Payment-by-outcomes and digital therapeutics (DTx) count among the serious challenges the pharma industry must negotiate in the coming years. They have the potential to change what healthcare industry reimburses. Rather than a drug alone, it will seek a package of drug, digital services and digital therapeutics. They will mean digitally-native service providers and DTx firms could start to own relationships with patients - and own patient data too - relegating pharma firms to a smaller physical product partner. But cross-industry collaboration could turn these threats into opportunities.
The rise of digital therapeutics and the shift of the health market towards payment for outcomes could be seen as a significant double threat to pharma firms. If they don’t find a successful strategy, they could see their premier place in the health economy relegated. Digitally enabled health providers and digital therapeutics firms would hold a wealth of patient data and real-world evidence on the effectiveness their services have on patient’s healthcare outcomes, which they can then use to augment or switch patient’s prescribed treatments , services and digital therapies according to individual patient needs. This means they would take the lion’s share of payments in any value or outcome-based model.
In the face of this building tsunami set to sweep through the health industry, pharma firms have three options. They could stay in their comfort zones, ignore digital therapies and stay focused on traditional core business of developing and selling drugs. Or they could create their own digital therapies using their understanding of clinical trials and standards, and set up in direct competition to DTx firms. A third option could see them seek to partner with developers of digital therapeutics to jointly create better outcomes for patients.
If pharma chooses to ignore digital therapeutics altogether - the industry risks losing the ability to capture real-world evidence on the effectiveness of their drugs to DTx or digitally-native firms offering services such as condition management. These firms can not only capture evidence on outcomes for reimbursement, but also gain an understanding of how patients are coping throughout their treatment journey.
Below is an extract from a recent white paper we took part in that details the potential threats to pharma companies if they simply chose to ignore Digital Therapeutics:
If we discount ignoring digital therapeutics all together - a scenario in which pharma firms would eventually lose the strong place they’ve held in the industry - the choice is between going it alone or working with partners already developing digital therapeutics and support services.
With either of these choices, pharma firms can’t stick their heads in the sand and cling to their 20th century business model where, traditionally, the clinicians and doctors are the customers, courted by armies of pharma sales reps. In the world of digital therapeutics, building closer relationships with patients, understanding and supporting their needs as active participants in their treatment will be key.
The combination of drugs, digital therapeutics, online monitoring technologies, condition management, and additional support services, offers a mountain of valuable patient data which pharma firms can analyse to develop a better understanding of how their treatments are used and how they can be improved. This is data pharma firms have not had before.
Applying analytics, machine learning and software driven interventions, it could be a rich and valuable asset. It can help pharma companies to develop digital therapeutics that compliment or augment existing treatments, addressing lifestyle and behavioral factors associated with certain conditions. Or it can be used to treat a range of conditions directly, servicing unmet patients needs or cohorts, expanding product portfolios and providing new revenue streams.
But there are also legal implications to utilizing patient data. Partnering with digitally native companies to develop tech-enabled therapies and services not only offers a technical head start; these firms are already looking at the issue of patient data governance and take responsibility for it one step away from pharma firms’ already weighty legal liabilities.
The following extract from the same white paper outlines the potential opportunity digital therapeutics could represent for Pharma:
Commenting on the choice now facing traditional pharma companies, Megan Coder, executive director of the Digital Therapeutics Alliance, says: “Over the last two years, I've witnessed a legitimate sense of confusion in the pharma industry about what digital therapeutics are and what they are not. We are not talking about digital strategy or digitising clinical drug trials; DTx are completely different. Their whole focus is to deliver therapeutic interventions digitally to patients to prevent, manage or treat a medical condition.”
She adds: “Given their ability to work alongside medications and address so many under-treated disease states, it's clear digital therapeutics aren't about to put pharma out of business. People will continue to have a physiological need for medication. But there does need to be better understanding of how pharma firms can work with DTx companies and their products to offer benefits to patients. Those that are getting involved with the right partners are seeing huge potential to improve clinical and health economic outcomes.”
Working with DTx firms and other partners, pharma firms could end up being organisations that get paid to deliver the best patient outcome via a service, a digital therapy and a drug combined. There is a huge opportunity in unlocking pharma’s potential in a digital health world and shaping the future of the industry. But to do so, firms will need to strike external partnerships, transform internal culture and recognise new drivers of value.
The next column will discuss how firms can execute these strategies.
Jim O’Donoghue is head of S3 Connected Health (www.s3connectedhealth.com), headquartered in Dublin, Ireland. He has 30 years’ experience in designing and delivering innovative services and solutions across healthcare, consumer and communications sectors.
Jim serves on the industry steering committee for the Applied Research Centre for Connected Health and served on the industry board for the UK “3 Million Lives” programme.