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April 26, 2022
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Can Digital Therapeutics Give Payers a Return on Investment?

The Current Cost of Healthcare to Payers

Chronic conditions and mental health treatment represent up to 90% of the USA’s health expenditures, according to the CDC. This estimated $3.7 trillion arises from direct costs of treatment such as medications, hospitalizations, and physician visits, but also from indirect costs associated with lost economic productivity. Particularly concerning is the American Academy of Actuaries’ estimation that spending on prescription drugs is projected to increase more rapidly than healthcare spending overall.

This vast financial and procedural burden of chronic disease has led to a need for new solutions to manage existing conditions, and improve their prevention. DTx are well-placed to meet this need.

How can Digital Therapeutics Reduce Costs?

The context

DTx are software-based interventions targeted towards treating and managing specific clinical conditions. DTx can be combined with conventional pharmacologics and medical devices in order to provide an ecosystem of care for a patient suffering from a particular disease, and any additional comorbidities or subsidiary symptoms they may also experience. DTx are backed by research, and are clinically-validated, evidence-based treatments.

DTx can provide symptom tracking, real-time advice from trained healthcare professionals, behavioral modification, medication and treatment adherence assistance, nutritional and lifestyle education, and mental health support, all of which can potentially yield reduced dependency on prescription medications and healthier lifestyle habits, resulting in a lower disease burden.

Throughout the COVID-19 pandemic, digital access to healthcare surged and became an integral part of a patient’s journey through the healthcare system.

Owing partly to the extensive length of the pandemic, digital access to healthcare is now a widely recognized method of triaging, diagnosing and even treating a patient, as the world begins to return to a new normal. DTx are therefore a natural extension to the telemedicine origins of this new healthcare era, holistically treating patients in an accessible, affordable, and sustainable way.

The strengths

For many common diseases such as Type II diabetes or heart disease, behavioral and lifestyle components are contributing factors to the severity and chronicity of the disease. DTx are often designed such that the lifestyle of a patient is monitored and supported, enabling the patient to make healthier decisions in their daily habits. By providing ongoing, personalized intervention, DTx have been shown to provide safer, optimized treatment for patients.

In a world where the most valuable resource is no longer oil, but data, efficient and automated gathering of user health data is one of the strengths of DTx with the most untapped potential.

The Michael J. Fox Foundation for Parkinson’s Research are utilizing the collection of biomarker data via a digital platform from healthy and Parkinson’s-diagnosed patients, with more than 100,000 volunteers. This landmark initiative means Parkinson’s research has access to one of the most robust datasets in the field, and is a prime example of how DTx can directly feedback to future clinical research and indirectly reduce costs: should a cure be found, treatment payouts for ineffective therapies would inevitably decrease as severe disease could be prevented entirely.

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A cost-effective intervention is one that is worth the extra investment for the expected degree of health gain. This is particularly relevant in DTx, where the treatment not only replicates in-person treatment such as counseling or nutritional advice, but can develop truly novel approaches to treatment. For example, MedRhythms’ combination of DTx, sensors and auditory feedback to improve walking ability and cognition in patients who have neurological disease. The additional mental health improvements of a patient being empowered to control their own recovery through accessible, discreet and continuous DTx support, along with direct reduction of in-person physiotherapy and hospital visits, lend DTx to be cost-effective.

The studies

In a randomized-controlled trial for reSET-O, a prescription digital therapeutic for opioid use disorder (OUD), it was demonstrated that use of the digital platform in conjunction with treatment as usual (TAU), resulted in a significantly higher retention rate than TAU alone (80% vs. 64%, respectively) in patients with OUD. In a data-based study, reSET-O was also found to have the potential to reduce healthcare resource utilization and costs from 12 weeks up to 5 years, from a US-third-party-payer perspective. The budget impact model demonstrated that total savings over the five years of more than $2.5million was possible, offsetting the treatment costs of reSET-O entirely.

Health economic analysis of literature on the use of DTx in Type II diabetes and hypertension found that over a three-year period, average savings of health resource utilization were around $145 per patient, per month. Sensitivity analyses showed that a primary driver for these lower costs was the resulting reduction of use of conventional medication.

Given the costs of drugs for the treatment of Type II diabetes and hypertension, the savings found above represent approximately 22% to 29% of the total estimated costs for treating these conditions as usual, without a DTx. These estimates are in line with findings from similar studies on use of DTx in heart failure patients and Type I and II diabetes patients, with healthcare cost savings of 33% and 21.9% respectively.

The challenges

Thus far, lack of reimbursement standardization has contributed to reluctance from payers to reimburse DTx on a large scale, but with prescription digital therapeutics becoming federally-recognized and Medicare and Medicaid benefit categories being developed, a consistent framework for reimbursement is soon on its way.

In addition, digital health formularies are being developed, and will enable a more straightforward approach to providing and paying for DTx.

With several DTx now available for each of a number of common chronic conditions, payers can have a catalogue of options from which to curate a plan for members.

Analysis offered by Professor Kazem Rahimi, cardiologist and population health expert at the University of Oxford, suggested that with the introduction of lower-priced technologies like DTx, there may be a rise in expenditure. He suggests this would be due to the increased demand of a low-cost option that addresses unmet clinical needs, leading to overall increased costs. However, with the direct savings through reduction of acute or in-person care that DTx can provide, the overall net cost to payers is likely to decrease.

The solution

Consumerism and ownership of smart devices represent an indelible shift towards greater access to information, and a renewed sense of autonomy for patients. The potential for leveraging that market for good holds great opportunity: engaging patients in a sustainable, even entertaining, way to use their devices for training their health and reducing their use of acute-care resources is an exciting prospect, not least for the reduced costs that will result.

DTx are the strategic shift in both motivating the individual patient to manage their condition, whilst reining in the spiralling affordability of healthcare; by productively outsourcing the technology to personal devices, patients regain some empowering responsibility to make lasting lifestyle changes that reduces their burden on the healthcare system.

Can DTx Give Payers a Return on Investment?

DTx are well-placed to alleviate the economic burden of healthcare through direct savings, via reduced patient use of acute-care services, and indirect savings from automated clinical data analysis contributing to more efficient healthcare of the future. In doing this, DTx support the value-based care that is fast becoming the pillar post for which healthcare systems are being remodelled around, improving long-term outcomes for patients in the process.

DTx provide not just economic answers to the question of whether they give payers a return on investment, but also an answer to the inevitable technology modality shift that healthcare at individual and population levels are adopting. Utilizing the powerful smart devices most people now own, DTx are a high-value solution that put healthcare back in the hands of the patient and provider, and cost savings back in the pockets of payers.

In short, DTx will very likely be the future, but it will pay to start adopting DTx now.

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About the author

Dr. Nessie Riley

Nessie Riley is a medical writer, veterinarian, and advocate for accessible healthcare for all.

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