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Digital Therapeutics explained

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Mar 27, 2023

12 min read

Evidence-based treatment for medical conditions ranging from irritable bowel symptoms to schizophrenia might only be as far away as your phone.

Digital therapeutics (DTx) are software solutions that deliver evidence-based medical interventions directly to patients to treat, manage, and prevent medical conditions. If cleared by the FDA, these digital interventions can (theoretically) be prescribed to patients much like traditional in-person treatment or medication, but take place entirely (or primarily) through software.

The DTx trend has massive market potential: One industry observer believes that the digital therapeutics market will be a global opportunity of $56 billion by 2025. A March 2020 McKinsey & Company report indicated that investment in digital therapeutics products grew by 40% per year over the past seven years – and that was before COVID-19 gave telehealth and virtual care solutions a huge boost. However, recent stumbles from DTx darling Pear Therapeutics raise questions about reimbursement and readiness of payers and providers to fully embrace this new class of digital interventions.

According to Brian Dolan of Exits and Outcomes, there are 100+ digital therapeutic solutions in the pipeline pursuing FDA approval covering conditions ranging from ADHD to cancer to post-COVID cognitive dysfunction.

What you’ll learn in this article:

  • What defines a digital therapeutic?
  • What is the difference between a digital therapeutic and any other digital health app?
  • What is the difference between a digital therapeutic and Software as Medical Device (SaMD)?
  • What are some digital therapeutic examples?
  • How does the Food and Drug Administration (FDA) approve digital therapeutics?
  • Can DTx be successful without FDA approval?
  • What are the biggest roadblocks for DTx?
  • What is the future of DTx? What trends can we expect?

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What defines a digital therapeutic?

The industry trade group Digital Therapeutics Alliance launched six years ago as a trade association that sets industry standards and promotes DTx integration into healthcare. The group defines digital therapeutics as software-based interventions used to prevent, manage or treat a medical disorder or disease. For instance, instead of meeting in-person (or via telehealth) with a psychiatrist weekly for cognitive behavioral therapy (CBT) sessions, a digital therapeutic would deliver clinically-validated CBT interventions virtually through a smartphone application.

True digital therapeutics either complement standard medical, behavioral or pharmaceutical treatments or replace them all together. They have the potential to increase patient access to clinically safe and evidence-based therapies. They may also extend clinicians’ ability to care for patients and help patients who live in rural or underserved areas who don’t have access to specialty care.

According to the Digital Therapeutics Alliance DTx guidelines, digital therapies should be based on clinical trial evidence published in peer-reviewed journals, and subject to regulatory oversight. DTx products must collect and analyze performance data and should incorporate general digital health best practices, including patient-centered design and HIPAA-compliant patient privacy and security standards.

What’s the difference between digital therapeutics and other digital health apps?

While many digital health applications include reimbursable care delivery (medical visits or interventions covered and reimbursed under insurance), they typically do so through virtual consultation with a clinician. What is unique about digital therapeutics is that the medical intervention or therapy is delivered through a software algorithm without requiring time or input from clinicians for each patient.

Of course DTx does not remove the health provider entirely. DTx delivers interventions and therapies outside of the traditional doctor’s visit, so it can be thought of similar to a medication. A doctor prescribes the digital therapy (via software application) as part of a more comprehensive treatment plan and then monitors patient progress over time to ensure that the therapy is working. However, the clinician is not personally involved in each therapy session. For instance, a digital therapy may be prescribed to help a patient manage chronic pain and their doctor may monitor symptoms over time in order to adjust their treatment plan.

Because digital therapeutics are responsible for delivering medical care without case-by-case clinician involvement, the regulatory requirements are stricter. Digital Therapeutics are regulated by the FDA similar to medical devices—specifically a new class of Software as Medical Device (SaMD). Only FDA approved digital therapeutics can be prescribed to patients and reimbursed by insurance similar to a medical appointment or medication.

Are digital therapeutics considered medical devices?

Software as Medical Device or SaMD is a new class of FDA-regulated software that has arisen out of the need to broaden the definition of a “device” with the advent of new digital health solutions and therapies.

Technically, digital therapeutics are one specific type of SaMD under the FDA definition. Other types of SaMD include companion software applications that improve the function of a hardware device like an app that helps patients track their blood glucose levels using a continuous glucose monitoring system. While both are regulated as SaMD, they function quite differently.

Digital therapeutics examples

The COVID-19 Pandemic spawned other epidemics: upticks in depression, anxiety, substance abuse, and insomnia. Coupled with a long-standing shortage of therapists and stigma around seeking treatment, it’s no surprise that digital therapeutic healthcare solutions treating behavioral health have been some of the first to arrive on the market.

Pear Therapeutics, which went public in 2021, is a leader in FDA-approved prescription digital therapeutic solutions. One of their first products was reSET, a 90-day program for adults with substance abuse disorders–excluding opioid abuse–who are already enrolled in outpatient treatment. The solution involves a clinician who supervises treatment and prescribes the DTx, which offers cognitive behavioral therapy (CBT) as part of the treatment plan.

Pear’s other prescribed substance abuse DTx product is called reSET-O, which is for adults enrolled in an 84-day outpatient program for opioid use disorder that includes prescribed buprenorphine. It has also been FDA approved and offers CBT to help patients remain on the program. Pear initially partnered with Sandoz (a division of Novartis) to bring both apps to the market, but is now marketing them as standalones.

The third mental health app from Pear to receive FDA approval is Somryst, which helps adult patients with depression and insomnia get a good night’s sleep. This was Pear’s first product brought to market by its own sales force.

Pear has a number of other products in clinical trials for treating conditions ranging from schizophrenia to multiple sclerosis.

Other FDA-approved mental health DTx include NightWare, a prescribable smartwatch app that detects night terrors in patients with Post Traumatic Stress Disorder (PTSD). It vibrates to wake the patient from the nightmare and is now prescribed by the Veterans Administration medical system. NightWare was FDA approved in 2020, as was EndeavorRX, a video game from Akili that works to improve attention in children with attention deficit hyperactivity disorder (ADHD).

FDA approved digital therapeutics

It is useful to remember that the FDA does not regulate or approve most of the more than 325,000 apps that offer health education, support wellness and fitness and serve many other health-related functions. Because the actual software function in these cases is relatively low-risk, they are not required to seek FDA clearance before submitting to the app store. This is a similar parallel to supplements: Unlike pharmaceuticals, the FDA does not regulate supplements because they do not pose particularly high risk to patients.

Digital therapeutics perform a digital therapy without hands-on involvement of a clinician and as such, they require FDA approval in order to be prescribed to patients and reimbursed as part of a care plan. As mentioned above, DTx fall under the category of Software as Medical Device (SaMD) and require specification, documentation, and proven clinical safety similar to other medical devices. This tier of regulatory oversight is reserved for software that has the potential to cause patient harm if it functions incorrectly.

4 types of FDA approval

The FDA offers online guidance for submitting premarket applications with four types of approval:

  1. The 510(k) premarket notification, which is for devices that are substantially similar to previously approved devices. An example of this is Clue, a smartphone app that helps women chart their menstrual periods. After completing clinical trials and gaining FDA approval, the company is expected to begin marketing the Clue birth control function in the United States in 2023.
  2. The Premarket Approval (PMA), is reserved for the category that requires the most stringent scientific evidence of safety and efficacy.
  3. The De Novo classification relates to instances when the device is novel and has no predicate devices, but for which general or special controls provide reasonable assurances of safety and effectiveness. Pear went through the De Novo process for its first reSET product, then used the 510(k) process for reSET-O.
  4. The Humanitarian Device Exemption is for devices designed for patients with rare conditions and is administered by the FDA’s Office of Orphan Product Development.

An FDA approval shortcut

The FDA approval process can take years. To counteract this, the FDA established the Breakthrough Devices Program in 2017 to speed up the process by getting timely premarket feedback from the FDA and design assistance for more flexible clinical trials.

More than 617 devices qualified for the designation by the end of 2021. For example, the ADHD DTx, EndeavorRX, was approved via this program.

The FDA also created the Safer Technologies Program (STeP) which covers devices aimed at less serious conditions. Pear’s Pear-010, a product aimed at treating chronic and acute pain, was recently awarded STeP designation.

Also in 2017, the FDA created its pilot Precertification program, involving nine volunteer companies, including Pear. The goal was to develop a new regulatory model, because medical software is iterative, provides real world performance data, and can be updated quickly if glitches are identified. Because many DTx continually improve due to AI and machine learning, the products soon evolve beyond  what was approved by the FDA. Under the pilot, the FDA would regulate the companies rather than individual products as traditional medical devices. A 2020 FDA report on the program indicates that the precertification strategy is still a work in progress.

Were these strides by the FDA actually impactful for DTx companies? A recent study by UCLA Biodesign and Boston Consulting group found that a large percentage of digital health industry leaders felt that these FDA innovations helped create a fast lane for device approval and made the United States the preferred market for introducing DTx.

Can DTx launch without FDA approval?

It is possible that DTx solutions can go to market without the FDA’s much sought-after stamp of approval. A prime example is the company Floreo. The Floreo VR (virtual reality) system uses a headset to create a virtual world to facilitate learning for neurodiverse people who have Autism Spectrum Disorder (ASD), ADHD, anxiety and other conditions. It can teach children with ASD to learn things like how to safely cross a street by creating a virtual world where they can see and hear the walk sign and visualize what to do. It’s also been used to help teenagers with autism learn how to safely interact and respond to police.

Company co-founder Vijay Ravindran was an early Amazon engineer who helped launch Amazon Prime and then became digital chief of the Washington Post. He is also the father of a son with ASD, and originally envisioned Floreo as a way for parents to coach their children. It launched in 2019.

“While parents were enthusiastic about Floreo, which is designed to be simple enough for them to use, after a few months, they found they lacked the expertise to assess what skills needed to be improved, and how much repetition was necessary,’’ Ravindran said.

“At the same time, we had special education teachers and therapists coming in through the consumer channel, downloading the product, starting to use it, and then asking for enterprise contracts or purchase orders and other enterprise conventions,” explained Ravindran. “That led us by the nose towards the model we have today, which is an enterprise license system primarily for clinicians.”

It’s caught on in the marketplace, and is currently used by more than 100 healthcare enterprises and in 2021 year delivered more than 17,000 therapy sessions.

Floreo is reimbursed by Medicaid in five states.

One strength of Floreo is that it works well via telehealth, enabling clinicians to deliver therapy in the family home. Because the tool is used by state-licensed professionals, it doesn’t need FDA approval, and successfully launched without it.

Still, Ravindran said Floreo is now beginning the approval process.

“Depending on a company’s reimbursement strategy, FDA approval can become essential,’’ he said. “We are planning to seek FDA approval for the system, because we think it opens up more avenues for reimbursement than if we didn’t have FDA approval.”

The benefit of the launch-first approach was that the company was able to fine tune its system into something that found acceptance in the market. “The downside of starting this late is that we’re six years into the company, and if we had started looking at FDA approval sooner, we might be much further along,’’ Ravindran said.

The biggest roadblocks for digital therapeutics

There are some that argue that prescription-only digital therapeutics effectively “paywall” important treatment and care behind the same institutional barriers that patients face receiving any other kind of care. For instance, with the current provider shortage, DTx may provide access to therapies that would otherwise involve a multi-month waitlist—but if seeing a provider is the first step in reaching these digital therapies, accessibility may not be such a selling point. Like with the pharmaceutical industry, FDA regulation can also lead to a monopoly of sorts that allows the only FDA-cleared solution for a particular condition to charge extremely high prices for access.

For regulated DTx, provider support is also crucial to reaching patients and getting paid through insurance reimbursement.

Physicians’ decisions account for the vast majority of healthcare costs, but many physicians aren’t familiar with DTx, and the digital therapeutics industry doesn’t have nearly the sales force of the pharmaceutical industry to raise awareness about these new therapies. There is also a natural aversion to risk among medical professionals who do not want to use their patients as guinea pigs for novel solutions. Because of this, some digital therapeutics companies have partnered with Pharma, with mixed results. DTx prescription can also result in even more data flowing to an overwhelmed provider who is already dealing with electronic health record (EHR)-driven data overload.

On the reimbursement front, the U.S. Centers for Medicare and Medicaid, which set the tone for private insurers, have yet to offer clear guidance on how DTx will be reimbursed. Analysts have attributed many of Pear Therapeutics’ recent financial challenges to the lack of consistent reimbursement, especially from Medicare.

Two large pharmacy benefit managers, CVS and ExpressScripts, launched digital health formularies in late 2019, but there is concern that because these products will have a 14-digit unique device identification number rather than an 11-digit national drug code (NDC), some systems won’t be able to process the reimbursements. The Digital Therapeutics Alliance is actively lobbying Congress on these issues.

Health plan leaders also expressed skepticism to Rock Health about DTx perceived lack of clinical evidence and ability to drive and sustain patient behavior change, especially among their highest need, highest cost patients.

Regardless, interest continues to group: A 2020 survey of healthcare executives who made formulary decisions found that while only 25 percent of their organizations’ formularies paid for digital therapeutics, another 45 percent were interested in doing so.

A segment poised for growth

Despite challenges, many experts see the DTx industry’s potential for growth, with the help of cross-industry cooperation and the transformation of clinical workflows.

Some digital therapeutics companies have bypassed insurance companies by offering their products directly to self-insured employers who hope to see reduced employee health costs.

Omada, the diabetes prevention program, and Livongo, a diabetes management app, got their starts in that space. Outcomes and Exits regularly looks at the “benefit stacks” of major employers and found a growing number offer their employees DTx for a number of conditions, ranging from insomnia to cancer support.

Because DTx can complement pharmaceutical therapies, Pharma has been interested in partnering with emerging digital therapeutics companies. Pharma offers established provider sales networks, robust research and development expertise, and experience in clinical trials, regulatory affairs, and the FDA approval process. Pear originally partnered with Sandoz to bring its first two products to market, but is now going it alone. But it’s not necessarily a perfect match. Pharma may lack the necessary technical skills and agility more common in the digital therapeutics world. And some Pharma executives have expressed skepticism over clinical evidence for DTx.

Assuming Digital Therapeutic momentum does not stall, there is a massive opportunity for virtual-first care companies to introduce a digital therapeutic product that expands reach and engagement with patients while also providing an income source that is not reliant upon clinician time.

In summary, successful digital therapeutics companies have products with three common features:

  1. Meaningful incentives: These may be financial, such as reducing healthcare costs and insurance premiums. On the patient side, the incentives range from gamification of behavior change to better clinical outcomes and overall health.
  2. Workflow integration for providers: Workflow integration means the DTx improves workflow and the quality of office visits for clinicians, and likely will involve engaging clinicians early in the development process to understand protocols.
  3. Human-centered design: Human-centered-design involves thinking about the end-to-end experiences for users and designing around their needs and preferences. Patients are increasingly expecting digital health solutions to meet the standard of other consumer tech apps on their phone.

HTD specializes in strategy, design, and development of healthcare software. Our SaMD function is well equipped with a specialized team and eQMS infrastructure to support the design and development of FDA-regulated software including digital therapeutics. Reach out today to learn more about how we can work together.

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