The healthcare industry is undergoing a digital transformation, with software-based therapeutic interventions known as digital therapeutics emerging as disruptive new modalities to prevent, manage, and treat a growing range of medical conditions.
Digital Therapeutics Breakdown
Digital therapeutics deliver evidence-based treatments directly to patients through smart devices and applications. These data-driven tools provide personalized interventions, feedback, and tracking to help patients modify behaviors and improve disease management. By enhancing patient engagement, adherence, and access, digital therapeutics have the potential to optimize outcomes and lower costs. The digital therapeutics market has experienced tremendous growth, with an estimated valuation reaching $6.9 billion by 2025. Investor funding has exceeded $2.5 billion in recent years.
The FDA has also begun oversight through creation of a Digital Health Center of Excellence, approval of the reSET and reSET-O apps for substance use disorder, and draft guidance on developing products with additional functionality like digital monitoring. However, critical questions remain around appropriate reimbursement mechanisms and sustainable pricing models for digital therapeutics. Manufacturers must find pathways to commercial viability, while payers and providers need strategies to integrate novel digital modalities into clinical workflows and benefits coverage.
To date, payers have taken an ad hoc approach, evaluating digital therapeutics individually and slowly opening doors to reimbursement, especially for solutions with strong randomized control trial evidence. But significant barriers around broader access, consistent coverage policies, and value-based payment still remain. Payers cite concerns about limited data on long-term clinical efficacy and cost-effectiveness. Providers also face integration challenges and poorly defined prescribing and billing pathways for digital treatments. Patients similarly have low awareness of digital therapeutic options and face affordability issues depending on insurance coverage. Addressing these challenges will require engagement across the healthcare ecosystem to develop innovative frameworks that support validation, valuation, and integration of emerging digital modalities.
All stakeholders have critical roles to play in realizing the benefits of software-based therapeutics – from manufacturers demonstrating value, to policymakers enabling modernized regulation and payment pathways, to payers and providers reimagining care delivery with digital technologies meaningfully embedded. The opportunities for technology-enabled, data-driven, evidence-based care transformation are immense – but achieving the full promise of digital therapeutics will depend on strategic collaboration across the healthcare system to overcome existing limitations.
Below, we take a closer look at the current DTx reimbursement landscape and strategies to optimize access and sustainability.
Current Reimbursement Landscape
- Uncertainty in public coverage
- CMS evaluates DTx individually, assigning to existing benefits like pharmacy or DME. This leads to inconsistent, unpredictable coverage.
- Inconsistent commercial policies
- Most slotted into pharmacy or DME benefits, but determinations vary across payers.
- Need for tailored billing codes
- Existing codes don’t fit digital modalities and fee structures. New codes based on mechanism, use and delivery model needed.
- Provider billing challenges
- Legacy claims systems not equipped for new DTx solutions. Upgrades needed to incorporate modular digital data.
Strategies to Optimize Reimbursement
- Build further evidence
- Payers want robust efficacy and cost-effectiveness data. Increased investment in trials and real-world data needed.
- Increase payer alignment
- Despite same evidence, coverage varies across plans. More uniform review criteria and CMS guidance would streamline access.
- Improve patient and provider education
- Low awareness of DTx persists. Targeted outreach and training needed.
- Develop innovative pricing models
- Outcomes-based, tiered or subscription bundles could improve affordability.
Importance of Interoperability and Integration
- Standardized APIs for system integration
- Open, defined interfaces needed for DTx plug-and-play across clinical and claims platforms.
- Integration with EHRs
- Allows e-prescribing, data sharing. Structured workflows for prescribing like medications required.
- Incorporation into PBM formularies
- PBM inclusion critical for pharmacy benefit coverage and e-prescribing access.
- Compliance with privacy regulations
- Responsible PHI handling critical for payer and provider trust.
The Role of Real-World Evidence in Coverage Decisions
High-quality real-world evidence (RWE) plays an increasingly important role in coverage decisions for novel digital health solutions like digital therapeutics. RWE provides insights into clinical effectiveness, cost-effectiveness, and care pathways in routine practice settings. Payers are requesting expanded RWE given the rapid iteration cycles and non-traditional development pathways of many digital therapeutics versus traditional pharmacological treatments.
RWE for digital therapeutics can derive from various sources including decentralized clinical trials, registries, electronic health records, medical claims data, and mobile app generated data. Study designs range from prospective observational studies to large retrospective analyses. To rise to the level of robust evidence for payers, RWE must demonstrate causality between the digital therapeutic and health outcomes with appropriate control groups and statistical methodology.
When incorporated into economic models, RWE can also estimate cost-effectiveness and cost offsets. Understanding total cost of care impacts is influential for payer coverage decisions and contract negotiations. Hybrid modeling blending randomized controlled trial and RWE inputs may best capture clinical and economic perspectives.
Challenges in leveraging RWE for digital therapeutics reimbursement include data interoperability, developing analytics infrastructure, establishing data sharing partnerships, and privacy regulations. But the benefits of RWE extend beyond coverage policies. RWE also supports product development, clinical integration, and patient engagement strategies.
Payer Perspectives on Digital Therapeutics Contracting
To expand digital therapeutics coverage, manufacturers are pursuing innovative value-based contracts with payers. These agreements tie payment to achieved health outcomes and cost reductions versus simply product purchase. Contracts may include performance milestones, outcomes-based rebates, and risk-sharing arrangements.
This aligns incentives across payers, providers, and industry around improved care.
However, digital therapeutics pose unique considerations for value-based contracting compared to traditional medical products:
- Clinical & cost impact measurement
- Digital solutions generate vast amounts of patient engagement and therapy utilization data that enable robust metrics.
- Contract duration
- Short-term agreements allow flexibility to modify terms as real-world data accumulates.
- Patient identification & engagement
- Ensuring intended patient population accesses digital therapeutic and adheres to treatment.
- Data integration & analytics
- Interoperability with payer data systems needed to measure performance.
- Health economics modeling
- Predicting cost offsets and ROI requires economic expertise.
Payers are increasingly receptive to innovative contracts but seek strong evidence of clinical utility and cost impact before assuming risk. Manufacturers should target contract negotiation efforts towards payers already covering some digital therapeutics, as they have infrastructure in place to measure outcomes.
Strategic Value Demonstration for Market Access
Gaining payer coverage and reimbursement requires crafting a compelling value story for digital therapeutics.
Manufacturers should take a strategic approach:
- Understand payer priorities
- Align messaging to payer cost drivers, clinical gaps, and star ratings incentives.
- Quantify clinical differentiation
- Model long-term patient health projections showcasing impact vs. standards of care.
- Develop economic models
- Project cost offsets across settings of care and illustrate potential medical loss ratio impact.
- Highlight convenience benefits
- Emphasize increased access, improved care coordination, and reduced burden.
- Provide real-world evidence
- Supplement trial data with observational studies, registries, and analytics insights.
- Engage KOLs and advocacy groups
- Influential clinical and patient voices help shape policy.
- Consider pricing models
- Value-based, indication-based, and subscription pricing can ease access barriers.
A multipronged market access strategy combining clinical, economic, and humanistic evidence tailored to payer priorities gives digital therapeutics the best chance of favorable coverage policies. This facilitates broader adoption and access for patients who can benefit.
Ongoing Outreach and Education Post-Launch
Once initial coverage is established, ongoing market access efforts are needed to drive uptake and engagement.
Outreach should target prescribers, health system leadership, and patients:
- Provider education on prescribing, integration workflows, and billing
- Increase comfort with new digital modalities.
- Training on EHR documentation and coding
- Ensure accuracy for reimbursement.
- Patient and caregiver education
- Raise awareness of digital therapeutic benefits and availability.
- Value messaging to providers
- Highlight clinical outcomes and workflow efficiencies.
- Internal stakeholder education
- Get buy-in from IT, population health, care management and other key departments.
Continued engagement with payers is also important post-launch, through communication of real-world utilization metrics, clinical data, and patient satisfaction outcomes that reinforce the value proposition.
Summary
Innovative digital solutions promise to transform healthcare delivery, but require new frameworks to realize their full potential. Manufacturers, payers, providers, and policymakers must collaborate to adapt existing infrastructure and policies to support value-based care enabled by digital therapeutics. This facilitates consumer-focused health outcomes and commercially sustainable models for ongoing innovation.
