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Exploring the Dynamic Landscape of Digital Medicines and Digital Therapeutics

Digital health products are widely used for the prevention, diagnosis, treatment, and management of health and disease. The introduction of digital medicines—and, more recently, digital therapeutics (DTx)—has begun to influence the treatment and management of certain diseases, both by consumers and by clinicians. Driven by advances in technology and increased acceptance of telehealth, digital medicines and DTx are poised to become an integral part of the healthcare model. 

Growth of the digital health market

Digital health is a dynamic, growing market, with almost $38 billion of new capital invested in startups in this space in 2021. By 2025, funding for DTx is expected to reach $56 billion. Traditional pharmaceutical and device developers are expanding aggressively into the space and have begun to diversify by developing digital health products, either on their own or in partnership with digital technology companies. 

Understanding the universe of digital health products

Digital health is a broad product category that encompasses digital medicines, which in turn include DTx: 

  • Digital health. Products or applications that engage consumers for lifestyle, wellness, or health-related purposes; capture, store, or transmit health data; or support life science and clinical operations. 
  • Digital medicine. Evidence-based software and/or hardware products that measure and/or intervene to improve health, but most do not claim a therapeutic benefit. Currently, fewer than 500 digital medicines are fully cleared and commercially available in the U.S. 
  • DTx. Products that deliver evidence-based therapeutic interventions to prevent, manage, or treat a disease or medical condition, with claims focused on the clinical impact of those interventions. Fewer than 10 prescription DTx are fully cleared and commercially available in the US, the most advanced of which are based on cognitive behavioral therapy interventions for mental health-related conditions. 

Understanding the nuances of these categories is essential for characterizing claims and levels of risk, which impact requirements for clinical evidence and regulatory oversight. Most digital health products are not classified as medical devices and do not require clinical evidence or regulatory oversight. For digital medicines, clinical evidence is needed, but regulatory requirements vary. DTx require both clinical evidence and real-world outcomes and must be cleared or certified by regulators to support claims of intended use, risk, and efficacy. 

Navigating the shifting regulatory and commercial landscape

The regulatory and commercial environment for digital health products is evolving rapidly. The U.S. Food and Drug Administration (FDA) has issued various guidance documents, created initiatives such as the Software Precertification Pilot Program, and launched the Digital Health Center of Excellence. The agency is also leveraging lessons learned from lead digital health products to identify opportunities to support and regulate such products with a realistic set of expectations. 

From a commercial perspective, there is not yet a standard go-to-market approach for products in the nascent digital health space. In February 2022, the Center for Medicare and Medicaid Services (CMS) created a new Healthcare Common Procedure Coding System (HCPCS) code for “prescription digital behavioral therapy,” which is expected to further expand reimbursement options for digital interventions. Reimbursement from commercial insurers for digital medicines and DTx is limited but may become more commonplace as we increase our understanding of the utility of these products and long-term outcomes data. 

Key takeaway

Digital medicines and DTx represent a significant opportunity, not only for digital developers, but also for traditional pharmaceutical and device companies seeking to differentiate their products and expand their portfolios. These digital health solutions enable patients to take greater control of—and responsibility for—their care, with the potential to influence and improve clinical outcomes. Despite the growth of this space, challenges remain as existing regulatory and reimbursement paradigms are not optimized for digital medicines and DTx.