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Digital health dilemmas - The challenges the industry is facing and how to address them

Digital health is facing major challenges. We outline the most relevant ones and suggest ways to mitigate them.


In brief

  • What are the key challenges both public and private institutions face in realizing digital health and broader innovation across the health ecosystem?
  • What can we learn from recent developments on the market, such as the bankruptcy of Pear Therapeutics?
  • How can organizations mitigate and address the issues and challenges surrounding digital health and innovation?

The vision of digital health and a fall from grace

Nearly two years after going public through a SPAC deal valued at $1.6 billion, Pear Therapeutics has gone into bankruptcy. Its digital therapeutic assets have been auctioned off for just over $6 million. As a result, a shining star in the field of digital health has come crashing down to earth, raising a lot of worries in the industry. If even an organization that seemed to have done everything right – from seemingly strong clinical evidence to partnerships with major industry players – can fail, does the business of system-relevant digital health and digital therapeutics really have a future?

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Many commentators are quick to reassure us that the idealistic target visions of digital health, such as a fully connected and integrated healthcare network including a broad range of reimbursable digital therapeutics, is still very much alive. In fact, in their opinion Pear’s failure should be taken as an opportunity for learning and growth in the industry. But that requires us to understand and effectively mitigate the many challenges stifling innovation and long-term value in the sector.

 

The dilemmas the visionaries of a connected future are facing

Naturally, there is no one-size-fits-all solution for the wide diversity of products and services encompassing the facets of digital health. EY analysis and interviews with several industry leaders have demonstrated, though, that any organization active in the field (be it public or private) faces a surprisingly consistent set of challenges. While this list is non-exhaustive, it does contain some of the most significant aspects to consider internally (1&2), externally (3-5) or with the products themselves (6-7):

  1. Digital as a second priority, as digital products and services are often the first on the chopping block in times of financial cuts or restructuring, in both the private and the public sector, since they are often not considered part of the core business. This frequently results in stalled projects and skeleton crews working on half-baked solutions, further perpetuating negative perceptions of digital solutions within organizations such as pharmaceutical companies or government entities.
  2. A distinct lack of internal innovation or ability to execute and deliver on innovative ideas and impulses. At the same time, partnerships with startups and other smaller entities frequently lag behind in expectations, with the resulting friction further exacerbating the problems.
  3. The highly fractured state of the (digital) healthcare system: payers, hospitals, MedTech, governments, regulators, pharma & tech companies are all vying for a seat at the table when it comes to the leveraging of patient data, all with their own walled gardens and infrastructures.
  4. Regulatory pathways for digital therapeutics are still evolving and vary significantly across geographies, further delaying commercialization of products. But even as regulatory challenges are passed, next come the reimbursement ones, which are often almost as varied and complex.
  5. Patient data safety, privacy and ownership require special care and increase the challenge of interoperability between healthcare systems, which is further exacerbated by significant differences in regulations across geographies.
  6. Unclear, uneconomical, or unrealistic commercial models that do not deliver as revenue drivers. These issues can be caused by a wide variety of factors ranging from lack of a clear pathway to reimbursement, pricing or a lack of innovation when it comes to options for commercialization, partnerships, or funding via other value-based modes of financing.
  7. Solutions lacking quantifiable value-adds to end-users. Often, solutions lack scalability and many of them only demonstrate value in pilot project but fail to impress when scaling up. Again, the causes for this are varied but can include a misunderstanding of patient value propositions and drivers, underestimating patient learning curves and adoption behaviors or lack of adaptation to local markets.

Not every organization will face the totality of these challenges, but our experience has shown that they do significantly impact many clients and their stakeholders. In the case of Pear Therapeutics, common challenges contributing to the failure were the commercial and business models of Pear, namely, high prices acting as barriers for patients with insufficient insurance coverage, salesforces of partners not being sufficiently familiarized with how to sell digital therapeutics (compared to generics), and payers and providers not being convinced of the real-world outcomes / value to patients and their willingness to contribute to such solutions. Reasons for this are twofold. Firstly, many payers are still relatively unfamiliar with digital products and services and how to handle them. Secondly, there were also lingering concerns about the clinical evidence generated by Pear Therapeutics, primarily based on the settings in which studies were conducted and their transferability to the daily life of patients.
 

Notably, though, Pear Therapeutics also faced unique challenges due to its unicorn status. The unrealistic expectations from shareholders led to the company being over-valued and receiving extensive pressure as well as to frequent strategic changes. One thing can be said for sure though: there was no lack of innovation or idea generation at Pear, something that many established players can only wish for.

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The future of digital health is a bright one, but many more forerunners across the system are needed to reach the full potential. Organizations aiming to be major players in the field should consider a number of lessons learned to avoid the pitfalls others have made apparent for them.

  1. Make innovation and digital health a core business strategy: Any organization that aims to be a serious contender in the digital health space must consider it a core element of its business and operating model rather than a fair-weather prestige project. While many companies only consider it a tool to support the traditional medical device or drug portfolio, its potential for the organization can be much greater. Support needs to be developed both top-down and bottom-up through a commonly shared vision that is well articulated and communicated. This is not a matter of a one-time announcement but requires constant and targeted communication as well as change management work on all impacted levels.
  2. Enable innovation to flourish internally: While mergers and acquisitions can be used to fill gaps in a portfolio, an organization that wants to achieve its target vision for innovation still needs to be able to nurture it internally. Working with partners and dedicated frameworks such as lean start-ups can be a first step, but many organizations are opting for dedicated, cross-functional innovation units containing SMRs from all relevant functional areas, ranging from customer and experience design to clinical and regulatory working hand in hand in a way that is aligned to the overall operating model of the parent organization.
  3. Ensure a viable business model that is combined with clear value propositions for all key stakeholder groups: Many organizations fail to spend sufficient time early enough to define viable commercial and business models for new digital solutions, often considering them an afterthought to be solved after the solution has reached a certain stage of development or clinical validity. Customer needs are often considered exclusively for solution design, when needs and value propositions must also be a key factor influencing the commercial design of solutions. Naturally, integrating the perspective of other players such as payers and providers is equally essential. Finally, the utilization of solutions around alternative pricing models such as value-based healthcare and leveraging new technologies such as the EY health outcomes platform can be major alternatives/additions to conventional business models.
  4. Interoperability with relevant digital and health architecture in the local markets: HCPs are generally not eager to engage with digital tools that are difficult to embed in their established workflows or systems. Even solutions to be primarily used by patients can create significant additional value by sharing and making data accessible and digestible to HCPs.
  5. Ensure patient data safety and privacy at every stage of design and development: Too often, data protection and privacy concerns are discussed and addressed at the tail-end of the design and development of solutions. This can frequently result in last-minute adaptations to business models, value propositions and technical requirements. It is thus key to adopt a mindset in which data protection is a key feature and is considered at every step of conceptualization. Tailored R&D frameworks and cybersecurity strategies that are in place before the solution is in development can ensure that these problems do not occur at later stages.
  6. Early and integrated partnering with the wider ecosystem: Organizations need to involve all relevant stakeholder groups in the early stages of the design and development of new digital projects to ensure key needs, regulatory concerns and other relevant considerations are addressed and alignment between the relevant parties is established early. For that, solution design and development must follow a structured approach and focus on long-term value generation for end-users and the wider ecosystem.
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In summary, while scientific and clinically valid R&D as well as innovative mindsets are essential to drive digital products and services, they need to be combined with user-centric design-led and commercially-minded approaches, a focus on including value-adds for all relevant stakeholders in the ecosystem and an early consideration on cybersecurity, privacy and interoperability, all under a common methodological and strategic framework to achieve their full potential.

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Summary

Digital health has been a buzzword for many years now, but it seems the realization of its potential is still far away. Recent setbacks such as the bankruptcy of a key innovator (Pear Therapeutics) has highlighted the significant challenges public and private organizations alike are facing. In this article we outline these key challenges and propose ways to mitigate them.

Acknowledgement

We thank Finn Beyer (EY Switzerland), Nayan Kalnad (CEO & co-founder of Avegen), Dr Anh Bourcet (Nguyen), Global Market Access Leader, Founding Chair, Asia-Pacific Medical Technology Industry Association Digital Health Committee Reimbursement workgroup, Roberta Sarno, PhD, Global Health Advisor; Founder and Director at D-Health Consulting and Mikel Mangold, (Startup Ecosystem – Alliances and Partnerships, Venture Lab Niterra Group) for their valuable contribution.

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