However brilliant its idea and implementation, it’s really the reimbursement model that can make or break a plucky start-up. And the roadmap to reimbursement is, lately, a fast changing one.
Perhaps nowhere more so, maybe, than in digital therapeutics.
Take the example of Akili Interactive Labs, a Boston-based start-up, which designed a video game which can help to improve concentration skills for children with ADHD.
After seven years of clinical trials, involving 600 children, they were able to show playing the game regularly could produce measurable gains in attention for a third of the children.
It uses algorithms to increase or decrease the game’s difficulty based on a player’s performance, to keep players challenged but not overloaded.
Then, the US Food and Drug Administration (FDA) said doctors could prescribe it. This means the video game is now medicine, in the eyes of the regulators.
And significantly, this opens the door for insurance companies to begin reimbursing for it.
Video killed the radio star
The FDA says EndeavorRX is the first prescription video game it has approved. On the back of the FDA decision, Akili then went public via a merger with a special purpose acquisition company.
Charging insurers $450 for a 90-day prescription, the company told investors, it would be able to bring in $500million in revenues in five to seven years.
The IPO was worth $163million, which Akili says, even after a drop afterwards in its share price, gives it enough money to cover at least 24 months of operations.
The cash will help fuel its efforts to develop other new digital therapeutics, for people with autism spectrum disorder, multiple sclerosis, and major depressive disorder, it says.
And rather than working with an established pharmaceutical company, Akili’s chief executive Eddi Martucci says the company also has ambitions of developing a platform for scalable digital medicine “the entire backend for digital medicine that doesn’t exist today”.
On one road, singing one (reimbursement) song
It’s now a route from research to profitability, via regulatory approval as medicine, that other digital tech start-ups are now eyeing.
“So we’re starting to see not just the regulatory piece of the puzzle coming into play, but also the reimbursers following. That’s quite exciting,” says Vivien de Tusch-Lec, a venture capital investor specialising in health technology start-ups.
Historically, reimbursement models have differed greatly between countries and markets.
At one extreme, in Estonia, patients pay all costs, while at the other, Sweden’s reimbursement system is solely publicly financed through the Dental and Pharmaceutical Benefits Agency, and focuses on outcomes rather than technology.
While in Germany, health insurers handle reimbursements, which has set the country up for a leap forward in regulating, prescribing, and reimbursing digital health technology.
Gigas of DiGAs
Germany made regulatory waves by introducing a new, specific regulatory pathway for digital therapeutics: DiGAs, for Digitale Gesundheitsanwendung, or digital health applications.
“We did something very non-Germanic by trying something new and improving it at the same time in an agile way,” quipped Dr Gottfried Ludewig, the head of digitisation and innovation at Germany’s federal health ministry.
In the year after DiGAs were introduced in October 2020, doctors prescribed them about 50,000 times. Other countries have been eyeing the model.
President Emmanuel Macron afterwards announced plans to replicate the DiGA scheme for reimbursement in France.
Talking about my education
For all the excitement about Germany’s new regulatory model, “the regulatory side is one thing, but it shouldn’t detract from creating a product patients and clinicians want to use,” warns Vivien de Tusch-Lec.
Also, while a start-up is attempting to get its device approved as a class 2 medical device (so doctors can rely on the device to prescribe or change prescriptions), this doesn’t mean it can’t go to market with a lower regulatory classification in the meantime, says John Lee Allen, a surgeon turned early stage investor in medical tech start-ups.
A way “to bridge a gap in reimbursement” is for a start-up to look meanwhile at “what can we achieve with a class 1 device,” he says.
These uses might include using the device in screening or for educational purposes.
So if a blood pressure measuring tool hasn’t yet received class 2 funding for GPs to rely on it with prescriptions, as a class 1 device, drug companies might still be able use it to screen out patients from drug trials.
“That’s a way for a company to get an initial reimbursement on a pathway that then leads to public provider reimbursement,” he says.
“We see it as joining the chain,” and keep a company from hitting choppy waters “if a gap is too large between where a company is today, and where it needs to be to sign a contract.”
“We see reimbursement as a big challenge within health technology. It doesn’t happen by itself,” Allen explains.