The fall and rise of digital therapeutics

A digital therapeutic (DTx) is defined as “health software intended to treat or alleviate a disease, disorder, condition, or injury by generating and delivering a medical intervention that has a demonstrable positive therapeutic impact on a patient’s health.” The digital health industry has been through a series of cycles and novel DTx are starting to emerge following changes in the regulatory framework and reimbursement environment. This has reignited investor interest and the field is now ripe for partnerships with the pharma industry.

DTx have been a transformative force in healthcare, providing an alternative evidence-based intervention to drugs and medical devices in the prevention, management, and or treatment of medical disorders. During the COVID-19 pandemic, DTx took on a new lease of life. Many start-up companies used the lenient regulatory environment to pilot new digital tools in various therapeutic fields.

However, in 2023 the market leader Pear Therapeutics’ filed for bankruptcy, raising concerns over whether DTx were commercially viable. DTx companies were forced to re-evaluate their business models and many companies merged. Akili Interactive was acquired by Virtual Therapeutics for $34 million, Click Therapeutics obtained the assets of defunct Better Therapeutics and Pear Therapeutics. DarioHealth expanded its digital offerings for chronic conditions with the acquisition of Twill, Mahana Therapeutics acquired Berlin-based Cara Care, and Aptar Digital Health acquired Healint to enhance its portfolio and drive growth.

Dave Hanaman, CEO and co-founder of Curavit Clinical Research, US, notes that: “The digital landscape has experienced a fluctuating investment cycle that has risen, fallen, and then risen again. DTx, along with other digital solutions, were promising nascent industries before COVID, and post-COVID there was a bit of a fallout in the digital health market. The highs and lows have been amplified by COVID, but in the long run smart business models have emerged and the industry is back on track to deliver strong steady growth and value to payers and sponsors.”

The Digital Therapeutics Alliance (DTA) has worked tirelessly to educate stakeholders and has lobbied for changes in healthcare policy to improve the coverage and payment of DTx. In the US, the Access to Prescription Digital Therapeutics Act introduced in 2022 helped to define the reimbursement benefit categories for DTx and increased the provision for Medicare and Medicare coverage of prescription DTx (PDTs). In July 2024, the Centers for Medicare and Medicaid Services (CMS) released a new payment policy proposal to provide new codes for the use of digital tools that support the delivery of behavioural health. More recently, H.R.8166 has been introduced in the Medicare supplemental agreement to provide clarity for Medicare Advantage plans.

In Europe, France and Germany have paved the way in DTx innovation by establishing regulatory frameworks and reimbursement models, and other regions, such as Asia-Pacific (APAC), are looking to embrace and integrate DTx’ into the healthcare ecosystem.

According to Andy Molnar, CEO of the DTA organization in the US: “During the last few months, however, we have seen a lot of DTA's hard work pay off in the form of health policy updates; CMS 2025 Proposed Physician Fee Schedule (PFS) has been released that includes three new codes to cover digital mental health treatment (DMHT) devices and this is a huge step forward. Plus, these changes are tracking internationally, with processes in Germany, France, South Korea, and Japan covering prescription DTx.”

“As the regulatory framework has evolved, the industry has been working on next-generation products,” he continued, “and we are going to see a sharp uptake in innovative products entering the market in the future.”

Recent product approvals

There are now several routes for regulatory approval of DTx based on the positioning of the product, which has de-risked the DTx development process. The FDA has established a Digital Health Advisory Committee (DHAC) to bring stakeholders together to assess digital health offerings and the DTA recently announced its plan to launch an accreditation programme to help DTx manufacturers to assess clinical efficacy and select programme(s) that are appropriate for their business models.

In the last year, several PDTs have received FDA clearance, including Click Therapeutic/Otsuka’s Rejoyn for the treatment of major depressive disorder (MDD), Freespira’s at-home treatment to reduce and stop panic attacks and post-traumatic stress disorder (PTSD), and MedRhythm ‘s MR-001:InTandem for neurorehabilitation in patients with multiple sclerosis (MS), Parkinson's disease, and chronic stroke. In 2022, Biogen entered into a $3 million development and commercialisation agreement for the PDT to address gait deficits in MS patients.

In June 2024, Akili received FDA approval for EndeavorOTC, its over-the-counter DTx for attention deficit hyperactivity disorder (ADHD) in adults. Alkil already had FDA approval for the prescription version of the interactive video game for children with ADHD, but had struggled to make it commercially viable; the new indication will help expand its use and make it more accessible to those in need. In addition, Hinge Health expanded its DTx solutions and launched a DTx to support menopausal women who experience musculoskeletal (MSK) and pelvic health issues. In April 2024, Curio Digital Therapeutics received FDA 510(k) clearance for its postpartum depression.

Leveraging real-world evidence

DTx have become more widely accepted by the medical community and patients. Increasingly DTx companies are undertaking more in-depth studies, including randomised clinical trials (RCT) and real-world evidence (RWE) studies to support their approval and coverage. For example, in May 2024, German-based GAIA initiated an RCT involving 348 participants to determine the impact of Klariva on the Dermatology Life Quality Index, psoriasis severity, and depressive symptoms. GAIA already markets the DTx for the treatment of psoriasis in Germany, but this data will help differentiate the product and secure its continued reimbursement by payers.

According to Hanaman, “DTx companies are leveraging RWE in a couple of important ways, and this is where decentralised trials are supporting the DTx space. It is feasible to not only look at the safety and effectiveness of DTx, but to also generate RWE to understand the health economic impact of the therapy on the individual, plus the healthcare system as a whole.”

“By looking at data over time, we can see the long-term impact and support of the product's application and commercial rationalisation,” he continued. “In addition, companion apps are evolving to support patient management, monitoring the effect of traditional therapies and lifestyles on disease symptoms and side effects across large patient populations over time.”

In oncology, DTx companies have started to leverage digital solutions in disease management. Earlier this year, Mika Health partnered with the global non-profit Cancer Support Community (CSC), and Health teamed up with Gerresheimer, to develop tailored DTx to support patients, caregivers, and healthcare professionals in cancer therapy management. In 2022, DarioHealth and Sanofi entered into a multi-year, $30m strategic agreement to help accelerate the commercial adoption and expansion of the Dario platform, which helps patients manage chronic diseases, including diabetes, hypertension, weight management, musculoskeletal, and behavioural health.

Pharma’s renewed interest in DTx

According to Molnar, now is the right time for pharma to partner with DTx companies.

“There are several routes for reimbursement of DTx based on the positioning of the product, and this is starting to de-risk various models, including pharma partnering with DTx manufacturers,” he stated. “Pharma is getting more involved in patient management of disease and the FDA has defined the Prescription Drug Use-Related Software (PDURs) pathway. This enables pharma to add value to existing pharmacologic interventions where the DTx can help to manage the disease or side effects of drugs and be used to differentiate products and bring value to the patients on a global scale.”

Several pharma DTx partnerships have been announced in recent months. In July 2024, Otsuka forged an alliance with Health Innovation Oxford & Thames Valley (Oxford HIN) to evaluate the implementation and integration of a new DTx, CARE for MDD. In March 2024, Teva UK announced a strategic partnership with Closed Loop Medicine to use its proprietary software as a medical device (SaMD) as a digital companion to pharmaceuticals to advance the development of personalised medicines. And, in January 2024, Orion Corporation and Newel Health entered into a licensing agreement for Virtual Reality DTx Rohkea (ODD-403) in chronic pain.

DTx are here to stay…

Healthcare systems around the world face increasing pressure to provide improved population health outcomes at lower costs, and technology including DTx will play an increasingly important role in care delivery.

“There are gaps in the healthcare system that can only be solved with DTx,” noted Molnar. “We have an ageing population and there are not enough doctors to take care of people at home 24/7, but there are DTx that can do that.”

Hanaman agrees.

“The future of US healthcare is the future of digital,” he said. “All types of digital medicine, including DTx as standalone solutions and in combination with traditional therapies, will be fully incorporated into the healthcare system, in the same way the internet has been incorporated into businesses.”

“DTx will be supportive in driving healthcare outcomes for our lifetime,” Hanaman concluded.