It’s been a wild year of innovation and growth in digital health. Necessity, after all, is the mother of invention. As the global pandemic arrived, digital health transformed from a convenience to a requirement. Yet contrary to popular belief, the spoils have not been evenly distributed.
The long-heralded class of “prescription digital therapeutics” has lagged in adoption, while the growth of “virtual care platforms” has been explosive. What differentiates each approach and what are the key takeaways for payers, providers, consumers, and investors?
A tale of two models
The vision was tantalizing. A natural evolution from drug-based therapies benefiting from software’s infinite scalability and zero-marginal cost.
This new wave of software applications would target serious diseases and undergo clinical trials and a rigorous FDA approval process, after which they would be ubiquitously prescribed by physicians and reimbursed by pharmacy and medical benefits. Moreover, they would be entirely automated and often be paired with their drug equivalents to boost efficacy and adherence.
It’s not difficult to see why big pharma took an interest, as demonstrated by the flurry of pharmaceutical partnerships and investments. Theoretically, pharmaceutical companies could leverage their existing sales, marketing, and distribution channels to market to physicians and other healthcare workers.
Buoyed by investor enthusiasm, these companies have raised vast amounts of capital on the back of achieving product and regulatory milestones.
While this story sounds great in an investor deck, it simplifies the hugely complex and nuanced U.S. healthcare system. There is a litany of practical real-world challenges from physician adoption to reimbursement that have yet to be overcome.
PDTs must face reality
Doctors don’t want to “prescribe” software
PDTs depend on already time-pressured and overworked healthcare professionals to change their mental models for prescribing. As a physician myself, I know this only too well. Software products have a much steeper learning curve compared to small molecule drug therapy and don’t naturally integrate into the daily hospital or clinic workflow. Given the “prescription” nature of the PDT model, physician adoption has become a massive barrier.
Great drugs reps aren’t great at selling software
For pharma-employed drug reps, PDTs also represent completely new territory. It turns out that being great at marketing a new biological therapy is quite different from demonstrating a live technology product and explaining its inner workings in a time-pressured environment. As a result, many of the expected synergies from pharma partnerships failed to materialize leading to PDT companies having to build out their own sales force at considerable expense.
Multi-year regulatory approval processes hinder product development
If there is one thing (securities fraud notwithstanding) that the Theranos debacle taught the world, it’s that “move fast and break things” may work for a social network but is not an acceptable operating model when patient safety and consumer trust in healthcare is at stake.
With that out of the way, there is the on-going question that the waterfall approach to product development naturally dictated by a multi-year regulatory approval process is not compatible with how high-quality software gets built today. That’s to say nothing of the subsequent inability to make significant product changes at the risk of losing approval. At what point is a software product sufficiently different to warrant revalidation? This is being at least partially addressed by the FDA’s Digital Health Software Precertification Program, currently in a pilot phase.
You need humans in the process
PDTs are typically software-only interventions with content and tracking capabilities, sometimes designed to be used in conjunction with conventional therapies. The reality is that we are a far cry away from AI replicating the clinical care team experience, as anyone who has used a chatbot can attest to. This is the exact opposite of “virtual care platforms” as discussed later on.
Reimbursement is patchy
The ultimate test of value is that someone will pay for your product. Recognizing the challenges above, it’s not too surprising that widespread reimbursement by payers remains elusive. Employers are unlikely to reimburse a program that doesn’t deliver a “whole product experience”, from enrollment marketing to care navigation and integration into their data warehouses.
Why “virtual care platforms” have thrived
Virtual care platforms sometimes referred to as “technology-enabled digital clinics” sidestep many of these challenges by knitting together an integrated patient experience marrying technology, telehealth, and human support, delivered directly to the patient.
These digital clinics typically make use of some combination of mobile apps, connected devices, integrated medication fulfillment, and a clinical care team including physicians, nurses, therapists, and coaches.
By marketing directly to the patient population of employers and health plans, they rely on consumer-driven healthcare decisions, with the added bonus of making healthcare professionals part of the solution rather than the sales process.
This approach has largely succeeded in driving adoption, meaningful clinical outcomes, and huge financial returns for the category-leaders delivering a digital clinic experience for high-cost conditions such as diabetes (Livongo and Omada), musculoskeletal care (Hinge Health), mental health (Lyra Health and Ginger), and substance addictions (Quit Genius*).
To be sure, there are still challenges, from siloed care to employer point solution fatigue. To continue to scale, it is essential that virtual care platforms focus on navigation across the continuum of care, delivering an end-to-end “whole product” experience and eventually broadening to clinically adjacent conditions.
* Disclosure: I am the CEO and Co-Founder of Quit Genius.