[Start! DTx Era] ① Layoffs and Business Restructuring... Challenging Global Market

Mass Layoffs by US DTx Developers
"Have Not Yet Achieved Expected Results"
Main Issue Is 'Usability'... "Limited to CBT Digitalization"

Calls for German DiGA Adoption Grow, but Effectiveness Remains Uncertain

[Image source=Pixabay]

[Asia Economy Reporter Lee Chun-hee] With the emergence of the country's first 'digital therapeutic device (DTx, digital therapeutics),' market expectations are rising. However, looking at overseas cases, the outlook ahead is not expected to be easy.

According to the industry on the 15th, even in the United States, where the DTx revolution began, developers are undergoing large-scale layoffs one after another. Pear Therapeutics, which developed the world's first FDA-approved drug addiction treatment DTx 'reSET,' conducted a 9% workforce reduction in July last year and a massive 22% restructuring in November to cut costs. Akili Interactive, which received FDA approval for the game-based attention deficit hyperactivity disorder (ADHD) treatment DTx 'EndeavorRx,' also announced last month that it would reduce its workforce by about 30% and halt development of other pipelines to focus on EndeavorRx. Despite attracting investments from global big pharma and even going public on NASDAQ, the companies have not achieved the expected level of performance, resulting in a sharp drop in stock prices and emergency austerity management through layoffs and pipeline restructuring.

Choi Yoon-seop, CEO of Digital Healthcare Partners (DHP), said, "These companies have not yet reached the level of expectations," adding, "Although they are maintaining the guidance they presented in terms of prescription numbers and sales, the fact that they have not yet achieved proper business results shows how difficult it is to achieve success in the DTx industry." However, Choi explained that regarding austerity measures such as layoffs, "Considering that big tech companies like Google and Amazon are also conducting layoffs amid a global economic downturn, it is difficult to view this as a problem unique to Pear and Akili."

Pair Therapeutics logo (left) and Pair's drug addiction treatment DTx 'Reset'
[Photo by Pair Therapeutics]

Currently, in the United States, only private insurance has covered DTx, while public insurance such as Medicaid has not yet entered the federal Medicaid program. Only Pear's reSET is recognized in several states on a state-by-state basis. However, there is growing expectation that the market will expand as Florida, the third-largest state Medicaid market with about 5 million people, recently decided to pay Medicaid fees for reSET. Additionally, Minnesota, Maryland, Arizona, and Hawaii are reportedly considering Medicaid fee payments.

Han Deok-hyun, professor of psychiatry at Chung-Ang University Hospital, suggested that a fundamental approach is needed in this regard. He said, "To overcome the lack of trust in clinical improvement, many DTx developers have shifted to digitizing cognitive behavioral therapy (CBT)," adding, "Although it is inevitable to secure scientific evidence, the reality is that Pear Therapeutics and others are not being used because they lack user engagement."

In fact, Pear revealed in its 2021 performance report that the fulfillment rate of its DTx was 51%. Although many prescriptions were received, only about half of the patients downloaded and operated the application (app). Considering that Pear's DTx requires 9 to 12 weeks of treatment but the previously released real-world evidence (RWE) analysis showed that only 49% of users completed the treatment, the actual rate of completing the full treatment is likely to be halved again.

Guide to Germany's 'Digital Health Application (DiGA)' System
[Photo by German Federal Institute for Drugs and Medical Devices]

Due to these difficulties in market entry and securing real-world data (RWD), voices from the domestic industry and academia have recently called for the introduction of a system similar to Germany's 'Digital Health Application (DiGA).' DiGA is considered one of the most innovative DTx reimbursement policies worldwide. In addition to operating a DiGA fast-track system that can grant provisional approval within three months, it also runs a reimbursement system that pays manufacturers at the proposed price for about a year regardless of proof of therapeutic effect, followed by price negotiations based on performance. Through this, currently as many as 42 DTx are receiving reimbursement and operating through DiGA, and 16 have succeeded in obtaining confirmed reimbursement based on RWD proven during this process. CEO Choi emphasized, "If the government decides to foster digital healthcare as a policy, a groundbreaking reimbursement policy must accompany it," adding, "Even if it means accepting some uncertainty, risk, and financial waste, bold decisions are necessary."

However, there are also cautions against having excessive expectations for DiGA. A representative from a DTx company said, "It is questionable how effective DiGA would be if introduced domestically." He criticized, "DiGA is a strict system that loosens regulations significantly but removes products if RWD is not secured during this period. Honestly, given the current state of domestic DTx development, many products would be delisted within a year unless basic efficacy and user usability are firmly secured." Last year, the DTx 'Mika,' which monitors pain levels and symptoms in cancer patients, was removed from the DiGA list after failing to prove cost-effectiveness over one year, and so far, a total of five DTx have been deleted from the DiGA list.