Prescription digital therapeutics: Applying Medicaid experience to value assessment and formulary management

Abstract

Digital therapeutics (DTx) are a rapidly growing therapeutic category with more than 150 clinical trials evaluating US Food and Drug Administration–regulated DTx to develop additional evidence by the end of 2022. Investments in DTx development have doubled since 2019, reaching $14.7 billion in 2021. Prescription DTx are regulated by the US Food and Drug Administration and require demonstration of efficacy and safety prior to commercialization and reimbursement by payers. Drawing insights from the Massachusetts Medicaid program’s early experience with prescription DTx, we provide an overview of this new category of therapeutics and suggest a roadmap for payers and policymakers to evaluate the value of prescription DTx for their member population. Finally, we propose solutions to potential challenges that may be encountered in the DTx coverage and reimbursement management.

Plain language summary

Digital therapeutics (DTx) is a novel and rapidly growing market. These products are clinically evaluated software to treat, manage, and/or prevent diseases. There is doubt around the coverage and access of these products in the United States. We present a summary of DTx and a proposal for gathering the value of these products. These recommendations are from a Medicaid programs’ experience with DTx. Also, we supply possible solutions for challenges in DTx coverage management.

Implications for managed care pharmacy

DTx are intended to treat, manage, or prevent diseases. Prescription DTx can be managed by payers under pharmacy claims. DTx can provide value to managed care stakeholders in areas such as diseases with therapeutic gaps, low patient adherence, and patients with limited access to care. Our article provides insight into existing products and provides a roadmap for coverage determinations and utilization management of DTx.

Defining Digital Therapeutics

Digital therapeutics (DTx) are defined by the Digital Therapeutics Alliance and Digital Medicine professional society as evidence-based, clinically evaluated software products to treat, manage, or prevent diseases, with some requiring a prescription.^1,2 DTx can be used both as monotherapy (often as a replacement for traditional therapies) or in conjunction with traditional therapies (eg, to assist in disease management, drug adherence, and drug dosing).¹ To date, common products target behavior change through mobile applications for behavioral health conditions (eg, substance use disorder, insomnia, major depressive disorder), musculoskeletal disorders (eg, back pain), and other chronic conditions (eg, diabetes and cardiovascular diseases).^2,3 For example, Somryst is a 9-week prescription DTx for chronic insomnia (Table 1). It provides a neurobehavioral intervention (cognitive behavioral therapy for insomnia) in patients aged 22 years and older to improve a patient’s insomnia symptoms. Pivotal studies showed patients experienced a significant reduction in severity of insomnia after 9-week treatment, with more than 40% of the study group no longer meeting the criteria for insomnia.⁴

TABLE 1.

FDA-Approved Prescription DTx Products

Company	Product	Domain	Indication	FDA clearance pathway	FDA clearance date
Akili Interactive	EndeavorRx	Video game via Apple products	Treatment of ADHD in patients aged 8-12 years	De Novo; class 2 MD	6/15/20
Amalgam Rx	ISage Rx	Mobile application	Self-management of type 2 DM in patients aged ≥21 years	510(k)	3/7/17
AppliedVR	EaseVRx	CBT on virtual reality headset and controller plus a breathing amplifier	Treatment of chronic lower back pain in patients aged >18 years	De Novo	11/16/21
Freespira	Freespiraa	Handheld tablet	Treatment of PTSD, panic disorder, panic attacks, and other panic symptoms	De Novo; class 2 MD	8/23/18
Luminopia	Luminopia One	Virtual reality headset	Improvement in visual acuity in children aged 4-7 with amblyopia associated with anisometropia and/or mild strabismus	De Novo	10/20/21
Mahana Therapeutics	Parallel	CBT on mobile application	Treatment of IBS in patients aged ≥22 years	De Novo; class 2 MD	11/25/20
MetaMe Health	Regulora	Mobile application	Treatment of abdominal pain due to IBS in patients aged >22 years	510(k)	11/24/21
NightWare	NightWare	Mobile application via Apple watch	Reduction of sleep disturbance related to ND or nightmares from PTSD in patients aged ≥22 years	De Novo	11/6/20
Pear Therapeutics	ReSET	CBT on mobile application	Treatment of SUD in patients aged ≥18 years	De Novo; class 2 MD	9/14/17
	ReSET-O		Treatment of OUD in patients aged ≥18 years	510(k)	12/10/18
	Somrystb		Treatment of chronic insomnia in patients aged ≥22 years	510(k)	3/26/20
Renovia	Leva	Mobile application	Strengthening of the pelvic floor muscle; treatment of stress, mixed, and mild to moderate urgency urinary incontinence/overactive bladder in women	510(k)	11/22/19
Voluntis	Insulia	Mobile application	Management of type 2 DM in adults treated with long-acting insulin analogs	De Novo; class 2 MD	11/9/16
WellDoc	BlueStarc	Mobile application and web version	Self-management of type 1 and type 2 DM in patients aged ≥18 years	De Novo; class 2 MD	11/4/19

This is a sample list of available prescription DTx products and is not inclusive of all prescription DTx in the US market.

^a Authorization from a licensed health care provider is required. A prescription from a physician is not necessary.

^b This product was cleared based on FDA’s Enforcement Policy for Digital Health Devices for Treating Psychiatric Disorders During the COVID-10 Public Health Emergency policy.

^c BlueStar does not require a prescription unless patients intend to use BlueStar with an insulin titration system. Additionally, clinical studies conducted were only for type 2 DM.

ADHD = attention-deficit/hyperactivity disorder; CBT = computerized behavioral therapy; DM = diabetes mellitus; FDA = US Food and Drug Administration; HCP = health care professional; IBS = irritable bowel syndrome; MD = medical device; ND = night disorder; OUD = opioid use disorder; PTSD = posttraumatic stress disorder; SUD = substance use disorder.

Currently, DTx are governed under the US Food and Drug Administration’s (FDA’s) Software-as-a-Medical-Device framework. Software-as-a-Medical-Device products undergo review via the De Novo pathway, a regulatory pathway for low- to moderate-risk devices (eg, class I [low risk] and II devices [moderate risk]) of a new type and on providing reasonable assurance of safety and effectiveness are FDA-approved. Subsequent devices of the same type are FDA-cleared through the 510(k) premarket notification process.^5-7 Therefore, based on the existing FDA pathways, DTx products are either approved or cleared. Although DTx are categorized as medical devices, they have research and development requirements similar to pharmaceuticals in that clinical studies are required during the premarket approval process to demonstrate effectiveness and safety for a specific therapeutic indication.⁸ However, unlike the extensive preclinical and clinical trial requirements specified for drug manufacturers seeking a new drug approval, the FDA has limited guidance regarding evidentiary standards necessary for approval of DTx products.^8,9

DTx represent a small subset of products within the vast category of digital health products. DTx, unlike digital health products, require clinical evidence to be accessible to patients. As of 2021, there were more than 350,000 digital health products worldwide, of which fewer than 50 were DTx (23 commercially available and 25 approved or cleared by the FDA).¹⁰ However, there has been a recent surge in DTx entering the market, with more than 150 FDA-regulated DTx expecting clinical trial results by the end of 2022. This surge is likely to continue in the short-term, with investment in DTx rising from $7.7 billion in 2019 to $14.7 billion in the first quarter of 2021.¹¹ This growth has been catalyzed by the increased demand for telehealth services and mental health applications amid the COVID-19 pandemic and relatively lower development cost of DTx.¹⁰ The long-term durability of growth in the development of new DTx products will be shaped by several factors, including the evolving regulatory and reimbursement environment.

With the rapid and significant expansion of DTx, stakeholders are scrambling to understand the potential value and budgetary impact of these products. In this viewpoint article, we provide a roadmap for payers and pharmacy benefit managers to strategically analyze the value of DTx for the member populations they serve. More specifically, we provide background on regulations and payer coverage related to DTx, and then we share recommendations based on our early experience developing Massachusetts Medicaid’s’ approach. We then highlight several anticipated challenges associated with DTx coverage and reimbursement decisions, including formulary management, coupled with potential solutions from various stakeholder perspectives.

Regulations for DTx

Reimbursement for DTx is being addressed at the federal level in the United States. In November 2021, the Medicare Coverage of Innovative Technology rule was repealed by the Center for Medicare and Medicaid Services (CMS). Although the rule was not promulgated because of implementation and appeals challenges, it would have allowed medical devices, including DTx, receiving FDA breakthrough designation to be covered by Medicare for 4 years if they fell into an existing benefit category.¹² After the expiration of this period, Medicare could have determined whether continued coverage was warranted based on the product being reasonable and necessary.⁹ The Access to Prescription Digital Therapeutics Act of 2022 is a current bipartisan bill introduced in the Senate, which adds prescription DTx to the list of services and products eligible for coverage under Medicare and Medicaid. The bill also directs CMS to establish payment methodologies and product-specific Healthcare Common Procedure Coding System codes for prescription DTx.¹³ CMS has already created 1 billable procedure code, in effect as of April 2022, for “prescription digital behavioral therapy, FDA-cleared, per course of treatment.” The availability of such a code is anticipated to remove 1 barrier to provider billing for and payer coverage of these therapies.¹⁴ Further promoting these recent efforts, the Academy of Managed Care Pharmacy is encouraging CMS to develop additional billing codes for prescription DTx, as they are needed to reflect the diversity of DTx products and will allow for reimbursement and utilization management flexibility.¹⁵

Coverage Considerations Including Standards

As federal requirements for DTx coverage by Medicare remain uncertain, it is unsurprising that coverage by other payers also remains limited. Furthermore, payers may be hesitant to proceed in this space given the rapid surge in product development, limited understanding of clinical impact, uncertain regulatory environment, logistical challenges, and potential budgetary impact of DTx. A recent Academy of Managed Care Pharmacy Partnership Forum on the evolving role of DTx highlighted opportunities to improve coverage process of these products, including, among others, emphasizing the value of regulatory approval in establishing standards of evidence, establishing evidence frameworks to guide coverage decisions, and promoting adoption and equitable access.¹⁶ Notably, a few early adopters of digital health have launched their inaugural digital health formularies in late 2019 to help employers and plan sponsors identify the digital health solutions that best meet their needs.^17-18 However, it is worthy to note that these are not inclusive of DTx coverage.

Of the public payers, prescription DTx may have particular salience for state Medicaid programs, whose member populations have a higher burden of behavioral health and chronic conditions.¹⁹ Furthermore, Medicaid serves a disproportionate share of individuals with treatment indications consistent with the prescription DTx currently available. For example, among the prescription DTx products (Table 1) that were approved as of December 2021, 2 are indicated for substance use disorder, with 1 specifically indicated for opioid use disorder. Medicaid is the payer for 57% of hospital discharges associated with a primary diagnosis of opioid use disorder and about 40% of discharges for other substance use disorders, despite only insuring 18% of the US population in 2020.^19-21

Medicaid programs, free from obligations to shareholders but with accountability to the public, arguably have a mandate to rigorously evaluate new technologies and cover those that meet medical necessity and scientific standards and improve population health. Several states, including Louisiana, Massachusetts, New York, Pennsylvania, and Washington, have implemented systematic, evidence-based benefit coverage determination processes for new technologies and services, although the number of products evaluated by these states each year is small.²² Such approaches are well-positioned to be applied, adapted, or expanded by other Medicaid programs, yet most have not yet implemented formal processes for DTx reimbursement.

Unlike prescription drugs approved by the FDA, which must be reimbursed by Medicaid if the pharmaceutical manufacturer is enrolled in the Medicaid Drug Rebate Program, coverage of prescription DTx is not mandatory and, with limited resources, this may be a lower priority.

Overcoming barriers and establishing DTx coverage standards can be viewed as an important opportunity for states because of the potential impact of DTx on clinical outcomes and the ability to leverage unique reimbursement strategies such as value-based arrangements.

DTx coverage standards encompass how technologies are selected for evaluation, the responsibilities and involvement of key stakeholders, the product evaluation process, criteria for coverage decisions, expectations for ongoing research and coverage reviews, and outcomes-based rebate arrangements. In Massachusetts, the Medicaid program has implemented a multistep approach to reviewing prescription DTx for potential coverage.

Recommended Approach to Determine Coverage

In the absence of current best practices for payers in determining coverage of prescription DTx products, we provide our recommendations based on experience with Massachusetts Medicaid program below. We propose that DTx coverage approach focus on prescription DTx products that (1) intend to treat, manage, and/or prevent disease and (2) are cleared by the FDA through either the De Novo or 510(k) premarket notification pathway. To establish an efficient and consistent method for reviewing prescription DTx, we recommend that organizations conduct a 2-step preliminary assessment composed of core and supplemental criteria (Table 2). If the prescription DTx is determined to be of promising value when considering the core criteria of disease prevalence, effectiveness, safety, and cost, the supplemental criteria would then be considered to decide whether the prescription DTx provides value in other domains to the various stakeholders such as the patient, provider, and payer (Table 2). When assessing the supplemental criteria, it is important to involve relevant stakeholders (including members and community representatives) to get their input related to prescription DTx indications and clinical management of patients with those conditions.

TABLE 2.

Criteria to Consider When Reviewing Prescription DTx

Criteria	Description
Core criteria
Disease prevalence	Number of members with the condition that may use product for the therapeutic indication
Efficacy	Clinical study resultsa Clinical benefit/medical necessity justification Optimal level of exposure (duration of effect and level of engagement) Efficacy compared with other available treatments for indication
Safetyb	Potential adverse effects in clinical studies and real-world studies Impact of discontinuation/change of prior therapy because of DTx Drug/DTx or DTx/DTx interaction(s)
Cost	Per member per year; low-, moderate-, or high-cost threshold
Supplemental criteria
Drug/therapy adherence	Significantly improves medication/therapy adherence during and/or after use
Quality and quantity of evidence	Multiple trial results with clinically meaningful outcomes Presence of real-world evidence in peer-reviewed journals
Consistency of evidence	Consistency of clinical study results Real-world evidence in alignment with clinical study
Evidence specific to payer’s population	Trials and observational studies conducted in populations that are similar to a payer’s member population
Addresses gaps in care	DTx targeted toward population with limited care options
Health equity	Promote health equity and reduce health and health care disparities
Dynamic intervention	Therapy adjusted based on severity and state of disease
Reduces avoidable care utilization	Reduces avoidable emergency department visits, hospitalizations, and readmissions
Provider education	Courses/certifications that can be tracked and shared with payer
Accessibility, security, and engagement	Easy to download, access, and adopt by patients through patient-owned devices High patient and provider engagement Appropriate data security Available in multiple languages and reading levels
Patient quality of life	Improves physical, psychological, and/or social functioning of patients
Health information technology integration and interoperability	Necessary considerations made on the dissemination strategy of DTx and integration with electronic health records including ordering and monitoring, decision support systems, population health management platforms, billing structure, and patient portals

Criteria should be adjusted based on applicability to the specific DTx product and positioned in core or supplemental criteria based on payer and member priorities.

^a Use of gold standard of clinical research, a randomized controlled trial.

^b DTx product expected to meet FDA-recommended data protection and cybersecurity device design and labeling.

DTx = digital therapeutics; FDA = US Food and Drug Administration.

If the DTx is determined to be of value based on this 2-step assessment, then a full product review, similar to a new drug review, should be performed. In addition to the criteria evaluated in the assessment phase, other considerations include results of economic evaluations (eg, cost-effectiveness, budget impact, return on investment), availability and characteristics of pipeline prescription DTx comparators, usability and patient-reported satisfaction, impact on patient quality of life, effects on and perspectives of providers, impact on nonclinical and societal outcomes, whether the provider and payer have full access to patient-level product use and outcomes data, and whether established reporting of regular updates on any changes made to the prescription DTx by the manufacturer are provided to and approvable by the payer. As the program gains experience evaluating prescription DTx, and as the number of available products grow, quantitative evaluation methods can be developed to score products on these criteria. The scores could then be used to prioritize products coverage and payment decisions in a standardized way.

Working With DTx Developers to Address Challenges

There are some challenges that are unique to prescription DTx that need to be resolved by manufacturers to aid payers in coverage determinations. The quality and quantity of evidence is typically limited for these products, including a lack of long-term studies and sparse peer-reviewed real-world evidence. The responsibility of evidence development should reside with manufacturers, whereas payers should set clear standards for the type, quality, and quantity of evidence needed and manufacturers should explore opportunities to align such standards. Such standards for supporting clinical evidence can be similar to drug dossiers, with a consistent template that would reduce the workload for both payers and manufacturers. In developing the evidence to meet payer standards, manufacturers should follow best practices for clinical trial and real-world evidence development, with careful consideration for equity, including the population most likely to benefit from DTx.^23,24 Prior to study initiation, research protocols, regardless of study design, should be registered in publicly available databases (ClinicalTrials.gov, ISRCTN, etc) to increase transparency and confidence in findings. When the studies are completed, manufacturers should publish findings in high-quality peer-reviewed journals. After the launch of their product, manufacturers should work with payers to study real-world evidence, including patient experience and outcomes, and present and publish findings in peer-reviewed journals and conference proceedings.

Assessing the value of prescription DTx in the face of limited evidence can be challenging, leading payers to be hesitant to use these therapeutics for their member population. Outcomes-based agreements represent a mechanism for payers to share accountability and risk associated with early evidence with manufacturers, while generating additional real-world evidence on the product. The rapid and durable shift to telehealth, especially for behavioral health in recent years, suggests that there is potential for DTx to similarly have rapid uptake and impact, but as with telehealth is likely to be dependent on changes in the payment and regulatory environments.

Once a DTx has demonstrated safety and efficacy, other considerations such as whether it can be accessed by patients, be seamlessly and efficiently integrated into clinical workflows, improve quality metrics, reduce cost of care, and help address health care disparities will be important considerations. To improve accessibility and equity, prescription DTx manufacturers should expand the available languages and reading levels of their products and use appropriate cross-cultural translation. Integration of prescription DTx into electronic health records and ordering is not yet widely established, and thus to be able to have smoother transition into practice, manufacturers should work with electronic health record platform providers to pilot their product before launch. Beneficial effects on cost and quality metrics may be especially attractive for providers and health systems accepting cost accountability for attributed populations, such as accountable care organizations.

Manufacturers, in collaboration with providers, should provide workflows, continuing education, and training programs accessible to various stakeholders to assure the appropriate use of their products. Finally, low uptake is a major challenge that manufacturers and payer groups face as these products become incorporated into practice. Working with health systems and providers with directed education and workflow support about the product to increase access to the appropriate population will help in overcoming this challenge. Manufacturers also need to be intentional about equitable recruitment of study participants most likely to benefit from DTx.

Conclusions

The growing digital health and DTx market have the potential to generate substantial value for society by better serving patients and improving outcomes by delivering care through new modalities and addressing gaps in care. With the lack of robust frameworks to assist in the decision-making process for coverage and reimbursement of prescription DTx, it is of great importance for payers and benefit managers to create standardized frameworks that can prioritize prescription DTx products. Our current proposed criteria for the assessment of prescription DTx provide a starting point to assess the value of products and initiate conversations with manufacturers. The criteria also set expectations for manufacturers in supporting the use and impact of their product for the diverse payer, provider, and patient populations.