Digital Therapeutics vs Digital Health
What makes something a digital therapeutic rather than just a digital health product?
A Brief Note: Thanks for your interest in Health Tech Happy Hour. Since my last article went viral with thousands of reads and a bunch of new subscribers, I am probably going to have to add 1x more proofreads to my pre-launch process for each article. I have written two books, dozens of articles, and a few scientific papers, and I have learned only one thing: people love to point out the occasional grammatical or punctual issue.
More importantly, thanks for being a reader! The next 10 years will represent the decade with the largest leaps forward in healthcare services in the United States and around the world due, in part, to digital technologies and the work of innovators that have broken the mold of traditional healthcare services. I hope we can follow along together as we seek to build a better healthcare future.
Digital Therapeutics Vs. Digital Health
I remember the day Pear Therapeutics achieved the first FDA approval for a digital therapeutic. At the time, I was working on a mobile app product for polypharmacy patients focused on medication schedule organization and medication reminders. We built a clinician dashboard to show patient medication adherence data to care managers, physicians, or pharmacists. Pear Therapeutic’s app was not functionally that fundamentally different from our product, but it was referred to as a digital therapeutic while we did not really consider our app as a “therapeutic” but rather a patient support tool or a clinical platform.
As I have continued building in the digital health sphere, the structure and definition around terms have become increasingly established, but the space has become significantly larger and more complex. At the same time, the communities have also become more established, and, with that, so have the business strategies and the ecosystems in which they operate.
While digital health is a broad term, some clear categories are starting to develop. In my head, here are the broad categories I use to think about the market:
*There are no right answers here right now given the dynamic nature of the market*
Digital Therapeutics = Pharma & Medical Device Playbooks
Digital Health = Anything that uses modern digital technology in healthcare; inclusive of digital therapeutics.
I see digital therapeutics as a fairly concrete category of digital health, the broader term. Typically, these are mobile applications that seek FDA approval for a particular clinical indication. This is the same playbook as a medical device or a pharmaceutical product R&D cycle and commercialization pathway.
To the investors out there, a significant amount of capital is needed to push a digital therapeutic through the FDA process and, thus, time-to-market can be both unpredictable and multiple years after an initial investment. The resources required to both build and maintain the software product and facilitate clinical trials are substantial. Investors must view digital therapeutics investments similar to biotechnology and pharmaceutical products—but, with less clear-cut IP protections.
Digital health is a broad term that has come to encompass the market consisting of a wide variety of companies, technologies, and solutions—including, but not limited to digital therapeutics. While there are emerging sub-market classifications, I use the following criteria to evaluate and classify digital health innovations in the market:
Customer Orientation:
B2B Vs B2C Vs B2B2C
Does the company sell B2B, direct to consumer, or B2B2C (we do this at Avenue)?
Level of Service:
Pure SaaS to Tech-Enabled Services
What is the level of human services associated with the product or service? Is it a pure SaaS play where the company hands off the software and manages light customer success issues? Is there an added services offering that is complementary to the software? Is there a true service that is provided by humans and augmented by technology i.e., a tech-enabled service?
Primary Product Impact:
Healthcare Utilization Outcomes (ED Visit Reductions, Hospitalizations)
Is the produce focused on producing clinical utilization outcomes? Does it help organizations prevent ED visits or unnecessary utilization? Does the product help route patients to cheaper locations to receive care or buy healthcare products? Does the product keep patients out of hospitals?
Workflows and Administration (Cost or Efficiency Outcomes)
Does the product help facilitate a workflow in healthcare? Does the technology automate processes previously performed by costly human hours? Does the technology connect previously unconnected parts of healthcare to better streamline efficiency resulting in internal cost savings for the facility? Does the technology allow facilities to increase volume due to enhanced efficiencies or reduction in time needed per unit of volume?
Patient Experience
Does the technology make accessing healthcare services or products easier? Does the technology help patients better understand their diagnosis or treatment? Does the technology help patients navigate care easier? Does the addition of the technology provide substantial improvements in patient satisfaction and NPS?
Clinical Outcomes (Disease Metrics, Physiological Metrics, Patient self-Report)
Does the technology lead to improvement in certain physiological metrics used to measure the presence of or severity of disease? Does the technology help patient self-report their symptoms and clinical activities? Does the technology enhance the healing process? The technology aid in adherence to complex care plans?
Many digital health technologies are multi-faceted and may impact a number of these outcomes, but there is usually a primary focus. However, these categories are not mutually exclusive i.e., an improvement in clinical outcomes can often improve utilization outcomes.
Mode of Impact:
Intra-Facility
Does the technology work inside the facility to facilitate certain processes?
Inter-Facility
Does the technology facilitate processes between healthcare providers and external organizations?
Facility-To-Home
Does the technology facilitate care in the home from a practice, clinic, or health system? Does the technology allow patients to receive care or information that was previously provided in a brick-and-mortar location?
Facility-to-Patient in Person
Does the technology impact the interactions between a healthcare provider or organization and a patient when that patient is in person at a brick-and-mortar site?
Patient-to-Patient
Does the technology allow patients to share information with other patients? Does the technology create a healthcare-oriented social network?
Target Customer Segment:
Biopharma and Medical Device
Does digital health technology sell to pharmaceutical or medical device companies? Does it help facilitate clinical trials operated by CROs? Does it help pharmaceutical companies track product performance in real-world settings?
Hospitals, Health Systems, and Healthcare Delivery
Does digital health technology fit into care delivery? Does the company sell to large enterprise health systems with sophisticated buying processes? Does the product work to support the needs of hospitals? Does the product work to facilitate processes or new capabilities for a major multi-specialty health system? Does the product or technology facilitate outpatient services, ambulatory care, or surgical services?
Physicians
Does the technology focus on the physician experience? Does the company sell to outpatient clinics, or independent clinics and medical groups?
Payors
Does the company sell to payors as a primary call point? Does the technology focus on the concerns and outcomes sought by payors?
EHR/EMR Vendors
Does the company sell to EMR/EHR vendors? Does the technology enhance the EMR/EHR offering and is integration necessary? Does the EMR route make sense for distribution purposes?
Modality:
Mobile Native application
Does the technology get delivered as a mobile app via the Apple App store or Google Play store?
EMR/EHR I-Frame
Is the technology located inside the EMR e.g., Epic’s App Orchard?
Desktop Cloud-based
Is the technology a cloud-based desktop application?
Software + Hardware IoT
Does the product have both a hardware and software component to deliver the benefits?
Smart Hardware Device
Does the product come as a smart hardware device or IoT medical device?
Algorithm
Is the product delivered as a simple algorithm or analytics output?
Pricing Model:
Subscription-based:
Is there a monthly or annual subscription paid by a patient or a B2B customer?
Per Patient per Month
Is the B2B customer charged per patient per month or per member per month rates?
Per User per Month
Is the B2B customer charged for “seats” representing the number of users, physicians, nurses, or other user-role with a login?
Single Price per Use
Is the product delivered like a true product priced per use or per unit?
Priced Based on Outcomes (Risk)
Perhaps unique to healthcare, does the technology take a cut of shared savings from its use? Does the company include a performance-based fee when certain outcomes are achieved?
An important facet to consider in evaluating pricing models is: reimbursement. Does the product or services that the technology facilitates lead to a reimbursable process defined by a CPT or other billing code? This helps in evaluating one of the most important considerations in digital health—is the technology a revenue center or a cost center?
Services-based or Product?
I continue to use the mental model of a services-based digital health technology or a product-based digital health technology to classify new technologies or companies in the market. The renowned digital therapeutic from Akili Interactive, EndeavorRx, has an FDA indication for ADHD. It is developed as a video game-like experience to treat ADHD in children. It is prescribed by a physician. Similar to pharmaceutical products, EndeavorRx is a product-based digital health technology that is delivered via a digital platform—because it has FDA approval, it is a digital therapeutic.
Unlike EndeavorRx, platforms like Carium are designed almost exclusively to facilitate a healthcare service. The platform has cloud-based desktop access for clinicians at medical groups and health systems and a mobile application for patients in the home to track symptoms, meals, RPM data, and message their care team. The mobile application itself has considerable overlap with digital therapeutics like Pear’s Reset. But, Carium is not designed to be prescribed by a physician in the manner of a product (a physician or QHP is definitely involved, but is not a traditional prescription). Pear’s Reset has an FDA-approved indication for substance use disorder and while Carium could certainly be used to care for a patient diagnosed with substance use disorder—the therapeutic value would be derived from the interaction between the treating provider and the patient rather than the mobile application itself as in the case of Pear’s Reset.
Interestingly, there was nothing stopping Pear from framing Reset as a digital clinical tool to facilitate a healthcare service. They could have sold B2B to substance use disorder treatment centers and fed the data from the app into progress notes for the psychiatrists treating patients—completely circumventing the FDA process. However, Pear made the decision to pursue FDA approval as they believe in the product-based modality and the value of the FDA “seal of approval.”
To further complicate the matter, there are exclusively B2C mobile applications on the market that have not pursued FDA approval but still function more like a product than a services-based digital health technology like Carium. Calm is the best example here. Calm walks a very fine line between marketing the app as a therapeutic with an indication for stress, anxiety, sleep, and other outcomes as it does not have FDA approval for these indications. Thus, Calm is not yet a digital therapeutic as it does not have FDA approval—however, the modality and outcomes are very much in-line with those of the digital therapeutics class of technologies. I wrote an academic paper on mental health app outcomes in clinical studies—you can see it here. This is an emerging regulatory space.
The overlap between digital therapeutics and patient-facing digital health tools in terms of the feature set and types of data collected is considerable—which makes classification and differentiation quite challenging for the market. It is fair to say that the major differentiator for digital therapeutics is adopting the FDA path to commercialization.