What it Takes to Succeed: Digital Therapeutics & the Health System (A Primer)

Perspectives from a healthcare strategic investor, sitting between a large, mission-first health system and earlier stage, innovative portfolio companies.

Photo by Wolfgang Lonien

For a while now, if I was to describe “a digital solution to address [clinical issue X]” to a colleague from any large health system, I’d likely hear one of two responses:

a) “oh, sure, I haven’t heard of that one, but you know there are hundreds of thousands of apps for health in the App Store…” or

b) “you know, my kid builds apps…”

It is true, there’s a lot of stuff in the App Store. And shoot, for all I know, some of those were built by your kid.

But in this boom year of digital therapeutics, those same health system leaders are starting to take notice of a few of these “apps.” This category includes, as its name suggests, interventions with therapeutic benefit, delivered through digital modalities. Ruchita Sinha gave a great definition in her post about her team at Sanofi Ventures’ investment in Click Therapeutics, and Cowen’s Ahead of the Curve report, “Digital Therapeutics: Dawn of a New Treatment Class,” offers some useful segmentation, examples and insights on the category.

At KP Ventures, we sit between our health system and our portfolio companies. I spend a lot of my time in the areas where these two sides struggle to work together, and from that seat, you notice when momentum picks up. My perspective on digital therapeutics is greatly influenced by what I’ve learned in the boardrooms of the great teams at Omada, Big Health, and Chrono Therapeutics, and what I’ve learned from leaders around KP who make us the pragmatic, innovative, mission-first health system that we are.

Classic Medical Innovation Methods, Tailored to the Digital Medium

Photo by Nick Youngson CC BY-SA 3.0

The digital therapeutics players that are getting noticed by insurers and health systems stand out because they adhere to long-tested methods of medical innovation, tailored to the digital medium.

These successful digital therapeutics companies:

1. Understand the needs of the population they are trying to serve, through extensive interviewing and user testing with patients and all of the stakeholders that will influence utilization and purchasing.

2. Team up with people best able to unlock the potential that exists between the technology, clinical need, and path to market.

3. Design to maximize uptake (adoption) and engagement.

4. Build an evidence base, by rigorously testing and understanding their efficacy, ideally with clinical trials and contributions to peer-reviewed literature. They seek FDA approval if their path to market requires it.

5. Open access channels to get into the hands of their target population.

6. Find a reimbursement schema that they can fit into to get paid, and get paid at scale.

(though I numbered them, these are way more interwoven than linear!)

These methods of innovation did not fall from they sky, many of them are well established by other “vendors” to health systems — pharmaceutical companies, medical device makers, clinical service providers.

In following this method of innovation, these digital therapeutics are elevated out of the realm of “just an app.” Their commitment to evidence and investment to integrate with existing systems helps to overcome reticence of the broader healthcare system to take these innovations seriously. Omada, Big Health, Akili and many others have used these methods to carve new paths into their respective markets.

Origin Stories: Two Sources of Digital Therapeutic Innovation

When thinking about understanding needs, building an evidence base, and opening up access and reimbursement, it’s important to note that from a health system’s vantage point, there are two different sources of digital therapeutic invention — and they are received with different expectations:

  1. Radically increased access to a proven therapy: Here the digital modality dramatically expands access to a therapy with significant and long-standing evidence of its efficacy, which has been underutilized because it does not scale effectively as in-person treatment. Examples: Cognitive behavioral therapy (CBT) (e.g. Big Health’s Sleepio product for insomnia); the Diabetes Prevention Program (DPP) (e.g. Omada’s DPP program). Most patients lack meaningful access to these (due to cost, availability of providers, or acceptability for patient lifestyle), but many could be eligible to receive them based on published literature and treatment guidelines.
  2. A new medium for therapeutic discovery: Here the digital modality is itself fodder for therapeutic discovery. Through R&D, teams imagine and test digital interventions targeted at addressing clinical conditions. Examples: Akili’s origins in experimentation between UCSF clinical leader and LucasArts game designers to explore how video games might improve cognitive function; AppliedVR’s exploration of how virtual reality can impact health, discovering the potential to serve as an alternative to pain management.

From these two different roots, there is a different reception — one gets questions about whether it could be as good as the original, and whether it’s an appropriate expansion of access. The second gets questions of fundamental validity.

Beyond that predictable “why would I prescribe a video game” question, digital therapeutics of both stripes must create much of the infrastructure needed to get into the hands of users. I’ll address that in another post on the “Last Mile” of digital therapeutics. In the meantime, we would love to hear from you and will continue to learn alongside of you. What else would you add to the list of methods of innovation, or how would you prioritize it? What is making these methods easier, or harder, to follow over time? Thanks for all of the hard work that went in to teaching us what we’ve learned to date — and for reading!

Liz Rockett is an investor in healthcare tech & services at KP Ventures. Her portfolio includes Big Health, Chrono, Omada, Vapotherm, and Xanitos, and she serves as an LP adviser to Rock Health. She formerly ran health impact investing for Imprint Capital, acquired by Goldman Sachs in 2015. Liz’s operational background is in product development & customer success at the Advisory Board Company, the TriZetto Group, and a health IT startup acquired by Quintiles. She is a graduate of Princeton, and completed her MBA and MPH at Berkeley. Beyond her work to help make the healthcare system work better, she has a longstanding love of all things related to career development, talent strategy and team culture.