Prescription Digital Therapeutics Market: From Boom to Bust – What Went Wrong in 2023?

What a difference a year made for the prescription digital therapeutics (PDT) market.

Jeff Liesch, principal in the Boston office of Blue Matter Consulting, described it as “night and day.”

On the heels of a number of promising years for PDT, 2022 looked good. Pipelines were growing and FDA clearances were being approved. There were signs of reimbursement. Pear Therapeutics and Akili Interactive were public companies with cash to thrive, according to Liesch, who leads Blue Matter’s digital health team helping biopharma and startups find a path to market for digital innovations. “In 2023, it became a bit of a struggle, mainly because of the challenges of having to develop a new market to pay for these types of products,” Liesch told MD+DI.

Standardized reimbursement for PDT remained elusive, as PDT companies faced high development costs and the urgency to push for market development. “Investors wanted returns,” he said. “A lot of these companies felt pressure to start showing revenue or else they wouldn’t have access to more cash flow to prop up market development.”

Current market outlook

Today’s PDT market is navigating through the reverberations of reduced cash flow, according to Liesch. In general, PDT companies that achieved FDA clearance and were close to going to market have had to change their business models in order to get revenue in the door, either to appease investors or to “keep their lights on,” according to Liesch.

A number have announced layoffs, including Akili which has since abandoned plans for a prescription digital therapeutics model and announced it’s now focused on a non-prescription model. “[Akili’s] price expectations have dropped. But they think they can get more users,” Liesch said. “A lot of people are very interested to see how that works out for them… and then maybe others will follow that route.” 

Pear Therapeutics went bankrupt.

There are, however, some indications that the PDT market could survive by evolving. FDA clearances have helped to convince people in the digital therapeutics industry, healthcare providers and consumers that prescription digital therapeutics, while not gamechangers, are safe and reasonably efficacious. “The real market challenge right now is how do you translate that into a price tag to pay for what it takes to develop and commercialize these products,” he said.

For years, expectations were high, with the thinking that PDTs could be priced and commercialized like drugs. However, according to Liesch, “That’s not how they’ve been received by the people actually having to pay for them. So, the challenge right now in a lot of ways is having a reasonable expectation of the overall value of the given product.”

With that line of thought in mind, he suggested that this year is more a reset of expectations and finding the right stewards to take PDTs to the market.

Promising areas

PDTs are most applicable in physical or mental health conditions that benefit from psychological or psychotherapy types of treatments. Anxiety and depression are good examples, as are chronic diseases shown to improve from adjunct psychological therapies, like irritable bowel syndrome.

Another area, or bucket, for PDT application is pain. “A lot of pain is a mental process, so we’re talking migraines, chronic back pain, fibromyalgia, things of that nature, where you could use [virtual reality] headsets, psychotherapy or some other kind of skills or tools in a psychologist’s toolbox,” Liesch told MD+DI.

Another potentially strong area for PDTs is in cognition, or brain training. This includes schizophrenia, Alzheimer’s disease, attention-deficit/hyperactivity disorder (ADHD), and a host of other conditions that benefit from practicing mental processes that might strengthen neurocircuitry to improve symptoms. Liesch continued, noting that “The last [bucket] is women’s health, including before, during, and after pregnancy and things around fertility. There’s a lot of activity there.”

Turning a profit

To drive revenue in the space, Liesch recommended that companies focus on a few PDT pillars. One is to access psychotherapy techniques known to benefit specific conditions and provide those in apps that offer access to people who might not otherwise have access to psychologists or therapists. “The idea of an app that can be honed, personalized, supportive, always accessible, and easy to access, is a great, compelling first pillar of PDT.”

Filling this gap also makes sense from a clinical perspective, according to Liesch. “Take an example like IBS. I’ve done interviews with physicians, like gastroenterologists, who treat IBS and they basically have said, ‘I know psychotherapy can work for IBS. There is data. The problem is that I don’t know anybody that I can refer my patients to that actually knows how to give them the appropriate type of psychotherapy for IBS.’”

And questions remain about who pays and how much. “There’s so much more than can go on in an app,” he said. “Some of them are novel interventions like neurocognitive training. Some are psychotherapeutic and users can do symptomatology management.”

Some apps that provide symptomatology management might prevent costly emergency department visits. Another important pillar is a reflection of added value in the cost of a PDT. Liesch told MD+DI, however, that PDT companies need to be careful with aggressive pricing, especially if they have a reimbursement path. “It’s going to be difficult to succeed in a reimbursable path without deep-pocketed partners at this point,” he said. “To get that model working you’ll probably need deep pockets from pharma to give you two to three years on market to kind of push it up. You’ll need [healthcare providers] to start demanding these products.”

In fact, the lack of healthcare provider demand is one of the challenges on which payers are pushing back. There’s no urgency to cover PDTs, according to Liesch, noting that “Ultimately, it’s a baby step approach where you’ll need to target regional players that might be willing to innovate and be highly flexible with their pricing and contracting approach to demonstrate that you’re worth even a reasonable amount of value to be reimbursed at this point,”

PDTs’ future

One major path forward for companies marketing PDTs would be passage of the Access to Prescription Digital Therapeutics Act of 2023, which would mandate that CMS make a new benefits category to pay for PDTs. “At that point, commercial payers will have to start covering these things,” Liesch said.

In the meantime, he said there are a few items to watch:

“… the collaboration aims to help close major gaps in [opioid use disorder] treatment, such as access to high-quality, personalized psychosocial treatment,” according to a Click news release. “Designed to work alongside pharmacotherapy, CT-102 will combine evidence-based behavioral therapy with tailored neuromodulatory interventions using Click’s AI-enabled platform to deliver personalized care to each patient. This collaboration will build on Indivior’s expertise in the commercialization of innovative treatments for substance use disorders and Click’s substantial real-world experience engaging patients seeking help with addiction.”

The Indivior collaboration is especially interesting, according to Liesch, because it will show commitment to the reimbursable path. “If [Indivior] thinks there’s potential for it, they’ll push for it, and you’ll see reps, you’ll see advertisements, and you’ll see certain tactics to prop up a certain level of the size of margins. If you don’t see those activities, then maybe pharma is acquiescing and saying this maybe isn’t worth the squeeze,” he told MD+DI. 

Other PDT models on the horizon include over-the-counter, which would likely still need FDA clearance but wouldn’t necessarily need healthcare provider involvement or payer reimbursement. The third model Liesch mentioned is that some PDTs will be scooped up by clinical service groups and wrapped into a provider care environment.

“When Pear Therapeutics went bankrupt, they had an auction and Nox Health bought their chronic insomnia product called Somryst to basically include it in their sleep program that they provide,” Liesch said. “They’re just wrapping it into a broader service offering.”