Getting out your prescription pad and writing a script for a smartphone app might seem ridiculous, but the practice could soon become commonplace, as some apps are now considered therapeutic (not TikTok though, sorry).

The digital therapeutics industry has a lot to figure out to get payer coverage

What are digital therapeutics?

By Maia Anderson

February 21, 2023

Amelia Kinsinger

The rising tide of ransomware attacks in healthcare is exacting a hefty price from hospitals and other medical providers who’ve had their data locked up by cyber attacks. Healthcare providers face potential costs arising from more than just the initial ransom; targeted systems have seen lost patient revenue, the need for remediation, and additional recovery costs. And even the largest health systems in the country aren’t immune to the costly ripple effects, such as delayed patient care, including surgeries, that can linger even after an initial attack. “Not only is the frequency [of ransomware attack] picking up, but I’d say the magnitude or the size is also getting bigger,” said Brian Tanquilut, a healthcare services analyst at Jefferies. CommonSpirit Health, one of the nation’s largest hospital chains, was hit with a high-profile cyberattack in October. The system has not publicly disclosed the financial fallout, but a Dec. 1 update published on the company’s website said that the cyberattackers gained access to personal information for some patients and that an investigation is ongoing. Chad Burns, a spokesperson for CommonSpirit, declined requests for an interview.

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Digital therapeutics promise to transform healthcare by making treatment more accessible.

The digital therapeutics industry was valued at $4.35 billion in 2021, a figure that’s expected to balloon to $18.1 billion in the next five years.

Companies within the industry have promised to transform healthcare with their software products, which are meant to make a wide range of services from mental health care and opioid addiction treatment to diabetes management more accessible. But few payers offer coverage for digital therapeutics—and without coverage, not many patients will be able to use these health solutions. Andy Molnar, CEO of the trade group Digital Therapeutics Alliance, told Healthcare Brew that “payer coverage is truly the No. 1 blocker” in getting products to patients.

Digital therapeutics are software products used to prevent, manage, or treat a disease, Molnar said. And they require a lot of oversight: These products must be clinically validated, go through quality management systems, and be FDA-regulated in the US.

Molnar attributes the emergence of the digital therapeutics industry to the 2013 FDA approval of Welldoc’s prescription app BlueStar, which helps patients manage Type 2 diabetes. That same year, the FDA cleared a digital therapeutic called Freespira to treat panic disorder, and Pear Therapeutics, which has a range of products meant to treat serious diseases like opioid use disorder, was founded. Today, some of the industry leaders include Omada Health that provides virtual care for chronic conditions and Akili Interactive, creator of a prescription video game for kids with ADHD. Each are valued at around $1 billion and have paved the way for other digital therapeutics companies when it comes to working with payers and getting FDA clearance.

The industry has a lot to figure out

Right now, payer coverage of digital therapeutics is sparse. There are a few one-off contracts with state Medicaid plans, according to Health Affairs. Highmark, a Pittsburgh-based commercial payer with about 6 million members, covers some prescription digital therapeutics products. There are many things the industry needs to figure out to get more widespread payer coverage, according to Matthew Fickie, senior medical director at Highmark. For one, there’s no standard among regulatory bodies on what exactly constitutes a digital therapeutic.

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On top of that, there’s “no cohesive reimbursement method” for digital therapeutics, said Jason Parent, director of clinical innovation at Point32Health, a Massachusetts-based commercial payer. The Centers for Medicare and Medicaid Services has only approved one Healthcare Common Procedure Coding System, or HCPCS code, less than a year ago for behavioral health digital therapeutics. “When you don’t even have a code to submit to the payer, how do you get reimbursed for it?” Parent asked. “What winds up happening is that all of these individual companies have to come up with these disparate solutions as to how to get reimbursed for their product.” Also, every digital therapeutic looks different from one another, Parent said, which makes it hard to standardize the billing process. “Let’s say a digital app has a chatbot that you talk to three times a week [...]. How often should they bill us for that? Three times a week? Three bills once a week?” asked Fickie. There have also been several cases where a digital therapeutic performs well in clinical trials but not so well in the real world, he added, which has led to some pessimism on the payer side. “The digital therapeutics community writ large needs to get high-quality studies showing clinical-level efficacy,” said Fickie. “That’s when the payers are going to latch on to them more.”

Payer coverage is a ‘when,’ not an ‘if’

It’s not a matter of if digital therapeutics will get payer coverage, but when, said Molnar. Every payer is working to provide digital health access in some manner, and big payers like Aetna, Optum, and Cigna have all made “major investments” in digital health, he said. The Digital Therapeutics Alliance has lobbied Congress to get legislation passed that would approve Medicare coverage for digital therapeutics, with Molnar calling it a “top priority.” The alliance spent $322,998 lobbying for the bill in 2022, according to OpenSecrets. The alliance is also working with state Medicaid directors to create localized models, and has put together a guide to help payers, hospital networks, and providers review digital therapeutics products.

Payer coverage = more prescriptions

The most obvious change that comes with payer coverage is more prescriptions for digital therapeutic products. Coverage means patients don’t have to pay for the product (or at least all of it) and providers get reimbursed. “You don’t want to prescribe something to a patient and then find out that the patient has to pay for it out of pocket, which means they don’t really have access to it,” said Benjamin Alouf, chief medical officer of Limbix, which is developing digital therapeutics to treat adolescent mental health. But getting payer coverage is also about creating some equity in access to digital therapeutics products. “If [a product is] only covered under certain plans or in certain states, or if it can only be afforded through self-pay, that’s not really solving anything,” Alouf said.