Digital Therapeutics’ Arrival — Part 1
A rise in digital therapeutics:
Digital Therapeutic companies (for simplicity representing all DTx — or DiGA in German — without differentiation between diagnostic and/or therapeutic focus) are becoming increasingly common amongst the Health Tech landscape and are used more and more by patients. Operating at the convergence of healthcare and technology, Heal Capital has seen a large number of these companies offering promising solutions across a wide variety of treatment areas which include mental health, gastroenterology, endocrinology, cardiology and musculoskeletal health to name a few.
Within this initial post, we are kicking off a series of thoughts about the DTx space that we will share over the upcoming weeks.
The rise of digital therapeutics seems to provide immediate benefits for all stakeholders in healthcare. Though, as is frequent within the complex stakeholder landscape, adoption of digital therapeutics into routine patient care is often more challenging than anticipated. Under the German Digital Care Act (DVG), the first DTx are supposed to be approved and market-ready by early September 2020, representing the first true test of this new regulatory framework in a real world setting. The question looming is whether a clearer pathway for reimbursement will in turn result in the increased adoption of current solutions.
From a provider perspective, the core driver for adoption is an exponential increase in the demand for healthcare matched with a linear (and insufficient) increase in healthcare resources. Digital Therapeutics offer an exciting opportunity where the inherent scalability of a digital solution can be leveraged to provide greater access to better, less expensive care. For patients, these offer additional advantages including more patient-centricity, increased convenience, and asynchronous delivery. The impact of COVID has further highlighted a growing need as all stakeholders try to find novel methods for remote delivery of care at scale to serve as an alternative to traditional, centralised healthcare delivery.
Despite a largely positive outlook on DTx, there is debate amongst the ecosystem around key metrics that define the success or failure of these new therapeutic solutions. While some argue that building clinical evidence via randomized controlled trials is key, others suggest user engagement is more important. Both are of central importance but at an early stage, startups frequently need to make a strategic compromise to prioritise one over the other. At Heal Capital, we’ve spent some time thinking about this question and found the framework below a useful way to think about solutions in the space.
Active Ingredient vs. Mode of Delivery:
When thinking about the DTx space, a parallel to traditional therapeutics is often drawn as a way of framing the debate. At Heal Capital, we find a frequent misconception is often made: comparing the creation of a digital therapeutic to the development of a new drug. For any new drug development process, extensive randomized control trial evidence is required to demonstrate safetiness and efficacy over several phases. For the majority of digital therapies today, this comparison doesn’t hold true as the vast majority of digital therapeutic startups aren’t developing novel therapies but are instead frequently centered around already well-established treatments. For example, Kaia Health is delivering multi-model therapy for musculoskeletal pain or HelloBetter is delivering cognitive behavioural therapy for mood disorders, both treatments with pre-established, extensive clinical evidence. Other companies such as Oviva, Second Nature or Liva Healthcare are all delivering impact through behavioural and lifestyle modification which again are first-line in the management in a raft of chronic conditions such as diabetes or cardiovascular disease. In our view, these companies are not creating a new therapy as such but are instead translating an existing therapy (and its pre-existing robust evidence base) into a digital format and thereby providing immense value to the patient.
Thus, if taking the traditional therapeutic parallel, a more useful comparison might be to think of these types of digital therapeutics as akin to developing a new drug delivery device — for example a new inhaler device or a new insulin pen. These devices are generally taking a well-established drug and changing the instrument for its delivery, frequently with a view to making it more user-friendly or to improve the administration procedure itself. In this respect, digital therapeutics are offering a novel method of delivery of a well-established therapy in order to improve clinical care.
Clinical Evidence vs. Engagement: How to apply early KPI’s?
Coming back to the question of key metrics, more precisely of clinical evidence vs. engagement: The most relevant early performance indicators to become a category champion in one — and later maybe many — indications is highly debated. We might start by looking at the stakeholders responsible for driving the adoption in the next few years. Will it be the payor, the provider or the patient? Or maybe pharma through drug plus DTx solutions?
It goes without saying that they remain cornerstones of any company in the space and that a degree of both is needed. Nevertheless, due to resource limitations in time and capital, the seed and series A startups we see at Heal Capital frequently find a strategic compromise needs to be made between them.
We would argue, framing the problem through the lens offered above, the core question they should ask is: “am I creating a new drug or am I building a new drug delivery device?”. If a given digital therapeutic is more akin to a new inhaler as compared, the more important proof-point is to demonstrate the effective delivery of the intervention. Demonstrate that you are able to do this in a way that patients find easy to use, convenient, and effective. Thus, we’d argue the metric that matters most in these startups is demonstrating impressive patient engagement by building a product users love. In doing so, a startup demonstrates it is creating the delivery vehicle for therapy that can truly leverage the promise of scale made by digital therapeutics and capture the most value in the long term.
To summarise our advice to DTx startup founders:
- Identify whether your DTx is a new drug or a new drug delivery device.
- If it’s the latter: NPS > RCT — at least early on.
- For the few DTx startups creating ‘a new drug’: RCT evidence will be critical.
We will share more of our thoughts on relevant aspects of a successful digital therapeutics company in follow-on posts in this space.
In the meantime, if you have a different view or want to discuss our perspective, feel free to get in touch with us at ew@healcapital.com.
Written by Eckhardt Weber
