the healthcare industry, we are well aware of the unnecessary surgeries, over prescribing of pain medications, and excessive treatments for chronic medical needs. If it wasn’t for this digital therapeutic (DTx) solution, Sally was on this path. That path was not appropriate for Sally, and the unnecessary surgery would have added more cost pressure to an employer already sensitive to high healthcare prices.

As an industry, we aren’t doing enough to get the right solutions into the hands of the right people at the right time. This is a technology challenge just as much as it is a distribution problem. Read on to understand why distribution is the bigger and more meaningful issue we need to work on.

Numbers story:

What do we mean when we say digital therapeutics? According to the Digital Therapeutics Alliance, “DTx delivers evidence-based therapeutic interventions to patients that are driven by high quality software programs to prevent, manage, or treat a broad spectrum of physical, mental, and behavioral conditions. Digital therapeutics form an independent category of evidence-based products within the broader digital health landscape, and are distinct from pure-play adherence, diagnostic, and telehealth products” [2]. This is a good working definition. The key is that these solutions are evidence based, which means they are all about outcomes.

DTx solutions are more than just a rebranding of digital health or health and wellbeing. A variety of the digital health solutions, of which there are many, have not delivered. Because some of these early tools have proliferated without being tied to evidence-based approaches, we think they are the ones most likely to disappear due to eroding the market’s trust by lack of provable efficacy. DTx approaches deliver a new level of rigor that proves the efficacy of treating, managing, or preventing a medical condition. Say it with your friends at m4… “Evidence is everything.” We’re in a skeptical, prove-it-to-me industry with those that are the gatekeepers to success. Some of the more successful DTx solutions in the market today have well established and proven claims like Proteus, Livongo, Akili, or Omada.

But we are still early. Omada’s study that concluded at the end of 2019 showed enrollment of less than 500 participants. This industry is still working through uncertainties on what constitutes a successful trial and how to measure digital results. There is yet to be a large scale RCT (randomized control trial) run on a broad population against a control group or “placebo”. We don’t even have a universal definition of “placebo” in digital health yet.

In addition, there has not yet been wide adoption by doctors, patients, and payers in real-world scenarios. This isn’t like a drug. There is an additional burden to prove efficacy beyond human physiology. For example, in the real world there are cultural dimensions to technology adoption and use. It goes beyond the simple task of popping a pill into your mouth and measuring the impact.

Despite the early stage of many of the solutions currently in the market, investors are viewing DTx in a very favorable light.

Globally, the DTx market was roughly $1.8bn in 2018. That is projected to grow to $7.1bn by 2025, which is a CAGR of 21.5% over that period [3]. The amount of investment into digital health is projected to grow from $179.6bn in 2016 to $536.6bn by 2025 [4]. This level of investment has driven a tremendous expansion in the number of solutions and clinical indications that they are treating. In the US alone, 2018 saw $8.1bn invested in digital health solutions, which represents a 42% increase over the prior year [5].

The number of health apps grew significantly leading into 2016. Since then that number has remained fairly steady. As of Q3 2019, there were 44,384 mHealth-defined apps in the Apple App store. This is a 4.5% decrease from the previous quarter [6]. Remember what we said about long-term viability being tied to evidence.

These figures show how a lot of money has been invested to create a staggering number of solutions in the market. The market is growing at a high rate (with a nice washout rate, too), but why do we think distribution for these solutions is broken? DTx has yet to make its way into large scale patient care; otherwise, we would be seeing more IPO’s or larger acquisitions. Has this happened to date? No. This may be due to the long tail of providing the evidence necessary for some DTx solutions. It may be due to a lack of societal trust that these things will do what they are supposed to do. Providers may be holding back on “prescribing” them until the evidence is better. It is very early and the industry is still figuring the correct way to value each solution and to pay for it.

Companies that achieve scale create a liquidity event either through IPO or acquisition by a larger company. According to RockHealth, 81% of the investments made since 2011 are still waiting for a liquidity event [7].

Net overhang – $29.4B (81%)
M&A – $4.1B (11%)
Shut Down – $1.5B (4%)
IPO – $1.3B (4%)

The numbers tell the story that a lot of capital has been invested, a high number of solutions are available, but very few examples have achieved scale. Market adoption for these types of solutions is not easy, but more can be done to get these therapies into the right patients’ hands. There are companies helping to make that happen.

Market Story:

Payers and providers do not have the same objectives. You might be justifiably thinking, “Thank you, Captain Obvious.” Chipper Stotz commented in a recent interview with MobiHealth that “very clear clinical efficacy is going to get a provider excited in the case of prescription digital therapeutics…that is pretty different from what we have heard from payers on that front” [8]. Providers that sit on the cutting edge of advancing innovative treatments are beginning to integrate DTx solutions that show promising results. It would be smart for other hospitals and specialists to begin exploring digital treatments with their patients. If they don’t, they stand to lose patients to more progressive providers.

Insurers are always looking for cost savings. That’s a table stake for any discussion with an insurer P&L leader.  But they also look at how easily any new tool can integrate into their existing systems. We believe these conversations should be happening, as It would be wise of insurers to shore up their portfolio of digital therapeutics to address some of their key cost drivers. This includes a focused DTx strategy to find areas where drug spending can be curbed, chronic disease expenses are combatted, members’ health is improved, and employers’ levels of trust are increased (resulting in winning business in a competitive marketplace).

So, we think a battle for distribution with DTx services is coming. Do you? Will hospital delivery systems want to be the source of trust as a platform to deliver DTx solutions or will it be insurers? The short answer right now is both. How this expands or diverges is a big focus of our community in 2020 and beyond. We at m4 innovation are accelerating the discussion on both fronts to drive growth and scale.

In October of this year in Jackson Hole, we will be bringing to the table leading healthcare executives interested in moving the needle in this space. This will be a meeting with people who want to build distribution that scales treatments that the market needs. There is urgency for our broad base members to get behind these trends, but there is the big question as to who the real rising stars of the growing DTx industry are. What milestones have they achieved?  What therapeutic areas carry the greatest promise in the application of DTx? What is the regulation (or lack thereof) for these new medicines? How do DTx solutions intend to make money? Will the emergence of pharma companies backing DTx solutions help or suppress their growth? And, who in the hell pays for these solutions and how?

Our direct (and sometimes colorful) approach to these private, curated conversations has proven to move ideas from concept to reality. True innovation is expressed through growth—whether it be DTx or other timely issues emerging that we think will impact the next five years. Growth and necessary industry advancement does not happen in isolation. It happens by bringing the right people to the table that can move an issue forward. Then, we all get real about how to do it.

Next Chapter:

Platform companies are beginning to emerge that link the clinical and social determinants of health (SDoH) insights to identify and stratify risk to an “n” of 1. These insights are used to direct solutions to those who need it the most at the right time. This lays the groundwork for payers and providers to more efficiently get the right treatments to those that need it.

For example, take a look at Solera. They pioneered the implementation of value-based arrangements with payers and DTx solutions. This was accomplished by lobbying insurers to cover the cost of these DTx solutions only when the outcomes they claimed were met. This establishes a path between employer-based group benefits and DTx reimbursement. The result is an efficient path for companies to identify and acquire patients.

On the provider side you see companies like Xealth, which integrate directly with electronic heath records such as EPIC and Cerner. The platform enables practitioners to order DTx treatments in a very similar way that they would order a prescription medication. This approach reduces friction with established clinical pathways and EHR workflows. It also makes it easier for DTx companies to acquire patients as a distribution pathway associated with a provider system.

Couple these distribution platform capabilities with new analytics solutions that are getting smarter about who we are, what we need, and predicting when we will need it. Take for example Carrot Health—a recent winner of the Accenture HealthTech Innovation challenge in Houston, TX.[9] Their intelligence solutions attribute several thousand data points to create new levels of insights. Armed with greater degrees of fidelity, DTx companies can more efficiently identify those patients who will most benefit from their treatment. Is this also a strategy that insurers might be able to capitalize on as they think through their DTx models?

If the goal is to get the right solution into the hands of the right person at the right time, then these companies are successful examples of getting that done. It’s time to bring payers, providers, benefits consultants, and technologists together to create meaningful partnerships to accelerate the scale of these solutions. Join our conversation. When the industry meets its next case like Sally’s, will it be ready to provide the best diagnosis for her without breaking the bank (both for Sally and the industry)? This is the answer our community is working towards.