Prescription digital therapeutics providers (PDTs) have been pushing for recognition and acceptance in the health care sector for years. That effort got a major boost thanks to a seemingly minor administrative move from the federal government.
In February, the Centers for Medicare & Medicaid Services (CMS) announced the creation of a new reimbursement code for prescription digital therapeutics that have been cleared by the Food and Drug Administration.
While no government funding is tied to the new Healthcare Common Procedure Coding System (HCPCS) code, it makes PDTs a legitimate and easily understood part of the reimbursement system within health care. This, in turn, potentially opens the door for reimbursement and makes it easier for patients in need to access PDTs.
“If we zoom out, the fact that CMS has created the HCPCS code for the digital therapeutics is a huge, massive step in the right direction,” Shiv Bhavnani, the founder of the Global Institute of Mental and Brain Health Investment, told Behavioral Health Business. “It’s validation or recognition of the product type from CMS.”
Specifically, CMS announced the creation of a Level II HCPCS code for “prescription digital behavioral therapy, FDA cleared, per course of treatment.” The CMS decision is effective April 1.
In its decision to create the HCPCS code, CMS said in a memo that “CMS believes that establishing a code at this time may facilitate options for non-Medicare payers to provide access to this therapy in the home setting.”
The first-ever PDT to gain FDA clearance to treat a disease is Boston-based Pear Therapeutics Inc. (Nasdaq: PEAR), whose products focus on behavioral health issues. The company’s three “software-based medicines” treat substance use disorder, opioid use disorder and chronic insomnia.
Beth Keyt, vice president of government affairs for Pear Therapeutics, told BHB in an email that many commercial and Medicaid health plans wouldn’t or couldn’t reimburse Pear’s PDTs as a pharmacy benefit.
Pear Therapeutics went public via a SPAC merger in 2021 with Thimble Point Acquisition Corp. (Nasdaq: THMA), a blank-check company whose management team is associated with the Pritzker Vlock Family Office (PVFO). The deal represents a pro forma equity value of about $1.6 billion.
“This new code opens the door for payers to pay for this within their existing systems,” Keyt said. “It is crucial for us to be able to build sustainable processes in the future.”
Greater validation opens many doors for PDT companies
A PDT, generally, is an application or regimen that patients access through a digital device like a smartphone, tablet or computer that is meant to improve the health of a patient in a specific way under the oversight of a physician.
“Like anything else, [PDTs are] prescribed for a period of time. It could be refilled if necessary. It can be changed to a different one,” Dr. Omar Manejwala, chief medical officer for DarioHealth Corp. (Nasdaq: DRIO), told BHB. “Except in this case, instead of swallowing a pill … you’re using a software application on your phone.”
The general idea, Manejwala explained, is that if something can help – and it’s medical in nature – it should be prescribable.
New York City-based DarioHealth offers digital therapeutics for a range of disease states. It focuses on chronic health conditions that exact a high cost on the health care system, such as diabetes, hypertension, and depression and anxiety, to name a few. However, the company does not take the route of requiring a prescription for its therapies.
While DarioHealth and PDT companies agree that the use of digital tools can treat disease, DarioHealth takes the approach of eliminating barriers to things that improve health and doesn’t require prescriptions for its treatments.
“If tools are effective, can’t we trust consumers to use them the way that they should and deploy those at scale as long as the evidence is there?” Manejwala said. “The question becomes, ‘Do we make it harder for people to access these things, or do we make it easier for people to access these things?’”
Regardless of approach, the health care sector is inching toward using technology to provide care as a discrete service that can be billed for. In late 2021, the American Medical Association added codes for remote patient monitoring.
While incremental steps like this new code aren’t a clear financial boon for PDTs, they are an important step on the journey toward potentially gaining access to funds from government payers.
“This is validation that CMS is recognizing PDTs as an in-home device that should have a pathway for payment,” Keyt said of the new code.
Combined, Medicare and Medicaid are the largest sources of health care funding in the U.S., accounting for $1.5 trillion, or about 36%, or all money spent on health care in 2020. Private health insurance accounts for about $1.15 trillion, or 29%, of all health care spending.
Keyt also pointed to the prospect of Congress legalizing reimbursement for PDTs — a prospect that has major potential to come to pass.
On March 10, bills in the U.S. Senate and House of Representatives were introduced by a bipartisan pair of lawmakers in each chamber that would mandate Medicare reimbursement for PDTs.
“Government reimbursement for PDT would be like the Holy Grail, everybody wants this,” Bhavnani said.
Companies featured in this article:
Centers for Medicare & Medicaid Services, DarioHealth Corp., Global Institute of Mental and Brain Health Investment, Pear Therapeutics