Digital therapeutics: An exciting innovation, but not without challenges

Digital therapeutics: An exciting innovation, but not without challenges

May 16, 2019

More traditional pharmaceutical companies are collaborating with digital players

"Digital solutions must…meet the needs of all stakeholders involved in the patient journey. "
Portrait of Thilo Kaltenbach
Senior Partner
Munich Office, Central Europe

Digital therapeutics: An exciting innovation, but not without challenges.

Digital therapeutics, or treatment options that involve digital technologies, have the potential to enhance and, in some cases, replace traditional medication. Examples are digital technologies for optimizing the way cancer patients receive chemotherapy or diabetes patients adhere to their prescribed treatments. In general, digital therapeutics come in the form of software, mobile solutions or connected solutions, and they fall into categories such connected medical devices, disease prevention apps, and remote monitoring via devices, to name a few.

All in all, innovation in digital therapeutics adds up to great news for patients. It’s good news for pharmaceutical companies, as well: We have calculated that through digital therapeutics (DTx), already today, 5% of the value of the global pharmaceutical market would be addressable. That's roughly 60 billion U.S. dollars by 2019.

However, companies must tackle four key challenges to stake a claim on this niche of the emerging digital health ecosystem . We believe that those pharmaceutical companies that are successful will be the ones that capitalize best on their existing competences and selectively gain access to the new capabilities they need.

We’d like to walk you through the four challenges, pointing out the differing approaches needed for DTx, an area that is completely new for some pharmaceutical companies. The challenges are identifying key opportunities; carving out distinct value propositions; accessing a broader patient population and the market; and quickly changing the current operating model and filling capability gaps.

Innovation in digital therapeutics adds up to great news for patients.
Innovation in digital therapeutics adds up to great news for patients.
Challenge 1: Identify the right opportunities

We recommend companies begin with a thorough assessment of the most attractive therapeutic areas and their potential for digitalization. Specifically, companies should consider the DTx potential within each therapeutic area by looking at:

  • Current pain points of the disease
  • DTx market and scalability potential
  • Accessibility from current business and required investments

In oncology, for example, patients and physicians need to deal with late diagnoses, a limited ability to personalize treatment and the enormous side effects of chemotherapy. Furthermore, when highly potent chemotherapy drugs are taken orally, and patients become responsible for drug administration, it’s imperative that doctor’s instructions are followed. DTx can address these pain points, as shown by US-based digital pill developer Proteus Digital Health. Its new oncology offering works when patients ingest a sensor, which submits data from the patient’s stomach via a wearable torso patch to an app for patients and a healthcare provider portal.

This is an example of a company that identified how DTx can add value to patient outcomes by helping patients and physicians manage drug and treatment regimens more effectively.

Companies just starting out should analyze specific indications from the viewpoint of the patient. Furthermore, they should consider price benchmarks and the potential to scale DTx solutions since not all medically relevant therapies will be profitable. And it’s not too early to see where the current product portfolio and existing capabilities can be put to work.

Challenge 2: Develop a distinct value proposition

The market for DTx is becoming increasingly competitive as more and more traditional pharmaceutical companies enter it through collaborations with digital players. Because of the steep competition, it’s critical to get a strong value proposition from the get-go, and that value proposition needs to address patients and other groups, such as physicians and payors.

Pharmaceutical companies must also prepare for new ways to market the solutions. When marketing drugs, companies focus on informing doctors and patients about the product. In digital therapeutics, however, branding and the user experience are important differentiators, since the scope of customer interaction and the number of touch points with customers are increasing.

This means digital solutions should not be limited to addressing an unmet medical need. Digital solutions must also meet the needs of all stakeholders involved in the patient journey.

Challenge 3: Gain broader access to patients and the market

A third challenge is to find innovative yet pragmatic ways to get access to a broader patient population and to the market. Here again, the lay of the land for DTx is different than that for traditional pharmaceuticals. We see two strategies:

  • Increase DTx adoption through reimbursement
  • Increase DTx adoption through digital monetization schemes

We expect clinical validation and regulatory approval to become key for the widespread adoption of digital treatments. Market approval paves the route to market through validated health claims, prescriptions and ultimately reimbursement. This drives patient adoption and secures scalability for pharmaceutical companies. As companies negotiate with payors, they will encounter new challenges and find new opportunities with DTx, due to faster time to market and the need for continuous post-sale version updating.

New pay models are also possible. For example, the company that operates the app Virta Health announced it would move from a fee-based model to charging based on its ability to achieve clinically relevant diabetes reversal in patients through individualized coaching based on the analysis of personal data, among other features. Success would be measured by diabetes reversal metrics such as HbA1c levels.

For products that will not be reimbursed, companies can explore options from other industries for monetizing. An example is the "freemium" model as adapted by M-Sense, an online therapy assistant providing medical documentation of headache trigger factors.

Out-licensing or selling aggregated and anonymized patient data may be an option as well.

Challenge 4: Design a winning operating model

Finally, new entrants need to identify the capabilities that are required to win in the new digital game, as well as the changes needed to the current operating model. They should also adapt their many existing competencies for the new market.

Changes will come across the board. In R&D, companies need to understand that digital shifts the focus from a product- to a patient-centric perspective, which means they need to incorporate feedback from patients on an ongoing basis into the digital product or therapeutic. Other important points are changing requirements for technical provision and distribution, such as the need for a digital infrastructure to make available the treatment to patients and physicians. Finally, governance and corporate structures may need to move away from therapeutic areas and toward a model that better suits digital therapeutics.

All in all, we believe that it’s unrealistic for traditional pharma companies to possess all the capabilities they need to succeed with DTx. As such, they should carefully consider options ranging from inhouse capability-building to M&A to close the gaps.

Further readings