The digital health graveyard is littered with genuinely valuable digital tools that have failed to scale or commercialize. This is because commercialization is the final, hardest and arguably most important stage in the life cycle of digital health innovations.
There’s no single marketplace or buyer for digital health solutions, but rather an assortment of potential customers with wildly different business drivers, buying preferences and evidence requirements. And unlike for a pill, injection or medical device, there’s no fixed commercialization path—instead there are many paths, with each path demanding a different approach.
Regardless of which commercial path a company chooses to traverse, customers will want to see evidence of either clinical or economic value before buying. This means having existing customers as users who can generate evidence, setting up a chicken-or-egg trap from which many companies have trouble escaping. While healthtech companies are, of course, free to invest in randomized clinical trials prior to market entry, this often isn’t viable either because of limited initial funding or because nascent products do not yet exist in the form that ultimately will be commercialized at scale.
The struggle, as they say, is real.
To transcend these challenges and commercialize successfully, digital health companies must be prepared to adapt and flex as they travel many potential go-to-market paths (sometimes sequentially but often simultaneously). This means first answering the question, “Who pays?” Depending on the commercial model, the answer may be public or private health plans, healthcare providers, employers or patients—or, possibly, all of the above. If pursuing reimbursement, companies must then decide which market or markets to pursue first. While the U.S. market for digital solutions dwarfs all others, familiar candidates in Europe such as Germany, France, the U.K. and Belgium may offer a clearer, more structured pathway to reimbursement.
The choice of direction may require companies to evolve their business models and even their underlying products as their target customer changes. They’ll need to be creative about whom they choose to work with at different points in their journey to get where they want to go. And ultimately, their success will depend on how well they understand that digital health is less about making sales than about making sure their customers realize value after the sale has been made.
Done right, digital health solutions can convey value to many different stakeholders from across the healthcare ecosystem. It’s a double-edged sword, because this means your target will include an ample pool of potential customers (which is good!) as well as multiple forking paths to consider (which is tricky!). Whether you’re a startup looking to commercialize your first innovation or a top-50 pharma company with an in-house solution, it’s critical to understand the four main digital health customers and what each one cares about.
The 4 basic commercialization paths for digital health solutions
Payers. These buyers offer access to large patient populations, promising the potential for both reach and scale. Yet these positives are partially offset by the skepticism many of them have shown toward prescription digital therapies, especially in the U.S., and the high evidence threshold they demand. Payers are most likely to respond to value propositions built around economic value, clinical necessity and member satisfaction. It’s important to note that payers vary widely—from small, vertically integrated networks to large managed care organizations and national health systems—so care must be taken to understand the customer’s specific needs and to tailor the value strategy accordingly.
Employers. Employers in the U.S. are probably the second most common commercialization target after health insurers, and for good reason: Like insurers, employers are invested in promoting their employees’ health and well-being, making them a logical target for digital health solutions. Employers are likely to be receptive to messages connected to cost reduction, employee well-being and talent acquisition and retention. Given that their evidence bar will be lower and that clinical evidence may take a backseat to strong economic evidence—which is easier to generate anyway—employers make an attractive first target for digital health companies.
Providers. Like payers, healthcare providers are no monolith. They include integrated delivery networks, academic medical centers and community health systems and hospitals. While business drivers vary across this customer segment, they all share an interest in improving patient outcomes and relieving the burden on healthcare providers through improved efficiency. Given the strain afflicting all health systems right now, these customers may be highly receptive to solutions shown to increase productivity. Digital health companies should consider pursuing both a top-down and bottom-up engagement strategy with providers by making the business case to administrators while also working to create viral demand with doctors who see a solution’s potential for improving their daily workflows.
Patients and caregivers. Adoption drivers for patients and their caregivers are fairly straightforward: They want convenient, accessible ways to improve health outcomes. Patients make an attractive early target for nascent digital solutions, given that their requirements for clinical evidence is lower than that of any other stakeholder. This attribute is balanced, however, by the fact that consumers have extremely low tolerance for paying out of pocket for digital solutions. Many companies opt to make inroads with consumers early in the product life cycle to generate the evidence they’ll need down the road to woo payers and providers.
Whether you’re a pharma company exploring digital solutions or a stand-alone digital health company trying to bridge the gap between funding and profitability, be prepared to explore each of these routes to market—maybe all at the same time.
Don’t over-index your focus on payer reimbursement
Some digital health companies in the U.S. have seen payer reimbursement as the pot of gold at the end of the rainbow and have planned their go-to-market strategies accordingly. This occasionally has led companies into ruin as the promise of reimbursement crashes into reality. When some digital health companies hear “reimbursement,” they think of the way drugs, medical devices and services are reimbursed: A patient visits her doctor, the doctor prescribes a treatment, the doctor files an insurance claim and the insurer pays its contractual share of the treatment.
When it comes to digital therapies, insurers in the U.S. strongly prefer to treat them as a programmatic spend—which means contracting with healthtech companies to make digital solutions available to their members, often at a steep discount. Even when companies do convince health plans to pay for digital therapeutics through traditional reimbursement channels, payment is often tied to achieving certain metrics, meaning revenue often falls short of expectations.
Unlike a pill or medical device, which is a fixed concept that’s extremely difficult to tweak midstream, digital solutions are inherently fluid. This is why, to successfully commercialize their digital health innovations, companies need to “play the field” by pursuing multiple go-to-market strategies. Not only should they be prepared to hopscotch across forking go-to-market routes, but they also should be ready to tailor their business models and value propositions—and even their underlying products—to whichever customer they’re targeting at a given moment. This means adapting for the global markets they aspire to enter.
What might this look like in the real world? Think about a company that’s developed a platform and app to help manage a chronic condition such as diabetes. Here’s a look at how the same underlying technology could be packaged to appeal to the potential customers we’ve highlighted here.
Patients and caregivers. A digital health company might market a free app to healthcare consumers, funded through ads, data collection or both. The company could add on an ad-free “freemium” version with additional features. This phase in the product’s life cycle can pull double-duty—by using consumer feedback to improve the product and by collecting user data that can be leveraged later when applying for designation as a Class II regulated medical device.
Providers. Digital health companies have successfully used at least three distinct business models to win business with providers: through existing reimbursement pathways and codes, by promising to improve patient care or provider operations and by helping providers achieve specific health plan targets.
Employers. The company could repackage its technology as a provider-like service to make it appealing for large employers in the U.S. eager to save money and increase employee engagement and retention. Employers may favor value-based contracts linked to real-world evidence. This will require partnering with the customer to agree on aligned incentives and metrics, such as employee enrollments or user weight loss.
Health plans. At the same time, the company might look to commercialize its solution either by convincing an insurer to reimburse prescriptions due to overwhelming evidence of medical necessity or to drive use through outcomes-based provider contracts.
As if overcoming the din of competing solutions and navigating the maze of stakeholders isn’t challenging enough, digital health leaders must contend with another obstacle: For genuinely innovative therapies, they must create a market that doesn’t currently exist. Leaders should be prepared to buddy up at three critical stages of a product life cycle: during product development, at launch and after a sale is made.
During product development. The fact that many successful digital health innovations have spun out from health systems illustrates the critical role early partnerships can play. These solutions benefit both from having been developed under real-world conditions and from having a built-in constituency of healthcare provider and administrator advocates.
Pharma also makes for a natural early partner for healthtech. The industry has capital to invest, robust experience generating evidence, a strong incentive to develop “around the pill” digital solutions and an uneven history of developing digital solutions on its own. While an infusion of money and expertise from pharma will be tempting for a digital health company straining to stretch its funding as far as possible, companies should carefully consider the down-the-road implications of “going steady” with any partner: It may restrict their freedom to work with others in the future.
At launch. We’ve seen numerous examples of companies with complementary (or even competing) solutions partnering either to gain traction as a digital therapeutic class or to present customers with an end-to-end offering. In Germany, for instance, digital health companies have banded together to promote the use of digital health applications. Better to open the door wide enough for everyone to pass through, the thinking goes, than to grapple at the threshold and risk having the door remain shut to all.
Most digital health companies aspire to transform care pathways but, in reality, offer point solutions that require the customer to connect the dots—adding to healthcare fragmentation rather than solving it. Increasingly, we see digital health leaders partnering with companies with adjacent offerings to bring customers a full, end-to-end care solution. This type of approach is highly attractive to health systems, who don’t want to waste time figuring out how to wire together disparate solutions.
Post-sale. The work doesn’t stop after a deal is consummated. Post-sale, digital health companies must choreograph a complex set of interactions to ensure their solution is being used in such a way that customers experience real-world benefits. Digital health companies have limited control over how customers roll out their products, so they must be prepared to partner with them to help orchestrate the process. This means exerting control (to the extent possible) over how end users hear about the offering. It’s also important to equip the customer with tools and information to ensure the right users have access to the solution and are using it correctly.
Many employer-funded digital solutions fail to gain employee traction and don’t see their contracts renewed after a trial period. Joint informational webinars led by your company, your customer and their employees is one tool that can help mitigate against this risk. For provider-funded solutions, we suggest digital health companies work diligently to woo key opinion leaders and then labor side-by-side with frontline workers to implement process changes needed to wring optimal value from a new solution. For payers, digital health companies can and should help educate their customers about which of their members are ideal candidates for a given solution.
Whether operating in lean times (like 2023) or times of abundance (2018-2022), funding for digital health is always finite. Companies must stretch what they have for as long as it takes to land on a successful commercialization path—or paths. Regardless of which path they choose—or, more realistically, which path chooses them—five fundamentals reign.
- Build a great product. To flourish, you need to start with a truly valuable, innovative solution backed by a strong value proposition and designed to solve a specific need for a targeted user. If you fail here, all hope is lost. So focus first and foremost on getting this right.
- Have an integrated evidence plan. Building evidence generation into development cycles may not come naturally to digital health companies, but it’s critical. This means planning from the outset to generate evidence to appeal to all potential stakeholders down the line, meaning both the customer segments outlined above as well as potential pharma and medtech partners.
- Be commercially flexible. This is so critical that it bears repeating: Do not get hung up on one go-to-market path. Be prepared to hopscotch and adapt your product and business model to suit whatever customer you’re pursuing at the moment. Payers are tantalizing, but don’t pursue them at the expense of other, possibly more viable customers.
- Know when to stay the course (and when to leave it). So many variables affect the ultimate success or failure of digital health solutions. Sometimes it boils down to being in the right place at the right time. It may sound defeatist, but it’s in fact the opposite: If you miss your window of opportunity, be prepared to pivot and reinvent yourself.
- Take a page from SaaS strategies. Companies selling software as a service (SaaS) learned early that it’s much more efficient to retain customers than to continually find new ones. That doesn’t mean it’s easy. The customer success movement grew out of a recognition that this business model depends on partnering with customers to ensure their ongoing success and satisfaction with a company’s software. Digital heath leaders must learn to do the same.
Getting these fundamentals right isn’t easy, but it isn’t rocket science either. To cite the old cliche: Knowledge is power and knowing these success factors from the start is the key to achieving success when commercializing digital health solutions.