Digital therapeutics (DTx) are becoming a key player for managing chronic health conditions in a world that’s shifting towards value-based healthcare. Healthcare providers are increasingly recognizing the value of this emerging class of therapeutics for tackling lifestyle-related diseases, and The Sidebar investigates how pharma and payers can benefit from them too.
What Problems is Global Healthcare Facing?
The combination of an aging population, increased prevalence of chronic diseases, and fee-for-service models has resulted in incredibly expensive healthcare globally. The effects of the COVID-19 pandemic have only added to these costs; in the US, total health expenditure jumped from 17.7% of GDP in 2018 to an all-time high of 19.7% in 2020, and similar increases have been seen in the UK and the EU.
However, even before the pandemic began, healthcare costs were spiraling out of control. Chronic diseases require long-term treatment and place a demand on healthcare resources—nearly 80% of all health costs are now associated with these often lifestyle-related diseases.
For many people, healthcare has become an essential commodity that is out of reach and out of pocket.
For example, the US has the lowest life expectancy at 77 years compared to up to 83.7 years reached elsewhere; healthcare burdens are high, and the costs of healthcare reflect that. Compounding that, nearly 10% of the population doesn’t have health insurance where similarly high-income countries have close to 100% health insurance coverage, making any chronic condition a very expensive impact on a person’s life.
Unproductive administration and behind-the-scenes processes from providers further delay access to healthcare. This has devastating consequences for the patients who need care the most, leaving many to disengage with their provider. For pharma companies, poor patient engagement means treatment adherence can wane over time.
What is the Current ‘Reimbursement Model’, and Who's it Letting Down?
Currently, a fee-for-service (FFS) reimbursement model is used in most healthcare systems. This traditional reimbursement model is volume-based in that providers are reimbursed based on the number of diagnostics and procedures performed and services provided. Although this makes perfect business sense, healthcare is rooted in (necessary) care ideals that reach beyond the transactional utopia that commerce thrives on.
Impact on Patients and Payers
This model leaves many patients with drawn-out and ineffective treatment pathways for their conditions. Repeated or unnecessary tests are carried out, with often little to no communication between different departments, leaving patients to be the organizer of their own treatment progress. Not only that, but their payers or governmental healthcare systems are paying for these services without the assurance of a successful outcome.
Impact on Providers
Practitioners become jaded with the volume of steps needed in an FFS model to achieve positive patient outcomes and can experience burnout due to the number of logistical and administrative steps. There is also a presiding unsustainable notion that ‘Gold Standard’ practice involves throwing every diagnostic test and procedure at a problem, and that using more advanced technology will yield more useful results.
Impact on Pharma
For pharma companies, the FFS model places emphasis on therapeutic treatment options and fails to acknowledge prophylactic management, limiting the scope of products that can be offered. Preventative therapeutics could open a world of additional revenue while tackling the lifestyle factors that can lead to disease progression.
What is a Value-Based Healthcare Model?
Value-based care (VBC) is a model centered on the Institute for Healthcare Improvement’s ‘triple aim’:
- Improving the patient experience of care.
- Improving population health.
- Reducing healthcare costs per capita.
And a fourth, additional aim:
- Improving the physician experience.
A VBC model places the emphasis on achieving successful outcomes for patients in a holistic way, taking into account not just a patient’s physical needs, but also their logistical and emotional needs. For example, a patient with diabetes would not need to go elsewhere to have their mental health taken care of; this would be factored into their treatment plan from the beginning, reducing wasted time and knock-on health effects of having to wait for a separate mental health service.
Care provision is restructured in a more economical and efficient format. Services are coordinated around the needs of these patient populations enabling the patient to receive integrated care from day one. The resulting spare bandwidth of effort can be used in tailoring treatment for those patients requiring more intensive care, optimizing outcomes for all patients regardless of the extent of their care needs.
The result? Top reimbursement for providers who achieve the best outcomes for their patients at the lowest cost.