Opportunities and Challenges in the German Digital Health Market
The DiGA Fast Track has brought the German market to the attention of foreign media, digital service providers, and healthcare investors alike. Germany’s large health system has long been attractive for investment, yet rigid bureaucracy prevented significant growth. DiGA presents, finally, an opportunity for digital innovation. Yet, this approval can only be one small part of the go-to-market strategy for digital vendors. Companies must balance major stakeholders and keep four challenge areas when seeking to bring their products and services to Germany.
The Digital Healthcare Act (DVG), passed in Germany towards the end of 2019, presents an exciting opportunity for digital health in the country. Germany has long been an attractive market due to the size of its population and extensive healthcare system, yet rigid regulation meant that many companies seeking to innovate either failed or moved out.
Now, DVG attempts to push the German health system away from “paper chaos” by incentivizing telemedicine, creating online health communications portals, and, most notably, creating the DiGA Fast Track, a process by which digital health apps can gain approval to be prescribed and reimbursed by statutory health insurance companies. In principle, apps under DiGA must be classified as low-risk medical devices; be primarily digital; and support the monitoring, relief, or treatment of diseases.
A new whitepaper from Research2Guidance explores opportunities for digital health in Germany given the new DiGA process. The whitepaper can be downloaded here.
Out of all these changes, DiGA has by far earned the most media coverage and foreign attention. This is not surprising, of course. After all- being listed in the DiGA directory seems, at first glance, a direct channel to both patients and providers. However, gaining this regulatory approval should be seen as more of a quality stamp for solution vendors interested in the German market, and in no way the be-all end-all of their market entry. As the German healthcare system remains complex, vendors must adequately balance all stakeholders to ensure significant uptake, whether they decide to pursue a DiGA listing or not.
Digital health companies should consider four major challenge areas when planning their German market entry.
Generating evidence
Generating high quality clinical evidence is crucial for establishing the principle claims and marketing of a company. What the solution can do for a patient is what distinguishes it from competitors, makes it attractive to end users, and draws the attention of payor organizations. As competition increases and apps in the same categories begin to gain approval, the importance is shifted towards high quality evidence, to justify higher prices. Companies should consider investing in clinical trials, especially to prove benefit in terms of return on investments, benefits to clinical workflow, or improvements in the patients’ condition or quality of life.
This is of course true for all companies, though those seeking DiGA approval have an additional burden of proof. To retain DiGA approval after preliminary listing, vendors must prove the effectiveness of their solutions in patient-specific results or overall structural improvements to the health system. However, results must be Germany-specific, meaning companies will have to invest in clinical trials or other forms of research within Germany. Companies moving in from other countries should consider partnering with German research institutions or large hospitals to conduct such studies. Here, using alternative study designs or real-world data may help vendors achieve evidence within the one-year timeline.
Pricing and business models
Companies must, of course, negotiate and set strategic price points. For the majority of DiGAs that are currently approved, price points have been set based on preliminary evidence and prelisting models. After the first year of approval, manufacturers must negotiate pricing with the “Association of Statutory Health Insurance Companies.” Furthermore, it is expected that as apps are added to the directory and gain approval, competition will inevitably lower prices.
Setting the price points poses a unique challenge for companies. Should they set the price too low, they may be undervaluing their product. Companies will have difficulties in raising their prices once they have secured an initial user base or closed first deals. A high price, however, is contingent on the service’s value proposition and claims. Insufficient evidence of success could push a product out of the market as competition increases.
Channel selection and planning
Selecting the right distribution channel is key in reaching the target, end-user population. Which channels a solution should target depends on the solution itself, the size of the population affected by the disease, how many doctors currently work in relevant field, the competition from other solutions, and many more unique factors. Traditionally, there are three main channels companies must explore to enter the healthcare market: healthcare providers and hospital systems, health insurance and other payors, and direct to consumer channels. Each of these pose a unique challenge and opportunities. As all public health insurances now must reimburse DiGA apps, private companies may also be interested in diversifying their digital portfolio, presenting an opportunity to close B2B deals. Here, companies should consider innovative partnership options, like those with a telehealth company or pharmaceutical company, to take advantage of the much larger sales force, marketing capabilities, and existing connection with healthcare providers.
Provider education
No matter the distribution channels prioritized, DiGA apps must always be prescribed by a provider, and non-DiGA apps still benefit from physician adoption and recommendation. Therefore, reaching providers becomes especially important for any digital health vendor seeking to enter the German market. App trainings or even organizational integration services will be needed to support the adoption of apps across practices or hospitals. It is important for solutions to consider the effects of provider burnout, as many healthcare professionals are feeling overwhelmed with new technology. To combat this, solutions must prioritize educating physicians about the benefits of using their service over the additional work needed to learn and implement the new system. Especially as digital health reaches a critical inflection point, companies must start to seriously consider the benefits they bring to the clinical workflow of providers, or be left outside of the health system.
DiGA presents new opportunities for digital health service providers and is an exciting advancement towards digitalization in Germany. However, achieving this regulatory approval is just one possible first step in entering the complex German market. As foreign investors and companies turn their sight towards Germany, those who understand the intricacies of the healthcare system and adequately address these four challenge areas may find their market entry options better than ever before.
At Research2Guidance, we provide high-quality, informed market research and strategy consulting from our headquarters in Berlin, Germany. Specializing in only digital health, we have assisted clients from large pharmaceutical companies to small service providers in shaping their go-to-market strategy both in Germany and beyond.
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