The most common and easiest way to take medicine is by swallowing a pill. For a new class of therapies, dosing is even easier—just a few finger taps on a touchscreen. The now-defunct Pear Therapeutics was a pioneer among companies developing such software-based medicines.
Digital therapeutics engage users with apps and tasks that retrain and rewire the brain as a way of treating a range of diseases. This treatment is usually done alongside the standard of care, which can include drugs. That’s different than health and wellness apps that provide users with a wealth of information but cannot make therapeutic claims.
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Boston-based Pear won the first FDA authorization to bring prescription digital therapeutics to the market in 2017 for substance use disorder. It was an interactive software that provided app users with lessons for achieving and maintaining abstinence. Later, Pear commercialized apps for opioid use disorder and insomnia. Other companies have followed, receiving the FDA’s go-ahead in indications such as mental health disorders, obesity, heart disease, and more.
Despite being first to market, Pear struggled as a commercial-stage company. In a widely read LinkedIn post, Pear CEO Corey McCann said doctors prescribed Pear’s products and patients successfully engaged with them. The problem, as he saw it, was that payers denied coverage. With cash reserves dwindling and no prospects for additional financing, Pear filed for bankruptcy protection and auctioned off parts of its business in June for pennies on the dollar.
Pear’s high-profile failure raises questions about the future of digital therapeutics. Almost everyone says this sector needs to produce more data to ease the financial risk that investors perceive and to persuade payers to reimburse these technologies. There’s less agreement on how to generate the data.
Three years ago, digital therapeutics was one of several sectors that saw an investment boom from the Covid-19 pandemic, said Rahul Rakhit, a research analyst at LifeSci Capital. Pitchbook recorded $1.5 billion in venture capital investment in digital therapeutics across 54 deals in 2019 and $1.3 billion across 49 deals in 2020.
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It’s a different story today, as companies struggle to raise capital. Pear might be the first of several digital therapeutics firms to fall, Rakhit said. Alternatively, the financial challenges could spark consolidation that results in a smaller but stronger field.
“I’m still bullish on this category,” Rakhit said. “It addresses a number of important unmet needs, especially post Covid—demand for healthcare that outstrips the resources we have available, rural areas where people don’t have access. This democratizes care in a lot of ways. It will take time to see what works, what doesn’t.”
Is Direct to Consumer the Prescription for Success?
The digital therapeutics sector breaks down to two camps: prescription and non-prescription. The prescription route is akin to traditional drug development, where a company raises several rounds of funding and takes a product through clinical development and regulatory review, said Rick Anderson, president of digital health company DarioHealth. The other pharma-emulating piece of this model is a partnership with a pharmaceutical company. In biotech, most companies reach late-stage development in partnership with a big pharma company that has the experience and the resources to steer a drug through FDA review and commercialization. Pear had a big pharma partner (Novartis) but that deal fell apart. Dario has a big pharma partner (Sanofi), but is taking a different approach to commercialization.
Dario deliberately chose a direct-to-consumer route, Anderson said. The company began as a diabetes care company. Dario Evolve is its metabolic software offering, an app that helps users track and manage their diabetes, blood pressure, and weight. The company’s offerings now also address musculoskeletal conditions (Dario Move) and mental health (Dario Elevate).
Dario makes its software directly available to consumers but it attributes most of its revenue growth to employers and health plans that make the software available to their members. While this approach means the company isn’t conducting randomized controlled clinical trials, Dario still generates data on clinical outcomes. In 2022, Dario inked an agreement with Sanofi under which the companies co-promote some of Dario’s multi-condition therapeutic, which spans diabetes, hypertension, weight management, musculoskeletal health and behavioral health. Those products and services will create new insights, some of which will be used to develop new products and services. Sanofi committed $30 million over the course of the alliance, during which the companies are conducting studies to generate data about the impact of digital therapeutics.
“I do believe the demand for evidence is going up and you’re going to see more studies,” Anderson said. “But I don’t think the FDA stamp of approval is the level of evidence people are looking for.”
Pear was partnered with Novartis, which had previously invested in the startup’s financing rounds. The pharma giant formally inked a schizophrenia and multiple sclerosis R&D partnership with Pear in 2018. By that point, Pear had received FDA marketing authorization for reSET in substance use disorder, a regulatory decision that marked the first time the agency permitted the marketing of a mobile app for this indication. In late 2018, Pear received FDA clearance for reSET-O—essentially reSET for opioid use disorder. Pear had a separate agreement with Novartis’s Sandoz subsidiary covering the commercialization of both reSET and reSET-O. In 2019, Sandoz terminated the deal.
Left to commercialize its digital apps on its own, Pear, which became public in 2021 through a SPAC merger, pointed to growing prescription numbers quarter to quarter. The problem was that half of those prescriptions weren’t filled and many payers failed to reimburse them because medical codes don’t exist, said Joel Morse, CEO and co-founder of Curavit Clinical Research, a contract research organization that specializes in decentralized clinical trials for digital therapeutics. Difficulty securing insurance coverage is not unique to Pear, but Curavit President and Chief Commercial Officer Dave Hanaman sees legislation as one way to drive change for all digital therapeutics companies. The Access to Prescription Digital Therapeutics Act of 2023 would expand Medicare coverage to include coverage of software-based treatments. Broader payer coverage should follow, Hanaman said.
LifeSci Capital’s Rakhit said payers are still tiptoeing around digital therapeutics, trying to understand what data they need to see. Investors are also uncertain about the space. In Pear, they saw a company that despite reporting prescription growth was burning through a lot of cash and showed no clear path to profitability. Rakhit said it’s not a question of whether digital therapeutics work, but rather how best to use them. For psychiatric conditions, the safety benefit of a digital therapeutic is attractive. While psychiatric drugs introduce many side effects, there’s almost no safety risk to a patient downloading an app to try it out, he said.
Going directly to consumers may be appropriate in some cases, Rakhit said. Akili Interactive’s EndeavorRx video game first received FDA clearance in 2020 as a prescription treatment for attention deficit hyperactivity disorder in children ages 8 to 12. On the heels of positive clinical trial data in adults, Akili last month announced availability of a non-prescription version for those 18 and older.
A non-prescription ADHD digital therapeutic for adults makes sense because adults tend to self-treat more than children do, Rakhit explained. While this OTC version of EndeavorRx will generate less revenue than a prescription product, it will enable Akili to cast a wider net that captures a broader swath of the population. Further, wider use generates more data, which is what payers and investors want to see. However, the direct-to-consumer strategy may be inappropriate for indications such as substance use disorder, the realm where Pear was playing with reSET and reSET-O. When it comes to drug abuse, physicians are central to patient treatment, Rakhit said.
Parsing Pear’s Clinical Trial Data
Payer concern about reimbursing for Pear’s apps might be related to the quality of the available data. The clinical trials used to support the regulatory applications were not done by Pear. In fact, those trials did not even test the Pear apps. Pear’s reSET and reSET-O incorporate technology licensed in 2015 from a company called Red 5 Group, which owns an app called Therapeutic Education System, or TES, according to Pear regulatory filings. This software has 62 interactive modules designed to help the app user achieve and maintain abstinence, compared to reSET, which has 61 modules.
Pear’s FDA submission for reSET was based on an open-label study conducted by the National Institute on Drug Abuse, the company said in documents submitted to the FDA in 2016. The 399 participants in the trial were evaluated on the desktop version of TES rather than the mobile version of reSET.
FDA clearance for reSET-O in opioid use disorder was based on that app’s equivalence to reSET. A clinical trial supported this submission, but like the prior study referenced by Pear, this one evaluated patients who used TES, not reSET-O. TES’s 12-week clinical trial, which was also done in collaboration with the National Institute on Drug Abuse, enrolled 507 participants randomly assigned to receive treatment as usual or treatment as usual and TES. In study results published in 2014 in The American Journal of Psychiatry, the authors acknowledged limitations that include the impossibility of separating the effects of the computerized approach from other aspects of care. The authors also noted that with longer-term follow-up, the superiority of TES over treatment as usual was not sustained.
Drug price watchdog group the Institute for Clinical and Economic Review (ICER) panned the short duration of the study and the lack of a sham control arm. ICER added that TES’s differences from reSET-O could mean its test results may not be applicable to the Pear app. Pear responded by pointing to real-world evidence in peer-reviewed studies that showed reSET-O reduced the need of app users to turn to healthcare resources, leading to measurable dollar savings compared to standard of care. But ICER raised questions about these data too, and called for more robust and rigorous research.
David Klein, CEO of Click Therapeutics, said that if Click or any other digital therapeutics company develops a drug-like product that makes drug-like claims, the supporting clinical trials must generate the same level of evidence asked of any biotech company. In Klein’s view, Pear lacked sufficient evidence from randomized controlled clinical trials.
“If you put reSET-O with that evidence into a pill, I don’t think payers would be reimbursing for that either,” he said.
Click’s prescription-based approach may differ from Dario’s consumer-focused strategy, but one thing that they have in common is a relationship with Sanofi. Sanofi’s venture arm was one of the early investors in Click. Klein describes Click’s strategy as a hybrid one in which some programs are partnered with a larger company that can help with clinical development and commercialization. A depression digital therapeutic is in development under a partnership with Otsuka Pharmaceutical and two schizophrenia product candidates are partnered with Boehringer Ingelheim. But a Click migraine digital therapeutic in Phase 3 testing remains unpartnered, and Klein said that’s intentional. Click aims to commercialize some assets on its own.
Felix Lee, medical head, digital healthcare, for Sanofi U.S., was unavailable for an interview to discuss the pharma giant’s digital strategy. But in an emailed statement, he said the integration of healthcare and technology can give people tools to improve their health, and Sanofi sees digital therapeutics as a key pathway to improve patient care beyond medicines.
“We know that health outcomes are not only determined by medical care but also by behavior, socioeconomic and other factors that can be addressed with personalizing interventions, which can be especially important in chronic disease management,” Lee said.
A Digital Player Finds Footing After FDA Nod
A new digital therapeutic is on track to enter the market soon, and it will be a prescription product. Better Therapeutics received FDA authorization earlier this month for AspyreRx, a type 2 diabetes mobile app that digitizes cognitive behavioral therapy. Using the app leads to behavioral changes intended to change the course of the disease. Better’s application was based on results from a Phase 3 study that showed treatment with AspyreRx, alongside standard care (including diabetes medications), led to reductions in hemoglobin A1C, a biological indicator of blood sugar levels.
Similar to Pear, Better has had financial struggles. A corporate restructuring earlier this year led to layoffs. The company’s stock price sank to the point of triggering a delisting warning. But the regulatory authorization of AspyreRx along with the supporting data from a pivotal trial give Better firmer ground to stand on as it negotiates commercialization opportunities, CEO Frank Karbe said during a conference call to discuss the FDA decision. The company’s options include an alliance with a larger partner or raising non-dilutive financing by striking a deal for the product’s royalties.
Discussions with payers are ongoing, and having clinical data from a Phase 3 randomized controlled clinical trial resonates with them, Karbe said. The discussions include value-based agreements, deals in which reimbursement is tied to measurable patient outcomes. The clinical data provide a framework for those discussions. Karbe said these data are key to the company’s commercialization strategy.
“Our product is authorized as a class 2 medical device, which we believe is critically important to ensure we and others meet specific standards for quality, safety, and effectiveness,” he said. “It is also an important prerequisite to obtain broad payer coverage and gain the trust of providers and patients, all of which are important drivers for adoption.”
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