What drives success in Digital Therapeutics?

Most digital health solutions fail, or at least, never manage to scale up. Very few succeed. What lessons can we learn from those who do it right? We have put together three (non-exhaustive) golden rules for a successful digital health offering.

In the age of COVID-19, digital health, telehealth, and remote patient care has become more attractive to funders and developers alike. Experts agree that these solutions have a potential to improve healthcare delivery around the world by offering tools for self-management and disease prevention, clinically actionable data for practitioners, and cost-savings across the board.

But let’s look at the flip side of this coin …

Healthcare, and digital healthcare especially, is arguably one of the toughest markets to disrupt with innovative technology, in part due to the complexity of the stakeholders involved.

Companies must convince a population of users (patients) who are generally apathetic about their health, probably underinformed about their condition, and usually willing to pay very little out of pocket. In doing so, they must simultaneously appeal to health care providers- a key distribution channel- by improving clinical workflow or providing some other significant benefit.

Marry this with the high burden of proving cost savings to payors and the long health insurance sales cycle, and you’ll find it’s an uphill battle for any digital health developer to launch a successful product. Oh, and let’s not even mention the cumbersome regulatory approval process for a medical device.

This convoluted relationship between stakeholders creates a high barrier to market entry and is probably why over 90 percent of digital health start-ups fail.

But despite significant barriers, 2020 has seen more start-ups than ever popping up across the spectrum of health conditions; muscular-skeletal, femtech, and heart health name only a few. More impressively, we see players like Solera, Omada, Happify, and Click Therapeutics making serious waves in the media and gaining initial successes.

So, in this difficult and competitive market…what drives success for the few companies that do make it big? R2G has found that successful companies follow some major themes in their product design and business model. Among these, three golden rules specifically stand out!

The Three Golden Rules of Digital Health

1. When it comes to any kind of digital tool, everything is nothing without usage. High usage requires high quality features. To make a digital health solution a true, daily, companion requires a combination of digital services, connected devices, and human interaction. Today, a best in class user experience begins with a beautifully packaged welcome kit, and an onboarding process that allows the user to familiarize themselves the service and connected devices, and to set goals and objectives. A curriculum-based coaching program delivered by a human coach or chat bot initiates ongoing interactions with the users. More and more solutions also integrate telehealth components, as HCP intervention is one of the main drivers of user retention. Peer group features and gamification tools also play a role in keeping the user engaged. With all that in place, best in class digital health solutions can retain more than 50% of their users over a period of months.

2. Patient-centric solutions should be scalable across several conditions. Solutions must meet patients where they are in their health journey and offer a holistic interpretation of health. At this day in age (and at this point in the epidemiological transition) most individuals with chronic diseases are also managing comorbidities. Patients with diabetes may have poor heart health or struggle with weight management. Individuals with muscular skeletal conditions could be grappling with the mental health challenges of their limited mobility. Rheumatoid arthritis can cause lung disease down the line.

So, while solutions should appeal to users by offering highly useful, condition-specific features, a flawless design should be leverageable across multiple conditions. This is not just to account for comorbidities, but for disease prevalence in general. With 40 percent of the U.S. population having some chronic disease, appealing to a wider audience will guarantee a larger pool of users.

3. Build a strategic business model, and shy away from a long-term, B2C approach. The more a solution offers behavior change features, the more a business model should target health insurance companies, employers, and other payors. The more medically driven a solution is, the more it must revolve around providers and reimbursement codes.

Prevention is the name of the game for payors. Solutions that leverage groups of behavior change features, such as mental health, smoking cessation, nutrition, and physical activity, are not just attractive for users, but appeal to insurers and employers. These institutions have the prerogative to prevent (chronic) disease or stop disease progression in their member groups, saving costs in the long run.

When designing a viable business model for such a product, developers must remember that patients are almost never willing to pay for their healthcare needs. Some exceptions exist, of course, especially in the weight loss or general wellness space. Here, major players like Weight Watchers, Fitbit, and Peloton are turning millions in B2C profit. (For more information, have a look at our comprehensive report on the weight loss market)

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Sure, some early adopters may be willing to pay for a high-quality solution, but most successful companies that launched with a B2C model have now transitioned to a more aggressive, B2B or B2B2C approach. These include pay per enrolled member (in which a client, like a large employer or health insurance, only pays the solution for the number of people who enrol in the program), pay per active enrolled member, or even pay based on outcome. All these models pose, progressively, more risk to the DTx company, but are more attractive to employers who want to pay for solutions that actually work.

Take Omada, for example, the diabetes solution that has put years of effort into scaling up an offering and business model that is attractive to payors. It operates based on the performance of its product, charging clients an enrolment fee for each user that signs up, and an additional fee based on the weight loss of each member. If Omada does not “work” as advertised, and the users do not lose weight, the client does not pay.

In solutions offering remote patient monitoring capabilities via the connection to a medical device, the healthcare provider is crucial. The key to remember is that data is not useful to a provider unless it is actionable. BardyDx, for example, offers a wearable patch for 24/7 EKG monitoring of patients with a suspected arrythmia as a long-term alternative to 48-hour Holter monitoring. A patient with an unknown condition wears this patch for up to fourteen days, transferring valuable data to the practitioner.

But how valuable is this data, really? No doctor has the time to watch live footage of continuous data to make a diagnosis, so this company offers a comprehensive dashboard with report overviews per patient, a patient management portal, diagnosis assistance, and clinical decision support features built in. No, a medical solution cannot flourish by only appealing to HCPs, but without the support of this population, failure is inevitable.

In these solutions, it is crucial to build a service around reimbursement codes. BardyDx saw original success in the long-term cardiac monitoring space, covered by Medicare reimbursement codes for up to 400 dollars. Hillrom planned to acquire the company at $375m as of Q4 2020. Last month, however, Medicare slashed reimbursements (and the company’s profit!) for long term EKG monitoring, down to about $40 USD. Not only does the company make significantly less per use case, but without a high reimbursement, providers may not be incentivized to prescribe the solution over the standard practice of Holter monitoring.

Now standing to make much less money, Hillrom recently pulled out of the deal. BardyDx and similar investor-backed companies, such as iRhythm technologies, are left to reinvent their service or dispute these changes, hoping for a different treatment in the 2022 CMS Physician Fee Schedule.

This is in no way an exhaustive list of the conditions companies must consider in order to become successful. But failing to account for these “golden rules” will ensure failure, as companies must keep in mind the intricacies of all stakeholders.

Interested in learning more secrets for building a successful digital health solution? Contact us to learn more!

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