Issue 048.
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Digital health research from Brian Dolan.
Welcome to E&O.
Last week’s newsletter had a 59 percent open rate. Here’s what’s happening this week:
- As part of the effort to make virtual care more accessible during the COVID–19 pandemic, the FDA posted a new enforcement guidance focused on digital health devices for the treatment of psychiatric disorders. Given how many DTx companies are focused on behavioral health, this move by the FDA has a lot of companies re-examining their go-to-market timeline. I pushed back the MSK report a few days as I’ve been on the phone with readers non-stop trying to getting my head around this guidance. Read more on the FDA’s in today’s top story below…
- Decisions Resources Group has a worthwhile report out on payers’ perspectives around digital therapeutics that is based on responses from 157 P&T committee members at hospitals, IDNs, MCOs, and PBMs. Some 25 percent said their org already covers some kind of DTx, while 45 percent said they were interested in providing coverage.
- Michael Evers, formerly CEO of The Learning Corp., is now CEO of Woebot. Evers took the reins as CEO right when San Francisco shut down because of the pandemic, and his experience of being a new CEO who can’t go into the office is chronicled here. Cognoa’s new CEO must be having a similar experience.
- Speaking of The Learning Corp., the company announced this week that the FDA had granted its speech therapy app for stroke patients with a Breakthrough Device designation.
- Shwen Gwee has left Novartis to join Bristol Myers Squibb as its new VP and Head of Global Digital Strategy.
- Three acquisitions of note this week, which may be a prelude to a period of a lot of consolidation in digital health: First up, One Drop acquired all of the assets of Sano Intelligence, a longtime developer of a continuous glucose sensing system that One Drop plans to continue to develop as a “comprehensive multi-sensorial solution”. A few Sano employees will also join One Drop.
- Biofourmis made an acquisition this week that expands the company beyond heart disease and into oncology and pain management: Biofourmis acquired Gaido Health from Takeda Digital Ventures. It offers “a prescription software that combines physiology biomarkers, and patient surveys to detect early signs of complications in patients with cancer who are undergoing chemotherapy, and CAR T-Cell therapy in those recently discharged from the hospital.”
- Medopad had rebranded as Huma and acquired two companies, BioBeats and TLT. BioBeats offered an “eight-week psychological wellness course comprising coaching topics, exercises, audio sessions, and surveys surfaced by an AI recommender system.” TLT was building a wearable, non-invasive blood flow and blood pressure monitoring device.
- Finally, BioIntelliSense, which offers an FDA-cleared, peel-and-stick remote monitoring device has asked for a waiver on paying tariffs that result from importing its device from China. The company cites the need for its device during the pandemic as a reason the Feds might consider the waiver.
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Unraveling FDA’s temporary enforcement guidance for DTx that treat psychiatric disorders
Mid-week most companies working on digital therapeutics turned their attention to a new enforcement guidance from the FDA that focuses on digital health devices used to treat psychiatric disorders during the COVID–19 pandemic. Clearly, the agency has decided that making these devices available poses less of a risk to patient safety than not doing so during a time when nearly all care has gone virtual and behavioral health services remain in high demand.
I spent most of the last few days discussing this new enforcement guidance with DTx companies, investors, and regulatory lawyers. Nearly everyone I spoke to or exchanged emails with agreed that the regulatory loosening is an opportunity for certain pre-FDA digital therapeutics to get to market sooner. Here are some of the details and ramifications we discussed:
This guidance is a positive development for digital therapeutics.
Across the board, digital therapeutics companies saw the FDA’s move partly as recognition of the importance of their work:
“We applaud the FDA’s new guidance to expand the availability of digital therapeutics specifically for psychiatric disorders during this health crisis. At a time when patients with behavioral and psychiatric diagnoses are seeing severely limited access to services and treatment, digital therapeutics may be able to serve a key role. As we’ve been publicly advocating for years – clinical validation is key, so we’re very pleased to see FDA including data and labeling standards in this short-term policy. It’s critical that, even and especially in a time of crisis, a high bar is set for the products that are made available to give patients and physicians confidence in the safety and efficacy of those products with data from rigorously conducted, prospective, published clinical trials.” Akili Interactive’s CEO Eddie Martucci wrote in a statement to E&O.
“Similar to past public health emergencies, FDA has been limiting enforcement for high-value products to expand access during the CoVID crisis. This action is similar to FDA action for ventilators and molecular diagnostics, for example. We believe the recent FDA guidance is a very positive step in the maturation of the digital therapeutics space. The temporary Emergency Guidance document creates clear guidance on the need for high-quality standards, clinical data disclosure requirements, and labeling requirements for non-FDA cleared digital therapeutics. We believe that this transparency is critical for patients and physicians to properly utilize digital therapeutics,” Pear Therapeutics’ CEO Corey McCann wrote in a statement to E&O.
“I think it’s positive that the FDA has acknowledged the value of evidence-based digital therapeutics at this time of crisis. It is, of course, critical that the industry responds in a way that shows we’re worthy of the trust the agency is putting in us — adhering to strict principles of evidence-based medicine and ensuring safety for the people we strive to help,” Big Health CEO and Co-founder Peter Hames wrote me in an email.
Overview of the new enforcement guidance.
As with all FDA guidances, this one should be read carefully and in full, which you can do on the agency’s site here. I’ll pull out a few important things in this section though.
During the pandemic, the FDA is allowing digital therapeutics that treat psychiatric disorders and would normally require a 510(K) clearance or other market authorization to go to market without a clearance at this time.
The agency specifically mentions computerized behavioral therapy programs, which are prescription-only, but says the guidance applies to digital therapeutics that use other interventions as well as to digital therapeutics that are not prescription-only. The agency names eight medical conditions:
- Obsessive-Compulsive Disorder
- Generalized Anxiety Disorder
- Insomnia Disorder
- Major Depressive Disorder
- Substance Use Disorder
- Post-traumatic Stress Disorder
- Autism Spectrum Disorder
- Attention Deficit Hyperactivity Disorder
But the FDA also notes that this list is not exhaustive and that the guidance applies to conditions “like” these. So, might this apply to schizophrenia, too? Maybe. One reader pointed out that the guidance probably does not apply to DTx offerings that are targeting a combination of conditions. The FDA made clear, however, this guidance is only for offerings that are adjuncts and not standalone therapeutics. That means, for the most part, that a physician needs to be in the loop to some extent.
Despite the enforcement discretion, quality systems, etc. still apply.
As McCann noted in his statement above, the FDA writes that DTx products that go-to-market under this guidance still need to abide by most of the usual rules in place for cleared medical devices. Software verification, validation, and hazard analysis are still required as are cybersecurity protections. Notably, the labeling requirements for these products are unique — that section has 15 bullets. Among other requirements, they must be labeled as not cleared by the FDA. The programs must also instruct patients to contact a physician before using and even include a prompt on-screen that makes the user acknowledge this recommendation, which goes back to the agency’s requirement that these are adjuncts, not standalones.
The big debate: How long will this guidance be in place?
The one area where there seems to be disagreement about this guidance document is how long it is likely to be in effect. One reader pointed out that emergency authorizations put in place during H1N1 lasted for about 14 months. Some cautioned that this enforcement discretion may only last a few months or six months, while others expected there to be a grace period that might last as long as two years after the pandemic is considered officially over.
Jason Brooke, a longtime FDA attorney who focuses on medical devices and digital health, expects such a grace period — if there is one — to be shorter:
“I could see a short grace-period, but two years seems unrealistic. In my conversations with the FDA about other product types that have received enforcement discretion during the pandemic, it was clear that the policy would only be in effect until the emergency declaration was lifted. At that point, the normal rules apply (e.g., premarket notification, registering & listing, etc). I would not hang my hat on the presumption of such a long grace period, especially when we’re talking about devices involved with serious conditions.”
Brooke and others noted that the timing of this is particularly crucial. Not all companies will be able to launch during this window of opportunity. Some may spend the next three months preparing an accelerated launch only to find the window closes just before they do. Others may launch but not have enough time to show true market traction and collect other real-world evidence.
“One downside is that if the pandemic ends in two months, you have to pull the product off the market and may have to wait six or more months before putting it back on the market,” Brooke said.
Besides patients, this guidance is a win for a few different types of companies.
1. Akili Interactive, Orexo and other DTx companies awaiting FDA authorization.
One company that came up in a few different conversations as likely to benefit the most from this guidance was Akili Interactive. Akili has been awaiting FDA clearance for more than a year now, which means it is likely able to commercially launch its digital therapeutic for ADHD quickly. While Akili did not explicitly state that it would launch its program as a result of this guidance, it said it was pursuing a number of paths to market currently:
“At Akili, we recognize that this is one of the most challenging times families have ever faced. The stress we are all experiencing today, exacerbated by upended schedules and routines, can have a detrimental effect on our cognitive health. This is especially true for a child who struggles with attention issues. For kids living with ADHD who are easily distracted and have a hard time focusing, the current environment makes it even more difficult for them to follow instructions and complete tasks. We’re pursuing a number of paths for making our attention treatment for children living with ADHD available for the families and children who may benefit,” Martucci stated.
Another potential winner here is Orexo. The Swedish pharmaceutical company recently laid out its multi-year plan to put the digital therapeutics that it has licensed from GAIA through the FDA before launching in the US. This week’s guidance might mean that Orexo could launch its programs for alcohol use disorder and opioid use disorder much, much sooner.
2. Digital therapeutics companies deployed at scale via self-insured employer contracts.
Another group of companies that might benefit from this new guidance are those that have not pursued an FDA authorization yet, but have gone to market either via self-insured employers and health plans or direct-to-consumer. Big Health is one example. Its digital therapeutic for insomnia, Sleepio, already has a substantial user base, real-world data, published studies, and agreements in place with payers and even a PBM (CVS). It’s not too hard to imagine Big Health coming out with a Sleepio Rx, prescribable version of its product during the pandemic. That would mean squaring up against Pear Therapeutics’ digital therapeutic for insomnia, Somryst, which recently secured FDA 510(K) clearance.
While Hames at Big Health would not confirm explicitly that his company would take the FDA up on this opportunity, he sort of indicated they would in an email to me today:
“At Big Health we pride ourselves in leading the market in terms of evidence — 12 RCTs published on our products, inclusion in leading clinical guidelines — so it’s great that companies like us are now able to offer effective help to the public in line with peer-reviewed clinical findings,” Hames wrote.
The bigger issue for this group of companies, however, is setting up a salesforce that can sell to physicians instead of to payers or consumers. Along those lines, these companies would also have to solve the distribution issue for prescribed DTx products. That might be a big pivot for a company like Big Health — even though the FDA has temporarily removed the regulatory hurdle for such a product. Such a move may also be within the power of bigger companies like Livongo and Omada, but it seems unlikely either of those companies would want to tack on a new business model like this opportunistically.
3. Specialty pharma and patient services companies like Eversana
The third group that might benefit from the FDA guidance are specialty pharma and patient services companies that have built out a business unit focused on digital therapeutics. Eversana is one company that has focused on this in the past year, and it could help companies that fall into the category above to bolt on a new business that sells into physicians, while also taking care of the distribution piece.
4. DTC telemedicine-powered prescription companies like Roman and hims
This one is a bit out of the box, but perhaps less so since hims and hers launched online therapy services in recent weeks to help people during the pandemic. This group already has providers prescribing pharmaceuticals via video visits. With the regulatory hurdle down, this might be the best time for them to explore prescription digital therapeutics. Creating a DTx from scratch, however, and putting in place the necessary quality systems to abide by this new FDA guidance is probably too much for any company to spin up from scratch in time. A quick acquisition, however?
Risky opportunity for pre-FDA digital therapeutic companies?
While there are other digital therapeutics companies focused on psychiatric disorders that are on the road to an FDA clearance currently, none are likely able to launch as quickly as Akili. This group, which might include Cognoa, is probably tempted to accelerate their plans to launch their digital therapeutics during the pandemic. The problem here is an accelerated launch could get messy. It would take some number of months to put all the necessary pieces together pre-launch, and a half-baked, rushed product launch could make the wrong first impression on patients and prescribers.
A rushed launch may also lead to a failure to show market traction and solid real-world evidence, which the agency could hold against the company later as they pursue a 510(K) clearance post-pandemic.
Best case scenario: A pre-clearance launch as bridge to a grandfathered-in 510(K).
One of my calls this week was with Brent Vaughan, the former CEO and co-founder of Cognoa now with VC firm, Morningside Ventures. Vaughan outlined some of the likely winners that could result from this guidance (which I noted above), but specifically said he wouldn’t speak to Cognoa’s plans.
Vaughan said that if a digital therapeutic company can get out there quickly, establish that they are improving outcomes and getting patient and physician adoption, then they have “a once in a lifetime opportunity” to convince the FDA to stay in the market once the pandemic passes. They might then be conducting something that looks like a Phase IV study that, if it continues to go well, leads to their DTx being grandfathered-in with a 510(K).
Quick links to E&O research reports
The links below aim to make it easier for paying subscribers to find the long-form research reports on the E&O site:
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 for Issue 048.
