Navigating the payer landscape for digital therapeutics

With a projected growth rate of 23.1 percent between 2021 and 2028, digital therapeutics are on track to make a sizeable impact on patient care. Driven by access to new technology, outcomes data, and enthusiasm for telehealth after COVID-19, diagnosing and treating disease through a phone, tablet, or other device could become a pivotal part of the modern healthcare model.

Already, developers have taken their innovations to market, seeing success in treating depression, substance use disorders, dementia, irritable bowel syndrome, and heart conditions, among other disease states.

“The amount of money invested and the quantity of digital therapeutics moving through the pipeline is increasing just in the last 24 months," says Colleen Cummins, Product Director at Lash Group. “Eventually, the skepticism of a digital treatment will wear off and people will start asking if there are alternatives and/or strategies to augment their traditional drug therapies. I expect we'll see an increase in adoption by providers and patients."

Despite the growth, challenges remain. These new solutions enter a payer landscape that wasn't made for digital therapeutics. Patient self-pay models are growing for digital therapeutics, but are inherently limited. Traditional reimbursement strategies involve pharmacy and medical benefits for packaged treatments—delivery methods that often don't apply to these technologies.

Even so, payers are interested in digital therapies and their potential to drive value-based care. A recent Xcenda survey found that 9 in 10 payers had reviewed at least one digital therapeutic for coverage in the previous 12-18 months. They also expected significant future demand, with the biggest predicted gains in remote monitoring, medication adherence platforms, and wearable/point-of-care diagnostics.

Moving forward, digital developers will still need to coordinate with payers just like any other pharma innovator. But the strategies they use to get on formularies and otherwise obtain reimbursement and revenue will need to evolve. These are a few of the payment models we're seeing as more digital therapies come to market:

Pharmacy, medical, or split coverage
One approach is to start with the traditional payer framework involving the patient's pharmacy benefit, medical benefit, or both.

Many digital therapeutics can be prescribed and added to drug formularies as a pharmacy benefit. Similarly, digital solutions might target medical benefits when they involve providers. This could apply to a situation where a developer engages telemedicine doctors to prescribe the app to patients (or "users"). In the Xcenda survey, for example, 41 percent of covered therapies fell under the medical benefit. Another 43 percent of therapies had product-dependent coverage.

Other developers have optimized the best of both models to obtain split coverage. This combination solution involves gaining coverage on both the medical benefit and the prescription benefit.

In the absence of long-term clinical data (which many respondents cited as a top barrier for coverage and/or reauthorization), developers may also consider positioning their product to payers as a companion product for traditional pharmaceuticals.

“You might partner or pair digital therapeutics with other treatments specific to symptom management," says Dale Hanna, Product Director at Lash Group. “That way, you can augment lower-cost treatments with a digital component to continue and refine what the patient outcome might look like."

Direct contracts with physicians

In direct contract strategies, physicians purchase a digital therapy “in bulk" and then bill patients to recover their costs.

“Consider, for example, a provider who does counseling," says Ryan Cothran, Director of Operations at Lash Group. “They could contract with the developer to buy access to a mental health digital therapeutic and then offer it as part of a more holistic care plan."

Direct contracts with employers
For some digital therapies that don't require a prescription, human resources leaders may have an interest in giving their workforce access to programs as part of workplace wellness initiatives. In these cases, developers sell directly to employers, who grant employees free use of the platform through employee benefits.

“In these circumstances, employees might be given a phone number that routes to a call center managed by a patient support partner like Lash Group to gain access to the platform," explains Warren Goff, Operations Manager at Lash Group. “After authenticating the caller in the system, we'd then take action in the technology platform so that the user would receive an email with instructions on how to register for their account and gain access."

These models may also inspire other revenue frameworks. For example, local governments could incorporate digital therapeutics for substance use disorders into prisoner rehabilitation programs or court-ordered treatments. Aiming for state Medicaid programs and municipality formulary inclusion can expand the coverage footprint for these emerging therapies.

Creating demand and a sustainable payer strategy
While some aspects of the payer landscape for digital therapeutics may inevitably evolve, one thing remains: Digital developers will need to prioritize payer communication and coordination to optimize coverage of their products. And that starts with proving the technology works.

“The companies that will be more successful are those that invest in pre-launch communications with payers," notes Tim Regan, Vice President of Commercial Consulting at Xcenda. “With payer coverage being such an important part of the care continuum, developers will need to create demand by documenting the efficacy of the therapy, so they have more rapid patient uptake and a reason for payers to cover the device."

With their experience helping traditional drug manufacturers bring new products to market, commercialization partners can help digital therapeutic developers in the same way. After all, digital therapies have serious staying power in this evolving care continuum.

“As digital therapies continue to demonstrate efficacy and outcomes, I don't see this as a fad or something that will just teeter off," adds Myra Reinhardt, Vice President of Product Innovation and Analytics at Lash Group. “I think there will be more investment and we'll continue to see the benefits. With that, we will need to navigate through access and affordability complexities moving forward."