Issue 208
Welcome back to E&O Fridays, a paying subscribers-only weekly newsletter focused on the world of digital pharma products and FDA-regulated digital health.
E&O Fridays.
Here are a few quick bullets on things happening in FDA-regulated and pharma-focused digital health:
- No new FDA clearances this week as the agency hasn’t updated its database of 510(k) summary documents since last Friday.
- New DiGA: Germany added another digital health program to its national formulary. Orthopy Health GmBH’s “Orthopy app is a digital health application for patients with an anterior cruciate ligament tear and/or meniscus damage. The Orthopy app accompanies patients before, during and after orthopedic treatment. Orthopy supports you with: understandable knowledge articles, physiotherapeutic training plans for home training, exercises based on guidelines and the presentation of visible therapy progress as a motivational aid.” It is preliminarily listed in the formulary and currently costs €487.84.
- Another digital health program listed in Germany’s DiGA formulary lowered its price. Kranus Health’s ED-focused digital program dropped its price from €656.88 to €235.00.
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Big Health acquired Limbix for $9.4 million in stock
One more Big Health-related scoop.
Back in July, Big Health announced that it would acquire prescription digital therapeutics company Limbix for an undisclosed sum.
E&O has learned that Big Health paid a little more than $9.4 million in stock to acquire substantially all of Limbix.
While it is possible there was also a separate cash component to the deal (I don’t have any intel on that), from everything else I heard about the deal, it seems likely the above was the total amount paid. (Hit reply and let me know if you know otherwise.)
Akili abandons prescription digital therapeutic model in favor of OTC and DTC
The news you know: After testing the waters for a few months, Akili made it official this week and announced plans to transition all of its current and future products to a non-prescription, FDA-cleared over-the-counter go-to-market mostly powered by direct-to-consumer marketing. As part of the pivot, the company announced plans to lay off 40 percent of the company’s employees. Most of those let go worked in parts of the company that supported the prescription model.
How did Akili come to this decision: EndeavorOTC (for adults) brought in more revenue in three months than Akili’s prescription digital therapeutic, EndeavorRx (for children) brought in during the past two quarters.
Akili also echoed comments it has made in the past alongside other early prescription digital therapeutics companies — that payers have been too slow to pay for digital therapeutics.
Here’s an excerpt of what Akili CEO and Co-founder Eddie Martucci said on a call with investors yesterday:
“This is a big change. We have been running a prescription model that has dependencies on healthcare stakeholders who we don’t solve a direct problem for. Friction here was honestly more than we anticipated. Insurers have been extremely slow-moving and are not stepping up for innovative medical products even when they’re safe. Additionally, physicians are steadily adopting our product, but in today’s world many patients are unable to navigate or are frustrated with the typical prescription process when a product is abundantly safe.”
Martucci said the company would shift its spend “dramatically” to support EndeavorOTC, while it puts EndeavorRx into a “slower burn” mode. Over time Akili plans to transition EndeavorRx (for children) to a non-prescription, OTC model too. First, it will secure its expanded label for older kids for EndeavorRx and then re-submit for a non-prescription label.
Pricing: When it first launched, a subscription to EndeavorOTC was about $29 a month or $99 for a year. Martucci said the company was still experimenting with pricing for the program. Its currently at about $20 a month and $130 a year, he said.
Martucci also said that while the focus is direct-to-consumer advertising, the non-prescription model will make it easier to work with B2B partners like employers and other third-party channels. He indicated that previously having to navigate the prescription process was a deal-breaker for these potential B2B partners. (So, by going DTC Akili may have more B2B opportunities.)
CPT codes? Long-time readers of E&O might recall that I’ve tracked Akili’s many attempts to secure a unique HCPCS billing code to help it track utilization of its digital therapeutic. The company also seems to have another CPT code application on the agenda for next week’s CPT Editorial Panel meeting at the AMA:
“Cat III – Remote Therapeutic Intervention for Algorithmically Adjusted Treatment of ADHD – Establish codes X225T, X226T, X227T to report prescription digital therapeutic (PDT) providing sensory stimuli and simultaneous motor challenges for neural attentional control.”
Given its new non-prescription model, I’m guessing Akili won’t be attending the CPT meeting next week.
Here’s one more excerpt from the investor call yesterday. Martucci on insurers’ unwillingness to pay for digital therapeutics:
“I’ve talked before about inertia. I hope sincerely we get to a point in this world where insurers are immediately doing the right thing for patients because there are safe and effective products and patients need more options. We have seen with our products … for many different reasons and many different excuses, insurers will refuse to cover and will delay coverage… The incentives aren’t always there and the inertia is there… We as a business have to focus on sustainability and profitability in the near term. That’s all I care about at this time. That and the ability to serve as many of our patients as we can.”
Johnson & Johnson to CMS: Here’s how you can add digital health to the TCET pathway
Various companies and stakeholders have sent comments to CMS about how its proposed TCET pathway for Breakthrough Medical Devices leaves out most digital health devices. I’ve read through a number of them, but a letter from Johnson & Johnson made an interesting (and simple) argument.
Quick background: TCET is the new acronym for a pathway that aims to make it simple and almost automatic for medical devices with FDA Breakthrough Device Designation to get reimbursement from CMS. The catch is that CMS can only pay for things that fall into one of its benefit categories and digital therapeutics and software as a medical device (SaMD) offerings don’t tend to fall into any of the existing benefit categories. (That’s the issue that the Access to PDTs bill in Congress is hoping to address — for prescription digital therapeutics, anyway.)
More background. Here’s the CMS one-line pitch for TCET:
“The new Transitional Coverage for Emerging Technologies (TCET) pathway for Breakthrough Devices supports both improved patient care and innovation by providing a clear, transparent, and consistent coverage process while maintaining robust safeguards for the Medicare population.”
Below is an excerpt from J&J’s letter to CMS that outlines the company’s suggestion for how CMS can include digital health devices in the TCET pathway. The gist of the argument is that CMS should just interpret its own regulations so that it can include digital health technologies — that’s what it did for Heartflow.
No act of Congress needed? Does that argument have any merit? Read on for more:
“J&J Supports a Broad Definition of ‘Benefit Category’ and Urges CMS to Interpret its Existing Regulations to Expand Access to Digital Health and Other Technologies under TCET
CMS is proposing the TCET pathway for FDA-designated breakthrough devices that fall within an existing Medicare benefit category. While CMS does not have authority to cover items and services that do not fit within an existing Medicare benefit category, nor does CMS have authority on its own to establish new benefit categories, the Agency does have the authority to interpret its existing regulations broadly, and to propose revisions to those regulations as necessary, to allow for innovations in medical technology to be reflected in its coverage and payment programs, and to enable clinicians and patients access to these innovations, as appropriate.
CMS has previously acted in this space in its approach to coverage and payment for certain technologies that incorporate augmented or artificial intelligence (AI) solutions, digital solutions, software, and algorithms. CMS already has interpreted its own regulations to identify and pay for these services as physician or hospital services, supplies or as other relevant benefit categories, such as durable medical equipment, and thus to ensure availability for use by clinicians and access by patients with medical needs that will benefit from them. For example, in 2017, CMS established separate payment under the Outpatient Prospective Payment System (OPPS) for Heartflow, which used proprietary software to analyze and generate data using software and a computer algorithm to inform physicians’ diagnosis of coronary artery disease (CAD) where previously such a service would have been packaged into the OPPS payment for the primary service. Since that time, CMS has proposed that other new technologies receive separate payment as ‘Software as a Service’ (SaaS). We urge the Agency to continue this journey to modernize coverage and payment for new and innovative medical devices.”
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