The pitches always sounded promising: A new software app could track glucose levels for people with diabetes or soothe the brains of insomniacs. Most pharma executives would politely smile and nod but then park their money somewhere else.
Backed by a growing body of evidence, software is itself becoming a prescription for diseases ranging from depression to heart disease, and drug companies are starting to take notice. In the past couple years, many have quickly ramped up their investments in digital startups, infusing software-based therapies into pipelines once dominated by traditional medicines.
These products, known broadly as digital therapeutics, deliver treatment to patients through video games, smartphone apps, and sensors buried in pills or attached to medication dispensers. They are designed to stimulate changes in behavior — and in some cases brain function — to help patients control a variety of illnesses and chronic conditions.
In 2017, global investment in these companies jumped to $11.5 billion, a fivefold increase from 2012, according to StartUp Health, a research firm that tracks the digital health market. The uptick in investment mirrors an increasing focus by many digital companies in achieving scientific backing for their products.
And just as important as the money flowing in is the rising stature of digital health products. Specifically, in two key ways, they’re starting to be treated as drugs: They’re seeking FDA approval, and they’re being covered by insurers. Increasingly, then, across the industry, digital health is moving from the app store to the drug store.
A drug in app’s clothes
“We’re a team of drug developers that just happens to be developing digital products,” said Dr. Corey McCann, president of Pear Therapeutics, a maker of apps for substance use disorder, post-traumatic stress, and other diseases. “What we’ve done as a company is to demonstrate that software can produce drug-like efficacy.”
In 2017, Pear’s reSET program, designed to treat substance use disorder, became the first digital product to receive FDA approval for the treatment of a specific disease. And last month the company inked a partnership with Novartis to develop prescription software to treat schizophrenia and mental health problems associated with multiple sclerosis.
The Novartis deal is one of many that highlights increasing investment in these therapies by prominent drug makers. Among the biggest spenders on digital health are GlaxoSmithKline, Roche, Johnson & Johnson, and Merck, whose $500 million global health innovation fund has invested in 24 companies since 2009.
Analysts who follow the field say digital products are getting more direct attention from pharma CEOs who now see their development as a business imperative, as opposed to a supplemental service with marginal importance to their companies.
“The CEOs are coming to us and saying, ‘I have a strategic problem, which is that my R&D; pipeline isn’t as productive as I need it to be and there are adjacent businesses my current (employees) just aren’t focused on,’” said Scott Bechtler-Levin, a director with BCG Digital Ventures, a consulting firm.
That is causing many companies to buy stakes in these companies or form partnerships develop and commercialize their products — either as standalone treatments or as a complement to existing medicines.
Honing the pitch to insurers
The rising investment in digital therapeutics does not guarantee their success. As a whole, the industry is still in its early stages of development, and so is the scientific evidence needed to show these products are safe and effective.
But some early entrants are winning over medical societies and insurers, putting themselves on a more equal footing with traditional pharmaceutical products.
Omada Health, a maker of software to treat pre-diabetes, obesity, and heart disease, now has contracts with more than 175 employers as well as dozens of insurance plans. Its program costs between $550 and $650 for the first year, with the price tied to the achievement of patient outcomes.
“Our big goal is to get to the point where in 70 percent of the country if you’re in clinical need for a program like ours, it’s written by default into your insurance design,” said Omada’s co-founder and chief executive, Sean Duffy.
Founded in 2011, Omada describes itself as a digital behavior change company. Its pre-diabetes program is essentially a set of clinical prevention strategies wrapped in a digital package. The software tracks patients’ weight, food intake, and activity, as well as glucose and lipid levels, among other measures. It also pairs them with a health coach to help provide education and feedback on progress.
The company’s website features nine published studies that report either positive results for patients or a clinical validation of Omada’s programs. Many of the studies are small and observational, owing to the company’s short history and limited reach compared to other providers. But it has helped leverage key victories in the industry: Last year, the American Medical Association decided to issue its first ever billing code to cover digital health services like those provided by Omada.
The AMA’s designation is crucial because it helps digital companies gain coverage for their services from private insurers. “It allows us to be categorized as a proper medical benefit,” Duffy said. “That’s always been the long game of Omada.”
Medicare has not yet extended coverage for digital pre-diabetes treatment, but it is inching closer. It has begun covering the prevention services Omada offers, just not in a digital format. Duffy argues doing so would greatly expand access to care, particularly for people who must travel long distances to see their doctors. “If you’re a Medicare beneficiary, you’re probably willing to drive three hours one time to get a knee replacement,” he said. “But it’s unlikely you’re going to do that for 16 straight weeks of a (diabetes prevention) program.”
A scientific formula for business success
The extent and type of regulatory validation sought by digital health companies vary widely. Some have sought to shield themselves from the review, while others have achieved positive results by taking the exact opposite approach.
McCann, Pear’s chief executive, said running scientific trials — and ultimately gaining FDA approval — is a crucial part of the company’s business plan. Pear’s current product pipeline includes digital treatments for cancer, Parkinson’s disease, depression, and schizophrenia, among others.
“If you want to say that something treats schizophrenia … then that’s something that absolutely requires regulatory oversight,” McCann said. “And in these very fragile patient populations, one absolutely needs to demonstrate safety data.”
That approach has positioned Pear as a direct competitor to traditional pharmaceutical companies, as well as an attractive partner. Its deal with Novartis is designed to further develop its schizophrenia treatment and bring it into clinical use.
The product, known as THRIVE, currently consists of a smartphone app that uses branching logic — similar to what one might find in a choose-your-own-adventure game — to help patients identify and counteract delusions and other symptoms. Novartis may contribute by developing complementary drug therapies for schizophrenia patients as well as those with mental health problems arising from multiple sclerosis.
Dr. Jay Bradner, president of the Novartis Institutes for Biomedical Research, said Pear’s success in gaining FDA approval for reSET is seen as a model for others in the industry to follow.
“It was a heavy lift, but the path that they have carved through the forest is very appealing,” he said. “The proof of concept offered by reSET is indeed encouraging to suggest that other forms of cognitive behavioral therapy might likewise be delivered through digital devices.”
The partnership with Pear is part of a broader digital transformation at Novartis. The company has hired a new chief digital officer and is investing in software to allow clinical trials to be carried out in patients’ homes, a move to speed up research and development and reach a more diverse group of patients.
“It’s a full reconsideration of the research, development, and commercialization model,” Bradner said, adding that such change is long overdue in an industry famous for its half-hearted embrace of technology.
“My mother in her retirement home is running AI when she logs onto the Amazon Prime website, without her even knowing,” he said. “Yet in science and medicine, as sophisticated as these fields have become, there is no pervasive impact of artificial intelligence and deep neural networks, as yet realized.”
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