Issue 054.

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Digital health research from Brian Dolan.

Welcome to E&O.

Last week I shared new financial details surrounding three recent M&A deals. Next week I’ll write Part II of how a piece of software gets coded like a drug. Here’s what’s happening this week:

• After a presentation on digital health business models to 100+ health startups in Finland, Sweden, and Iceland, I spent the rest of this week trying to wrap my head around NDC vs UDI coding. Read Part I: How Welldoc got an NDC code — after the jump.
• One of the newer prescription digital therapeutics companies I’ve been tracking (Issue 035) is IBS-focused Mahana Therapeutics. A new Medium post from the company reveals that Mahana’s first product will be named Parallel: “Together, we’ve made major strides in a short amount of time. This includes the development of Parallel, Mahana’s first product, based on an 8-week, clinically-validated, minimal-contact digital program for people with IBS.”
• I previously reported (Issue 010) that Qualcomm Life had sold some of its assets to partner UnitedHealthcare last year to power the payer’s Motion program. Now, it has been announced that last month Philips snapped up the remaining Qualcomm Life asset: its remote monitoring platform, 2net. Philips subsequently announced a new remote monitoring-enabled clinical trial offering.
• Propeller Health secured FDA clearance to connect patients using AstraZeneca’s Symbicort inhaler. The clearance revealed Propeller’s partnership with AstraZeneca, which is also a long time partner and minority owner of Propeller competitor Adherium. This deal adds a considerably large new patient population to Propeller’s platform.
• One more thing: Following three years of development, NightWare has submitted (not secured, just submitted) its de novo application to the FDA. NightWare is a prescription digital therapeutic for people with traumatic nightmares, including people with PTSD. It runs on the Apple Watch.

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Part I: Coding Software Like a Drug. How this digital therapy got an NDC, and why it was the last.

Welldoc was, as far as I can tell, the only digital therapeutic to obtain an NDC/NHRIC code from the FDA.

That was six years ago, however, and Welldoc’s strategy has changed significantly since then. It is no longer pursuing a prescription digital therapeutic business model. So, think of this first part as ancient health tech history, not about the Welldoc you know today.

The first and only DTx with an NDC

I recently talked to Chris Bergstrom, who just joined Amalgam as president (Issue 050) after about five years at Boston Consulting Group. Before BCG, Bergstrom led strategy and commercialization at Welldoc for about five years.

Bergstrom is a true pioneer in the world of prescription digital therapeutics. Here’s how he managed to secure the first and only NDC for a digital therapy.

Bergstrom’s first move — and this was about 10 years ago, remember — was to talk to payers. After explaining what a digital therapy was, he asked them not whether they would pay for it, but how they would pay for something like that. They pointed out that legally, it’s a medical device so it could be in the HCPCS/DME bucket. However, it has efficacy studies like a drug so maybe the drug path made sense? It’s also doing the kind of work for a patient that a clinician might do, so maybe CPT codes were the way to go?

Bergstrom was surprised to not receive a more direct answer. The payers he spoke to left all three of these doors open: pay for it like it’s a medical device; go the pharmacy benefit route; or focus on providers via CPT. Each very different paths.

Bergstrom landed on the pharmacy benefit. It offered quicker adjudication and was set-up for similarly priced products. Another key benefit appeared to be scalability thanks to the middlemen that facilitate the pharmacy benefit. Here’s Bergstrom:

For drug companies, once they get the NDC code for a new pharmaceutical, some lower-level staffer will log in and fill out the product’s information so that the compendia can update with that new listing.

It’s a mundane task completed with little fanfare.

We’ll get back to the compendia in a minute, but first Bergstrom had to obtain a National Drug Code (NDC) code so that his digital therapy could be listed in the compendia. After getting through the FDA with a 510(k) Class II clearance, Bergstrom applied for an NDC from the FDA and waited.

And waited.

After follow-ups were met with no response, Bergstrom decided to visit his senator.

As luck would have it, at the time Sen. Barbara Mikulski, a Maryland Democrat, was a member of the Senate’s Health, Education, Labor and Pensions Committee. Bergstrom walked the senator through what he was trying to accomplish and how it would help patients.

A week later Welldoc had its NDC.

Next step: Get listed on the five main compendia

With an NDC in hand and prior experience at pharmaceutical companies, Bergstrom expected the next step to be relatively rote: Listing his product on the five big compendia. Four of them were immediately receptive and helped him to retrofit the unique aspects of a digital product into the typical information required of a pharmaceutical drug.

There was one holdout: First DataBank (FDB).

This week I asked FDB to comment on how it views prescription digital therapeutics. Had its position changed since it declined to list Welldoc in 2014? A spokesperson declined to comment specifically but did note that FDB has since launched a new compendium — not for drugs but for medical devices.

FDB was the dominant player among the big compendia back in 2014, and it remains so today.

The problem with being listed in four out of five compendia is that when a provider prescribes your digital therapeutic to a patient, and that patient’s PBM — let’s say, Express Scripts — relies on the missing one, in this case, First DataBank, that patient will be denied reimbursement for the therapy.

The digital therapeutic is invisible to the PBM and, thus, inaccessible to the patient.

It’s unusual for one of the compendia to play this kind of gatekeeper role.

As noted above, the typical process for listing a new drug in the compendia is a mundane one. Not getting a listing, however, cuts off broad swaths of a patient population from accessing that therapy. So, while it’s a power that the compendia typically don’t exercise, they do have influence over which therapies patients can access.

While there are plenty of takeaways and lessons in the above text, many of the specifics are now moot.

The FDA rules no more NDC codes for medical devices

The FDA published a guidance document in the summer of 2016 (https://www.fda.gov/media/95794/download) , called Enforcement Policy on National Health Related Item Code and National Drug Code Numbers Assigned to Devices, that made clear that medical devices would no longer be able to receive an NDC.

That door is now shut.

What’s more, Senator Mikulski retired just four months later.

So, her door is shut, too.

Next week, I’ll dig into the path forward, how today’s digital therapeutics companies are finding their way into compendia without NDCs, and why the pharmacy benefit is still a focus for many pre-market prescription digital therapeutics companies.

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 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 for Issue 054.