The digital therapeutics (DTx) industry has historically faced hurdles when it comes to reimbursement, but Medicaid opportunities are now popping up.
The bulk of DTx, evidence-based treatments delivered through software interventions to treat or manage a condition, focus on addressing behavioral health conditions. While the products have been on the market since 2017, reimbursement challenges have been a major barrier to getting them into the hands of patients.
But state Medicaid programs have become early adopters.
“Digital solutions are pivotal for the Medicaid market, where a shortage of providers has made access to care difficult, particularly for children and children with mental health issues,” Dr. Benny Alouf, Limbix’s chief medical officer, told Behavioral Health Business. “A digital therapeutic has no limits on its ability to scale and can be downloaded before even leaving the authorizing provider’s office. Access to care is a top priority in population health, and DTx are the most effective methods to improve access across a large population.”
Limbix is a DTx company focused on treating adolescent depression. The Palo Alto, California-based startup has raised $31 million. It has not yet been cleared by the FDA.
A new piece of legislation – the Medicaid and CHIP Access to Prescription Digital Therapeutics Act – was introduced in December. The legislation was designed to provide state Medicaid and Children’s Health Insurance Programs (CHIP) with guidance around coverage for DTx.
Although the legislation did not make it into the $1.66 trillion omnibus funding bill, it could be a sign of where the DTx industry is headed.
“It was a move in that right direction to basically get Medicaid coverage, or to explain what Medicaid coverage would look like,” Andy Molnar, CEO of the Digital Therapeutics Alliance (DTA), told BHB. “It [sought to] define prescription digital therapeutics, and not be a massive change to the Medicaid or Medicare program because of cost.”
The DTA is a trade organization focused on the needs of companies with clinically validated DTx products.
Both Alouf and Molnar noted that time was working against the legislation as it was introduced just days before the deadline for reconciliation. But bipartisan support of the act could be a good sign for similar provisions in the future.
Reimbursement changes aren’t necessarily dependent on new legislation, Molnar said. In 2023, the DTA is looking to focus on policy.
“There’s a lot of different areas we can work on, including working with policy as well as legislation, because there’s still potential for these products to be covered,” Molnar said. “The whole point of this bill was to say that states can cover these products under existing policy. It’s like a bill to tell them they can do what they already do.”
A track record of Medicaid deals
Individual DTx companies have been making moves in the Medicaid space for quite some time. In fact, Pear Therapeutics has announced multiple deals with state Medicaid plans.
Pear Therapeutics develops prescription digital therapeutics. It landed an FDA De Novo in 2017 for its addiction treatment software, reSET. It has since released a product for opioid use disorder and insomnia.
In 2021, it announced a partnership with MassHealth to reimburse for Pear’s addiction and opioid-focused prescription digital therapeutics. The company has since made a number of other deals with state Medicaid programs.
“Where we’ve been is deeply focused on the state Medicaid side,” Pear CEO Dr. Corey McCann said during The Future of Mental Health conference in September. “MassHealth has moved to include prescription digital therapeutics and create access for every Medicaid patient. The states of Oklahoma, Indiana, Ohio, Kentucky – we’re up to about 10 different states – have been vanguards in providing access to patients for these products.”
The Centers for Medicare & Medicaid Services (CMS) has also been making changes over the last few years that could help make it easier for commercial and Medicaid payers to cover DTx. In 2021, it added a Healthcare Common Procedure Coding System (HCPCS) code for “prescription digital behavioral therapy.”
While starting with Medicaid might be a way to prompt commercial insurers to cover DTx products in the future, commercial insurers have also begun to make moves.
In 2022, nonprofit health insurance plan Highmark became the first commercial insurer to cover certain FDA-cleared DTx products. But there is still a long way to go before DTx reimbursement is universal.
“It is important to recognize that digital therapeutics are designed to be used by health care providers to improve access and offer solutions to many different disease states,” Alouf said. “As such, all markets are ripe for DTx innovation. Indeed, passing legislation that creates a benefit category with consistent coding and reimbursement will assure that these essential therapeutics are available to everyone rather than in one state but not another, or for a commercial plan member but not a public plan member and so on. We need to make sure there is equitable access to them so all patients can benefit.”
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