Digital therapeutics hold promise but companies within the industry are searching for a viable business model.
Digital therapeutics companies develop software applications that can deliver wellness products or therapies to patients, primarily through smartphones. Companies operating in the space are taking vastly different approaches to increase adoption from patients and providers while potentially receiving reimbursement from payers.
Industry insiders say the sector holds promise but broader challenges loom, as exemplified by the downfall of Pear Therapeutics and the shifting business model of Akili, which sells a video game therapy for children with attention deficit hyperactivity disorder.
Here’s what you need to know about digital therapeutics.
What is a digital therapeutic?
The Digital Therapeutics Alliance, an industry trade group, defines digital therapeutics as "evidence-based medical interventions that use software to treat, manage and prevent a broad spectrum of diseases and disorders."
What kinds of digital therapeutics exist?
Digital therapeutics interventions available to patients range from wellness products to over-the-counter treatments. One company has developed an ingestible sensor. The sector includes a broad spectrum of therapies and therapeutics, some of which require a prescription from a clinician.
The methods that companies use to deliver these therapeutics vary as well. Click Therapeutics, which launched a digital therapeutic focused on smoking cessation called Clickotine in 2020, relies on smartphone applications. Companies like AppliedVR, which is focused on pain management, use virtual reality applications.
Why is this area of technology notable?
The companies offer a potential alternative to traditional pharmaceuticals or medications. Additionally, digital therapeutics can treat many diseases and disorders, including pain management, insomnia, asthma and more. While digital therapeutics are emerging, most still act as a companion to traditional therapies.
“The digital therapeutics environment really can be described as a mosaic of medical means,” said Michael Pace, CEO and founder of PalmHealthco, a firm that helps digital therapeutics companies commercialize their offerings. “These are software-enabled medical interventions but they’re generally not intended, in any way, to be standalone alone in nature.”
Who are the digital therapeutics companies in the space?
Akili, initially focused on kids with ADHD, was the last digital health company to go public in 2022. In the time since, the company has shifted its business plan to focus more on consumers and added a therapy geared towards adults.
Big Health, a developer of digital therapeutics for insomnia and anxiety, acquired Limbix and its SparkRX adolescent depression therapeutic in July. While terms of the deal were not announced, Big Health has raised nearly $130 million in funding. The company’s CEO Arun Gupta previously told Modern Healthcare it sees teenage mental health as an area with a lot of unmet need.
Click Therapeutics is a digital therapeutics company developing therapies in multiple disease states such as migraine headaches, schizophrenia and obesity. Propeller has developed a respiratory-focused digital therapeutic and was acquired by medical device company ResMed for $225 million in January 2019. Freespira has also developed a respiratory-focused therapeutic, which it has focused on patients with anxiety and panic disorders.
PursueCare, which offers addiction treatment, acquired a pair of assets developed by defunct digital therapeutics company Pear Therapeutics and raised a $20 million funding round in December.
How is the space regulated?
Those selling digital therapeutics say convincing payers to pay for a new class of products is challenging. In June 2023, the Digital Therapeutics Alliance took steps to codify the sector by releasing a toolkit for payers and other decision makers, such as government payers, to measure and evaluate companies as a way to encourage reimbursement. The organization called on U.S. regulators to provide more oversight.
The industry is looking for these therapeutics to be viewed as medical devices because an established regulatory pathway and required set of clinical benchmarks already exists. In October, the Food and Drug Administration included digital therapeutics under a list of areas its Digital Health Advisory Committee will advise.
What happened to Pear Therapeutics?
Pear Therapeutics at one time was one of the most notable companies in the digital therapeutics industry, as it had approval from the FDA for three of its prescription therapeutics. The company declared bankruptcy in April 2023 and subsequently sold off its assets in May. The former company's founder and CEO Corey McCann said in a LinkedIn post shortly after it filed for bankruptcy that the company had failed because of denials from payers and market conditions.
In the wake of Pear's downfall, companies are figuring out how these therapies get reimbursed and adopted. Convincing payers, patients and clinicians to embrace the technologies has proven challenging despite a growing number of Blue Cross Blue Shield insurers covering at least one prescription digital therapeutic as standard pharmacy or medical benefits for some members, according to an analysis from PalmHealthco. Still, most payers are waiting on additional evidence to see if digital therapeutics are clinically effective before covering them.
Among clinicians, Pace said some don’t have a full grasp of how digital therapeutics can affect patients, which presents another roadblock. “The systems of care don't necessarily have a unified view and necessarily an energized view of the range of benefits and opportunities that digital therapeutics provide to enhance patient care,” he said.
What are other approaches to reimbursement?
While some companies focus their commercialization on payers and government coverage, others are embracing a direct-to-consumer approach. Akili said it would shift gears to focus marketing its products to consumers. This strategy is not without its own challenges, according to Scott Kollins, Akili’s chief medical officer.
“We spent a lot of time thinking about, ‘How do you get consumers to really understand that in the same place on my phone, I can get a game where I'm killing zombies, I can also get a regulated medical device?’” Kollins said. “It's a new class, and I think we will get there, but that's the challenge that we face on that path that we've chosen.”