After years of reimbursement uncertainty, the digital therapeutics industry is beginning to see newfound clarity.
Within the last year, digital therapeutics, which are evidence-based treatments delivered through software interventions to treat or manage a condition, have made inroads with both commercial insurers and Medicaid.
Earlier this year, state Medicaid programs in Massachusetts and Oklahoma announced new partnerships to cover certain digital therapeutics.
The bulk of digital therapeutics, or DTx, are aimed at treating behavioral health conditions. They could potentially give patients and providers another treatment option. These new developments could lead to a more widespread adoption of these technologies and impact the future of behavioral health care, industry insiders believe.
“This announcement clearly shows the shifting attitudes towards DTx, from being considered experimental and investigational to being recognized as legitimate, safe and effective treatment for patients [by] increasing access to therapy where they are and when they need it most,” Limbix Chief Medical Officer Dr. Benny Alouf told Behavioral Health Business. “It moves this class of therapeutics from being labeled en-masse as not covered to creating real medical guidelines for approval and coverage. And [it lends] legitimacy to the FDA process, which these products must go through.”
Limbix has created a digital therapeutic for adolescent depression. The Palo Alto, California-based startup has raised $31 million. It has not yet been cleared by the FDA.
Historic reimbursement challenges
The digital therapeutics industry has made regulatory headway over the last five years. In 2017, Pear Therapeutics landed an FDA De Novo clearance for Pear ReSET, a digital therapeutic aimed at treating substance use disorder.
Since then, scores of digital therapeutics have been cleared through the FDA’s 510(K) pathway.
Despite the growing number of new therapeutics on the market, the reimbursement question has been one of the segment’s most difficult challenges.
“If it’s not a pharmaceutical, it is extremely difficult in today’s world to get broad-based coverage for novel modalities,” Eddie Martucci, CEO and founder of Akili, said during The Future of Mental Health conference in September.
Akili is a digital therapeutic focused on cognitive impairment. It has an FDA 510(K) clearance for its video-game-like digital therapeutic aimed at improving cognitive function for children with ADHD. It went public in August through a SPAC merger.
Still, the space is gaining attention from both the federal government and the private sector. In April, the Biden administration encouraged new digital therapeutic reimbursement strategies as part of its National Drug Control Strategy report.
“Coverage for the provision of motivational incentives could be considered within health plans,” said the report. “This will require considering billing codes and setting reimbursement parameters.”
But there is still a long way to go before widespread coverage of these technologies. Until then, some industry stakeholders are calling for patients and clinicians to put pressures on payers.
“We live in a world where we’re essentially forcing patients into the mindset, which we know we’ve adopted here in the U.S., of prescribing a pill to treat our problems because we have no choice,” Martucci said. “We talked about the issues with behavioral therapy and access to care. And we have other prescription software treatments which are available now. …We’re essentially forcing patients to have to really have a single care option, and that’s wrong.”
Others are saying that the onus of proving the value in the technology falls on the digital therapeutics makers themselves.
“We should be able to show amazing ROI that should mean that the commercial [payers] are falling over themselves to commission our products,” Peter Hames, co-founder and president of Big Health, said on the panel.
Digital therapeutics company Big Health’s products include insomnia digital therapeutic Sleepio and Daylight for anxiety.
A reimbursement pathway
Payer coverage and new billing codes could lead to more widespread adoption of the technology.
In 2021, the Centers for Medicare & Medicaid Services (CMS) added a new Level II Healthcare Common Procedure Coding System (HCPCS) code for “Prescription digital behavioral therapy, FDA cleared, per course of treatment,” making it easier for commercial and Medicaid payers to cover digital therapeutics.
“I think this is a huge step forward for the space,” Dr. Corey McCann, president and CEO of Pear Therapeutics, said during the panel.
There has also been legislative movement on digital therapeutic coverage. The proposed Access to Prescription Digital Therapeutics Act of 2022 would expand coverage of prescription digital therapeutics for Medicare and Medicaid beneficiaries.
McCann’s company, Pear Therapeutics, has been one of the leaders in securing Medicaid coverage for its products. In 2021, the company announced that MassHealth, Massachusetts’ state Medicaid program, would cover Pear’s digital therapeutics reSET and reSET-O.
In June, Pear announced a value-based agreement with Oklahoma Medicaid. Pear is also working with a number of states to provide its therapeutics.
“Commercial payers generally speaking, are laggards,” McCann said. “Commercial payers can and will deny care, and that’s really where we’ve been leaning in with the states to make this standard reimbursement to then force commercial payers.”
While Medicaid stakeholders may have been one of the first entries into digital therapeutics, the Highmark announcement could be a new chapter for commercial payers. Highmark will cover eight digital therapeutics approved by the FDA.
“Highmark has taken the lead and paved the way for other health plans to recognize these therapies as legitimate, worthy of reimbursement and much needed for their members,” Alouf said. “DTx are evaluated and cleared by the FDA through a rigorous process no different from other medical devices. This decision indicates that this class of devices is finally being recognized for the potential it has to safely and effectively impact patients’ lives.”
The therapeutic must be prescribed by a provider “for whom the condition is in their scope of practice.” This could be a medical doctor, psychologist, licensed mental health social worker, licensed professional mental health counselor or advanced practice provider.
While this is the first of commercial insurers to cover the technologies, many in the space are seeing this space as the next frontier for reimbursement.
“I would think about the next part of “the state of the state” as being around evidence, and that’s where all of the players in the space prescription or otherwise are developing health economic datasets to go to payers to convince them that there’s a positive ROI on incorporating these products into their patient populations,” McCann said.