Digital therapeutics (DTx) were gaining popularity as tools to cut down on chronic disease costs, but the pandemic vaulted the tech into the spotlight and it's gaining much more attention from healthcare incumbents. Health insurers, pharma companies, and telehealth cos are partnering with DTx companies to help stave off sky-high chronic disease spending—which hit nearly $3 trillion in the US last year—since there’s more and more evidence showing how digital therapies for conditions like diabetes can replace traditional drugs or complement treatments to provide better outcomes.
But DTx tech is still new in the grand scheme—Happify Health’s head of digital therapeutics walks us through strategies DTx firms can take to overcome some of the biggest barriers to adoption. We spoke with Chris Wasden, head of digital therapeutics at Happify Health, about adoption barriers like the fact that physicians aren’t fully confident prescribing digital therapies, and consumers' privacy concerns amid record-high healthcare data breaches.
The following has been edited for brevity and clarity.
Insider Intelligence (II): Happify Health has plans to deepen its relationships with pharma cos, but we've seen some DTx-pharma partnerships deteriorate within the past year. What’s the recipe for success here?
Chris Wasden (CW): We've seen pharma-DTx partnerships fall apart when there was no underlying strategic logic. When the pharma company wasn't even operating in the same space as the digital therapeutic partner. So, they had no sales force, no R&D effort, no commercial focus.
We've also seen some of these [partnerships] fail when the digital therapeutic company actually has no background experience or existing assets in that therapeutic area. Partnerships that have been more successful actually have a therapy they've proven works at scale. Some that have fallen apart have shown that their therapy works on 50 people. Well, that's not scale, that's not real world.
II: Many DTx companies use pharma and insurance partnerships to reach consumers. Are there any hurdles DTx firms should think about when pursuing tie-ups with insurance companies?
CW: When we talk about payers, it's easy to lump them all into one category we call “payer.” But even within an individual payer, we have to look at the three different buckets of money that you can go after if you have a digital therapeutic product. And the strategy going after each one of those buckets is different.
The administrative bucket tends to be focused on differentiating the payer and providing a benefit to members who are valued by those employers, customers.
The medical benefit bucket is more focused on the clinician and providing products that the clinician can use to deliver better patient outcomes. [Those] payers are really interested in data that shows: If you pay for my prescription digital therapy that's used for the practice of medicine by a physician, patients get better outcomes and you will see the lower overall medical costs associated with those patients. Those payers tend to have a rule of thumb of what sort of ROI that they want, which is something like a 3-1, 4-1: For every dollar that you pay for my product, you want to get $3 of medical cost saving benefits among patients who use my product.
The third bucket of money is the pharmaceutical benefit. There are several digital therapy companies that have tried to get access to that bucket of money—it's a big bucket. And what [digital therapeutics companies] do is clearly therapy, but we're not a pharmaceutical product. So, many of the payers don't really have a process for evaluating and selecting a digital therapy to be paid for as a pharmaceutical benefit.