Issue 065.
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Digital health research from Brian Dolan.
Welcome to E&O.
Last week I wrote about Teladongo, no bids for Proteus, and a pretty lengthy list of digital health-related CPT codes that the AMA’s editorial panel is set to consider in October. Here’s what’s happening this week:
- I’m working on a long-form report focused on Evidation Health. Any insights, metrics, rumors you can share? What would you like to better understand about Evidation? Hit reply to send me tips and questions.
- Also, last week — about an hour after I send the newsletter — the AMA broke the link to its list of potential CPT codes. Here’s a working link, which they updated seemingly because of a copy-paste error. (This new URL will likely break once they make an edit in September since — mindbogglingly — their URLs use a numeral to denote the month.)
- The Lazarus of Digital Therapeutics Companies: Constant Therapy is back (from the almost-dead?) after some of its founding team acquired the digital therapeutic assets from Digital Health Corp, which bought CT’s parent company The Learning Corp in May 2017. So, a new DTx company is born: Constant Therapy Health, which will focus on brain rehab and will also offer a “virtual care” service that would connect clinicians and patients in real-time. More here.
- Teladoc competitor MDLive CEO Charles Jones told STAT that he plans to take the company public in January or February. (sub. req.)
- The German government has published an English-language version of the 128-page explainer document for its new fast-track process for digital health prescription and reimbursement.
- The best thing I read about the Teladoc-Livongo (aka Teladongo) deal this week was Nikhil Krishnan’s take in his Out of Pocket newsletter. This kicker was a good reminder too: “If we’re not changing the economics of a visit with telemedicine, we’re not actually figuring out ways to lower cost for the system we’re just making it easier for people to pay into it.” Read the full post here.
- The best thing I watched about the Teladongo deal was a 30-odd minute video from Jessica DaMassa and Matthew Holt, which included cameos by leaders at the two companies as well as execs from Vida, Ginger, Omada and more. It was subtle but I heard diverging opinions on how quickly this deal will impact the market. Will it take 12-18 months for the two companies to figure out their integration issues? Or will we start to see a change in how Teladongo and other healthcare giants operate in virtual care much sooner, like in the next few months? Lots of other great ideas here if you have time to watch.
- Is this a Teladongo reaction? A recent job post from Pear Therapeutics reveals the company is creating its own “Patient Service Center (PSC) team” in-house. The team “will be on the frontlines to assist assists patients and prescribers in enrolling, navigating, and supporting patient access to Pear products. This team will contribute to the design and execution of the first-ever, all-digital patient services center and enable Pear’s evolution into a ‘Virtual Care’ model.” That last line points to new, grand ambitions, right?
- One more thing… This open position at Google Health also helps solidify the case I made in The Google Health Report about the company’s plans for consumer health devices and services: “As a Senior Clinical Specialist, you will be a key member of our team focused on building tools that empower people to be healthier in their daily lives and in their interactions with the health system.” The posting also requires applicants to have “experience in consumer-focused healthcare technologies such as consumer health applications, patient portals, or digital therapeutics.”
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Prescription-only digital therapeutics: 4 percent have FDA OKs. 20 percent have a clinical study.
This week I added two new columns to E&O’s database: Prescription Digital Therapeutics Pipeline of Pipelines.
- It now tracks whether a particular digital therapeutic product has FDA clearance or approval. (Only four do currently or a little more than 4 percent of Rx-only DTx products.)
- It also now includes a link to the latest study listed for that particular DTx in ClinicalTrials.gov. (Be sure to let me know if I missed and of your company’s studies.) And I’m going to have to figure out how to make those URLs clickable.
Coincidentally, the FDA just issued a guidance that outlines how much companies need to pay in civil penalties for not updating ClinicalTrials.gov with current information on trials — or for posting misleading information. It’s not cheap:
“The statutory maximum penalties under section 303(f)(3)(A) of the FD&C Act for committing these prohibited acts are not more than $10,000 for all violations adjudicated in a single proceeding and, if a violation is not corrected within 30 days following notification of such violation, section 303(f)(3)(B) of the FD&C Act provides for an additional civil money penalty of not more than $10,000 for each day that the violation continues after such period until the violation is corrected.”
So, update your study info quickly to avoid those fines — and be sure to let me know when you do.
I still have two more companies’ pipelines — Limbix and AmalgamRx — to add to the database, which I will do this weekend. Am I missing anyone else?
LabCorp leaves CDC DPP program? Other DPP updates…
In other database news, I’ve made updates to the original E&O database, which tracks digital-only diabetes prevention program (DPP) administrators registered with the CDC. Tracking this list has yielded one interesting scoop this week:
LabCorp owns one of the DPP administrators that the CDC has granted full recognition to, but that program is no longer listed in CDC’s registry. It just so happens that LabCorp rebranded this subsidiary from Wellness Corporate Solutions to LabCorp Corporate Solutions in May. I reached out to LabCorp and should have an official response by next week, but it sure looks like they have bowed out of the CDC-sanctioned version of DPP.
It was also surprising to me that few companies progressed along the CDC’s recognition spectrum. Only HabitNu achieved “full” recognition since I last compared the CDC’s registry to the E&O database. Check it out here for a few more names and a couple of other smaller DPP players that also disappeared from the CDC registry.
Big Health still sees big market for non-human-delivered, over-the-counter digital therapeutics
A few weeks ago, just before Big Health announced an expanded deal with CVS to add its Daylight digital therapeutic for anxiety to the PBM’s version of a digital health formulary, I had a long chat with Big Health Co-founder and CEO Peter Hames.
For the therapeutic areas that Big Health is currently focused on, Hames believes that pursuing a prescription-only route to market is the wrong approach. Big Health has also managed (so far) to develop evidence-based programs that do not require human coaches or care providers for support.
Many companies start with this product focus and then evolve into services companies, but Big Health has found traction with its product approach.
Here are a few highlights from our conversation related to Big Health’s go-to-market strategy:
“We are obviously living in a time when remotely-accessible, non-human-delivered, evidence-based mental health care has never been in higher demand.”
“I look at it with a very first-principles approach, which is to say, that any new therapeutic class brings with it constraints and new opportunities. My belief if that you need to start from scratch on those and think about what is the value chain that is most appropriate for each therapeutic class.”
“For me, with digital therapeutics, when I’m explaining what we do, I often equate the algorithm with the molecule. This is the reason it is so exciting for me: Pharmacotherapy has for 100 years a monopoly on scalable, affordable, consistently-deliverable, evidence-based healthcare. You discover a molecule, you patent it, you manufacture millions of copies of it… all of these qualities are held by software. We can create infinite copies of software and, unlike human therapists, every single copy of that software is going to be identical. You are going to be able to control the quality very, very, closely.”
“The way that healthcare is delivered all over the world, and this is very true here in the US — it is actually kind of artifactual. There isn’t really any logic to it, necessarily. I see opportunity in that.”
“The answer [to how these digital products should go to market] is as heterogeneous as healthcare itself. It is disease-area specific, patient group-specific, different for different risk-profiles. So, I can only speak to the health problems that we are striving to address.”
“For us, the hallmark is scale. The sheer number of people who suffer from these issues and who do not get anything — about 70 percent of people with these problems get nothing — no care, zero.”
“So, how do I get care to those people in a way that is commercially viable and attractive so that I can grow and scale to meet increasing levels of need? Keeping that in mind, this isn’t a molecule. It is software. Starting with the people we are trying to help: if the major issue here is access, well, I don’t want to disintermediate that relationship. I want to be able to harness the amazing scalability of software and help them get access to healthcare as efficiently and rapidly as possible.”
“That was my starting point. We have to maintain the individual’s ability to directly access this without the need for a script. Why would you take this intrinsically scalable method of care, which is safe, and artificially squeeze it through a prescriber? Through a human? If you don’t need to, why would you do that?”
Hames also pointed out that the FDA even validated this approach in its recent guidance document that allowed digital health devices for psychiatric issues to go to market pre-FDA clearance.
“With its recent guidance document, the FDA has even validated that mindset. They have essentially said — even for treatment claims — ‘Look, in this time of need, we don’t need to (as long you have labeled correctly and have the right claims) be in the middle here. You can just take it to market.'”
In the US, Big Health’s primary market so far has been through self-insured employers. So, the company drives enrollment through them similar to how Omada or Livongo has driven enrollment for much of their existence. Hames sees their marketing strategy evolving as Big Health’s coverage increases:
“As our coverage in the US increases, we will find other ways to reach users at the right time and right place. The ways that we enroll people will evolve over time. The point is once we have sufficient coverage within a population, we can then effectively use direct-to-consumer marketing techniques to then reach the people we are trying to reach.”
Proteus pushes back: Otsuka was not an insider, we went to them to set up the Stalking Horse bid
Well, I’m surprised to be writing about the Proteus-Otsuka saga again this week, but there is an answer to last week’s accusatory letter and it only seems fair to mention it.
Otsuka and Proteus’ current handlers took offense at the accusations in the equity holders’ letter I mentioned last week. They basically alleged Otsuka rigged the deal for Proteus’ assets since it was its closest partner, customer, and a large equity owner itself.
Here’s the part of the equity holders’ letter (this group includes Novartis) that I posted last week, in case you missed it:
“The proposed sale for which [Proteus] is seeking approval amounts to nothing more than a giveaway of [Proteus]’s valuable assets to an insider to whom those assets are essential at the expense of equity. While the sale price is calculated to bring in just enough to pay the secured creditors and the unsecured creditors in full or close thereto in order to buy their silence, it is designed to do anything but maximize value, leaving approximately $500 million of equity holding the bag. As a sale to an insider, this transaction must receive increased scrutiny from this Court for fairness. It cannot withstand such scrutiny.”
Apart from pushing back on the specifics of the allegations in the equity holders’ letter, Proteus’ handlers noted that this complaint came at the very end of the process, instead of during or before when it might have been more constructive.
There’s a lot of back-and-forth here, but one of the things I thought was interesting in the response to this equity holders’ letter was that Otsuka apparently did not show interest in acquiring Proteus’ assets. Proteus’ bankers ended up approaching Ostuka to set up the Stalking Horse Bit not the other way around.
“In fact, Otsuka did not initiate contact with [Proteus] regarding the potential purchase of substantially all of [Proteus’] assets, nor did it submit an expression of interest on or before June 10, 2020 in response to the Raymond James marketing process. It was only after June 10, 2020 that [Proteus] (with the assistance of Raymond James) initiated negotiations with Otsuka regarding the potential Sale.”
One of the more stinging allegations that Proteus’ equity holders lobbed at Otsuka was that it was an “insider” that used that status to get Proteus on the cheap. Proteus pushed back on that too:
“In addition, although Otsuka has observation rights regarding [Proteus’] Board, it did not exercise that right and did not receive any confidential Board materials since the middle of September 2019. In other words, from well before the inception of the sale process, Otsuka had the same access to information as all other bidders who signed non-disclosure agreements.”
This is the first Chapter 11 saga I’ve followed closely. Are they always this heated? While this one was set to be finished this week, the next hearing is now on the calendar for next week. I’m going to stop counting my Proteus eggs before they hatch — who knows when this will be over…
Quick links: E&O research reports and databases
The links below aim to make it easier for paying subscribers to find the long-form research reports and databases on the E&O site:
Database: Rx-only Digital Therapeutics Pipeline of Pipelines (Subscribers-only Link)
Database: Online Diabetes Prevention Program Companies (Subscribers-only Link)
Database: Digital Health PPP Loans (Open Access)
The Proteus Digital Health Report (Subscribers-only Link)
The Hinge Health Report (Subscribers-only Link)
The Digital Health Enrollment Report (Subscribers-only Link)
The Omada Health Report (Subscribers-only Link)
The Google Health Report (Subscribers-only Link)
The Pear Therapeutics Report (Subscribers-only Link)
The AliveCor Report (Subscribers-only Link)
Apple’s Healthcare Work Experience (Subscribers-only Link)
Approximating Livongo’s S-1 (Subscribers-only Link)
That’s a wrap on Issue 064 of E&O.
