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Are We at a Tipping Point for Prescription Digital Therapeutics?

By Jayne Hornung

The category of treatments known as ‘digital therapeutics’ is widely misunderstood. Though the term is often conflated with ‘digital health’ tools, such as fitness trackers or meditation apps, digital therapeutics (DTx) are distinguished by their reliance on clinical evidence.

DTx products use evidence-based, clinically evaluated software to deliver medical interventions directly to patients to prevent, manage, or treat a disorder or disease. Many prescription digital therapeutics (PDTs) are software-only, while some are connected to wearable devices, and others are paired with traditional treatments.

This emerging class of therapies offers immense promise for addressing disparities in care, because they reduce the need for in-person visits. As most PDTs are smart device-enabled, they are ideal for disease management that requires frequent interaction and intervention. PDT treatment can also decrease the number of daily medications a patient requires. Research indicates that DTx medication adherence is much higher (80%) than adherence for pharmaceuticals (50%) used to treat the same conditions.

Many stand-alone PDTs have launched over the past ten years, but most have failed to reach critical mass. In 2024 and beyond, a new surge of PDT products will bring renewed energy to this nascent field. One important distinction is that the bulk of these impending products are synergistic, designed to be used in conjunction with other therapies and devices. Most importantly, they’re backed by larger manufacturers, like Sanofi and Merck.

Let’s take a deeper look at the unique challenges of the PDT space to see how these larger manufacturers might successfully tackle market access issues like coverage, reimbursement, and contracting.

Payer Coverage Concerns

Most PDTs are considered Class II medical devices, which are reviewed under either the De Novo pathway—which usually requires a clinical trial—or the 510(k) pathway, which does not. In general, obtaining FDA clearance for a medical device requires far less clinical evidence than payers are accustomed to seeing for pharmaceutical products.

This presents a big problem for payers, who want to see substantial clinical and health economic evidence before evaluating PDTs. According to research from MMIT’s Indices team, 70% of surveyed payers say they still need more evidence on the clinical efficacy of PDT products before they will cover these therapies. Surveyed payers state their preference for specific endpoints and benchmarks, such as improved A1C levels, reduced hospitalizations, or reduced pharmacy and medical spend.

Some large insurers, like Aetna, have gone so far as to publicly state that they consider digital therapeutics to be experimental and investigational, because there is insufficient evidence in the peer-reviewed literature to support their efficacy.

Other payers are beginning to recognize the potential value of PDTs, and some have publicly announced their embrace of new digital treatment modalities. For example, Highmark was the first large commercial insurer to announce its intention to pay for claims for PDTs to treat psychiatric disorders and other complex conditions.

MMIT’s research indicates that payers’ current PDT reimbursement models include month-to-month payments and subscription models, which provide a per member per month fee for each member who signs up for the product. As of January 2023, all surveyed payers without a current reimbursement model in place for PDTs plan to implement at least one reimbursement model within the next two years.

Pending Medicare and Medicaid Legislation

Recent legislation aiming to expand patient access to PDTs for Medicare and Medicaid beneficiaries might change the game for digital therapeutics. Historically, Medicare is often the starting point for reimbursement and market access transformation, as Medicaid and commercial payers typically follow once a precedent is set.

The Access to Prescription Digital Therapeutics Act of 2023 aims to amend the Social Security Act to provide Medicare coverage and reimbursement for prescription DTx products, devices, and apps. This bill follows on the heels of the similar Medicaid and CHIP Access to Prescription Digital Therapeutics Act, introduced in December 2022.

The passing of either act would be a huge boon for DTx manufacturers, not to mention providers and patients. The establishment of an overarching PTD payment methodology for either Medicare or Medicaid would help clarify how these products should be coded.

Currently, as PDTs are not drugs, they are not assigned NDC numbers. Yet only a few PDT products have been issued CPT or HCPCS medical billing codes, which leaves the bulk of these therapies squarely between our two claims systems for pharmacy and medical insurance benefits. Without a designated claims processing workflow, PDTs will never achieve widespread utilization—regardless of how beneficial they may be to patients.

Problems of Scale

As a result of insufficient coverage and a nonexistent reimbursement pathway, many small DTx manufacturers are fighting an uphill battle to remain financially sound. Last year, both Better Therapeutics and Akili announced layoffs amidst significant net losses, and they’re far from alone.

In April 2023, the DTx trailblazer Pear Therapeutics, Inc. declared bankruptcy, citing the fact that many payers refused to cover its three PDTs for substance use disorder, opioid use disorder, and chronic insomnia. Pear was a much-vaunted pioneer in the field, as it was the first manufacturer to achieve regulatory clearance for a PDT product and the first to use the FDA’s Software Precertification Pilot Program. At the company’s peak, employer group opt-in coverage helped make the company’s reSET app, which treated substance use disorder, accessible to 35 million lives.

For PDTs to achieve scaled market access—before their manufacturers go out of business—the industry clearly needs a paradigm shift in how regulating bodies, payers, employers, and providers enable patient access to these new technologies.

The Influence of Big Pharma

Several large manufacturers will soon be releasing their own PDTs in areas ranging from behavioral health and neurological disorders to metabolic disorders. Many DTx solutions are being developed through B2B manufacturer partnerships with support from both patients and providers. For example, Eli Lilly partnered with DTx manufacturer Sidekick Health to offer a DTx solution for breast cancer patients, while Sanofi partnered with DTx manufacturer DarioHealth to market its existing products to treat chronic conditions, including diabetes and behavioral health. Several of these new PDTs will be offered as one element of a combination therapy that includes traditional medication.

As larger manufacturers enter the DTx market, payers are more likely to pay attention to their comparative effectiveness research and clinical efficacy claims for their new PDT products. These more established pharma companies have greater funding and contracting power, in addition to portfolio depth. Most importantly, large manufacturers have the funds on hand to offer payer rebates and participate in traditional contracting.

The prevalence of new behavioral health PDTs will also help to legitimize this new category. The demand for mental health services has increased tremendously in the past three years, exacerbating an existing shortage of therapists, psychologists and psychiatrists. As a result, there is likely to be intense interest in newly approved behavioral health PDTs, with a boomerang effect for older therapies. When patients face long waiting lists for in-person or even virtual therapy, physicians may be more inclined to prescribe an immediately accessible digital combination therapy. Given the national focus on this therapeutic area, payers and PBMs will also feel increased pressure to provide a greater array of treatment options.

But mental health is not the only area where big pharma is looking to expand its digital pipeline.  In 2022, Sanofi launched a Digital Accelerator to fuel new digital experiences for patients and HCPs, focusing first on atopic dermatitis, while Merck created a Digital Sciences Institute to help DTx startups bring their ideas to market. As manufacturers invest in developing a new generation of PDTs to improve symptom management, boost therapy adherence, and enhance the patient experience, they’ll also be focusing on capturing real-world data to provide actionable insights into patient behavior.

As a category, DTx products work by engaging patients to improve their own outcomes. By collaborating with technology experts, providers, and insurers, pharmaceutical manufacturers can unlock deeper insights into disease states to develop better, more targeted digital therapies. To do that, they must engage experts in disease management, disease modeling, digital health, and life sciences. When pharma companies can bring PDTs to market in the same way that they bring traditional products to market, patients will have greater access to digital therapies that improve their quality of life.


To see how targeted payer market research can improve your brand strategy, learn more about MMIT’s Rapid Response and P&T Perspectives solutions.

© 2024 MMIT
Jayne Hornung

Jayne Hornung

Jayne Hornung is the Chief Clinical Officer at MMIT (Managed Markets Insight & Technology), a trusted go-to-market partner who believes that patients who need lifesaving therapies shouldn't face delays because accessing drugs can be confusing. She is a clinical pharmacist and has been one of MMIT’s clinical subject matter experts for the past 13 years. In her role, she conducts research of drug, indication and policy data and helps MMIT’s clients understand market access from a clinical perspective. You can find her on LinkedIn.

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