I spoke to thought-leaders last week at DTx East in Boston to get a feel for how they were feeling about where the DTx industry is at the moment, and where it’s heading. I asked these leaders to describe DTx in three words: the results were a mix of grim realism about the challenges the industry faces (“struggling,” “difficult”) and optimism about where we’re headed (“hopeful,” “emerging,” “getting there”).
The consensus theme that emerged at DTx East was that it’s been a tough year in the digital health space, and next year’s shaping up to be about the same.
In fact, several companies that took the event’s main stage in past years no longer exist, and the recent, high-profile struggles of notable DTx companies (and a retrenchment among DTx investors) is prompting life science executives to rethink their strategy and approach to digital.
And that examination in turn has driven a lot of talk about diversification. Should DTx companies strive to broaden their offerings to weather tough times? The answer, according to one DTx East panel, is mixed.
Here are three key insights gleaned from the Sept. 26 panel, “Diversifying the DTx Portfolio,” on navigating the complex waters facing digital:
Focus on one thing, do it well, and be able to demonstrate return on investment, said BrightInsight Co-Founder & CEO Kal Patel, MD.
“We haven’t pivoted to try and be everything to everyone. We aren’t trying to run five different businesses. We are focused on solving pharma brand challenges with digital, as we’ve always been,” he said, noting that it’s easy in digital health to create the “shiny penny problem.”
Regulation and reimbursement issues make it risky to have too many products, said Beats Medical CEO Ciara Clancy, as pharmaphorum noted. It’s challenging to balance a broader revenue stream and the need to focus, she said.
Josh Gaffey, VP of Digital Health & Medicine and Head of Strategy, Pipeline & Engineering at Pfizer, said pharma’s approach to new digital products often involves sharing risk with DTx makers, a point echoed by Clancy.
"Where we've found reimbursement more successful is when we've done it with partnerships. Our commercialization strategy is partnership with the pharmaceutical industry, and that's been the case for the last two or three years," she said. A crucial element of those partnerships, Patel said, is identifying projects that have clear revenue paths — and passing on those that don't.
"I think this is going to be like dot com. At the end of the day a lot of hype, a lot of companies go away, but at the end we're left with something that's really impactful," said Patel.
And although physicians and healthcare providers may not care how diversified your portfolio is, payers want to limit the number of point solutions they’re covering, meaning that treating multiple conditions from one point can help in the fight for reimbursement, according to Joseph Cafazzo of the Centre for Digital Therapeutics, University Health Network.
A core group of digital therapeutics, especially those that address adherence, are highly complementary to pharma drug offerings, Cafazzo said.
Adherence’s attractiveness as a target is understandable, given the amount of revenue tied up in pharmaceuticals, and the amount of waste around the issue, Patel said. The key is solid documentation of the value delivered.
"Payer partnership, pharma partnership, is not the definition of success. They have to show that they've driven return on investment," Clancy agreed, adding that the dearth of VC funding has driven Beats Medical to be very careful and ROI-focused, an important attribute for potential pharma partners who’ve been burned by investing in startups that eventually failed.
Bottom line: Digital health startups should maintain focus, not try to be everything to everyone and put all of their energy behind driving ROI for biopharma customers.