Digital & Technology

The digital therapeutics (DTx) rockets have launched but still need regulatory scaffolding

By Tai Chung

Oct. 11, 2021 | Article | 6-minute read

The digital therapeutics (DTx) rockets have launched but still need regulatory scaffolding

Technological advancements outpace regulatory frameworks

This is an accepted fact by innovators, developers and institutions keen to introduce novel products and services to improve the user experience but are slowed down by regulatory obstacles. (In particular, the fintech sector and real-time payments come to mind.)


Indeed, regulatory scaffolding in most industries needs to catch up to the speed of innovation, but this is nowhere more critical than in healthcare, where fast-evolving digital technologies have the potential to prevent, manage or treat disease while improving the patient experience and saving taxpayers millions of dollars each year. 


In this context, delaying the integration of reimagined care modalities that are clinically effective, personalized and cost-efficient into traditional patient pathways will weigh down innovation efforts. This frequently happens due to procedural complexities around reimbursement—even when the technologies that power these care modalities have been granted FDA clearance and breakthrough designation.


This is exactly what is happening right now in the U.S. with digital therapeutics (DTx). DTx are a new class of medicine that is digitally delivered either as stand-alone software-driven interventions (also known as software-as-a-medical-device or SaMD). These also can be bundled as software plus a drug or software plus medical device configurations (known as companion apps and combination products).


Like drugs and hardware medical devices, prescription-based DTx that aspire to broad market adoption and reimbursement coverage must be clinically validated and pass muster with the FDA, usually by demonstrating evidence from randomized clinical trials or N-of-1 trials. Their differentiating advantage is that the best of them can achieve behaviorally based health improvements that are out of reach for conventional therapies.


The FDA has signaled its commitment to promoting accelerated progress in this direction by launching in 2019 its Software Precertification (Pre-Cert) Program to vet digital health organizations’ developers and processes rather than individual products (2020 Update). Pre-Cert came on the heels of the agency’s 2017 launch of its Breakthrough Devices Program, which fast-tracks review and grants a breakthrough designation to highly promising digital health technologies, including DTx.


Since those advances, the ball has been in the court of government agencies, such as the Centers for Medicare & Medicaid Services (CMS), to adapt existing pathways to reimbursement. The goal is for DTx and other evidence-backed, innovative, non-implantable digital health technologies to be prescriptible by doctors and accessible to patients on par with other medical devices.


Where the Pre-Cert Program failed in gaining much steam, the Breakthrough Devices Program is beginning to hit its stride. But it needs more help. So, how is our regulatory framework meeting this challenge?

Medicare coverage of innovative technology falls short with DTx

In 2020, CMS published a draft rule looking at Medicare Coverage of Innovative Technology (MCIT) to establish a reimbursement pathway for breakthrough-designated medical devices. It sounds promising, but, as always, the devil is in the details. The delayed rule is confined to updating coverage pathways for breakthrough-designated durable medical equipment (DME)—but omits the type of technologies at the heart of our healthcare system’s digital transformation.


Restricting reimbursement to traditional pathways only, such as DME, chokes the innovation that is so badly needed in healthcare. DTx target the quadruple aim of healthcare, but it needs more concrete reimbursement pathways to get there.


The agency’s explanation was that innovative technologies must fall into existing (pre-digital) benefit categories. It cannot create new categories. It does not have the authority to assign DTx to one of the current categories.


But what purpose does an updated reimbursement coverage rule for innovative technologies serve if it skips over one of the most potent advances in digitally delivered care?


As we wrote in response to CMS’s request for comment: “Without appropriately outlining a framework for how innovative technologies such as DTx and SaMD would be covered under current or proposed pathways, there remains a lack of solid scaffolding for coverage and reimbursement … This piecemeal and patchwork approach should be replaced with a sturdy foundation and systemic construct of how innovative, evidence-based treatments—whether a traditional benefit category exists or not—will be covered and reimbursed by the proposed rule.”

Next-gen value-based care (VBC) requires innovative tools

Value-based care has had many incarnations over the years: patient-centered medical homes, accountable care organizations, hospital value-based purchasing, bundled payments, risk-based purchasing—you name it. Healthcare providers operating under any of those frameworks share a common goal: to improve health outcomes at a lower cost than traditional fee-for-service. Prescriptible, reimbursable, platform- or cloud-connected digital therapeutic systems can supercharge this mission by enabling uniquely granular, longitudinal, interaction-based patient monitoring capabilities. This, in turn, gives providers unprecedented visibility into intermediary patient outcomes in real- or near-real time and empowers them to intervene spontaneously in case of an abnormal deviation rather than relying on scheduled outpatient visits or patient-initiated contact.


From a payer perspective, good health outcomes translate into lower expenditures by reducing the need for costly hospitalizations and other acute care services, which are often the consequence of undertreated chronic disease. If looked at this way, DTx are also a powerful tools in health policymakers’ arsenal of approaches to reining the overall cost and burden of care, which can be especially high in underserved communities. And that brings us to our last point.

Social determinants of health (SDoH) and positive change

Beyond their capacity to improve health outcomes due to evidence-based, personalized, behavioral interactions with users, DTx also have the potential to dissolve long-standing barriers to physical and mental health care faced by some of the most vulnerable populations in the U.S. As the increased use of telehealth services during the COVID-19 pandemic demonstrated, virtual care is not only technologically and organizationally feasible at scale, but also a convenient solution for frail patients who have mobility issues or can’t get to a brick-and-mortar healthcare facility due to employment-related, childcare-related or other logistics challenges. To that list, we would add individuals disproportionately affected by rural, urban and socioeconomic disparities, such as those in the Black, Latinx, Native American and LGBTQ communities.


“Reimagining how breakthrough medical devices can be covered and reimbursed via a national lens presents a powerful opportunity to address disparate access to care, treatment and outcomes in our society. CMS, as the single largest payer for health care in the United States, has the capability to act as a force multiplier for positive change in how we envision coverage and reimbursement for innovative technologies, including DTx and SaMD,” we wrote in response to the MCIT proposed rule.


Streamlining coverage and reimbursement for innovative, clinically validated digital health technologies is an idea whose time has come. As a society, we cannot afford to let this historic opportunity pass us by. 

The path forward to DTx-supported health

DTx reimbursement is a burning issue that has gained visibility along with evolving payer awareness about these technologies. Since 2019, when DTx investor valuations began to make headlines and DTx clinical relevance began to be recognized, DTx prescription and use have been tied mostly to programmatic spending decided on a case-by-case basis by private health plans. As familiarity with the technologies grew and some of the more forward-looking players began to create digital formularies that include them alongside traditional drugs and therapies (CVS, Humana, Express Scripts, we are looking at you), attention began to shift to claims-based reimbursement. Claims-based reimbursement is decided at the national level (i.e., Medicare). It is seen as preferable to programmatic spend because of the standardization of the review process and the vote of confidence it implies to stakeholders along the whole DTx value chain: DTx developers, clinicians, patients and payers.


The current version of the MCIT proposed rule does not seem to capture this evolving market sentiment, but we are optimistic the regulatory framework will continue to mature. If it cannot muster the strength to be the blueprint, CMS can draw courage and inspiration from other countries—Germany, Belgium, the United Kingdom and Singapore—which have all introduced the proper groundwork, paving the way for proper DTx reimbursement.


View our full response to the MCIT proposed rule.

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