Issue 195
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 happenings in FDA-regulated and pharma-focused digital health…
- Phew. What a week. If you don’t follow me on Twitter or LinkedIn, you may have missed my scoop Monday morning that revealed the Pear Therapeutics mystery buyer: Pear founder and former (and future?) CEO Corey McCann. A recap on that plus many new details in today’s top story — below.
- In other bankruptcy news: France-based Dreem is going through liquidation — France’s version of bankruptcy proceedings. Dreem started out as a direct-to-consumer sleep tracking company that attempted to move into the healthcare market in recent years. For example, just two months ago I wrote about Dreem’s clinical trial on its insomnia-focused cognitive behavioral therapy program that used data streamed from the company’s headband device.
- DiGA price decrease: Germany’s national formulary for prescription digital therapeutics lowered the price for aidhere’s digital therapeutic for obesity, zanadio, from €499.80 to €218. “Zanadio is an application that helps patients to reduce their weight in the long term by changing their habits in the areas of exercise, nutrition and other behavior.”
- In last Friday’s issue, I noted that Swing Therapeutics secured a De Novo clearance for its prescription digital therapeutic for fibromyalgia. The twist was that — for the foreseeable future, Swing will not pursue the traditional go-to-market of prescription digital therapeutics. Instead is going to bring its PDT, Stanza, to market via a virtual clinic named Swing Care, which is set up and licensed to practice medicine in Texas. This week the FDA finally posted the reclassification order for the device, which includes the indications for use and the generic descriptor for the new device category the De Novo process established for Swing Therapeutics’ future competitors. Read it here.
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Ex-CEO is the mystery buyer of core Pear Therapeutics assets and other details from this week’s bankruptcy court proceedings
Last week news broke that four companies had successfully bid to acquire various bits and pieces of Pear Therapeutics. The company that had the winning bid for Pear’s reSET and reSET-O products, trademarks, customer contracts, and distribution platform was a newly formed, mystery buyer named Harvest Bio LLC. In last Friday’s newsletter, I wondered if the secret buyer was actually Pear’s founder and former CEO Corey McCann:
“Wild guess: Is someone from the old Pear team trying to resurrect the company? The most dramatic turn of events that I can imagine is that Pear’s former CEO and founder Corey McCann bought back Pear’s core assets via Harvest Bio LLC. What are the chances that’s what just happened?”
By Sunday the signed purchase agreements revealed that, yes, McCann and former Pear executive Michael Langer were behind Harvest Bio LLC. They had bought back core Pear assets for a little over $2 million in cash.
Question: What do you think the biggest challenge will be for Harvest Bio as it brings Pear Therapeutics back from beyond bankruptcy? (Hit reply to this newsletter to let me know how you think this plays out.) Read on for a few more details from the past week’s proceedings…
The 7.5-hour process: During the bankruptcy court hearing on Tuesday, it came out that there had been 13 qualified bids for the various Pear assets. Bidding took place over 7.5 hours and there were multiple rounds of bidding for some of the assets.
How they tried to protect the integrity of the process with inside bidders: McCann wasn’t just the founder and former CEO of Pear, he was also helping the company as a paid consultant during the sales process. Once the company and its advisors determined that there was a possibility of McCann bidding on the assets, they established protocols to monitor all of McCann’s communications with other potential bidders. They also set up a special committee of independent directors to create more of an arms-length process. Bidders were also informed that a Pear insider was among them (but it is unclear to me whether they knew that it was McCann and Langer specifically.)
On Tuesday the court approved the transactions: At the hearing on Tuesday the judge presiding over the bankruptcy proceedings approved all four of the asset sales, including the transaction with McCann and Langer’s Harvest Bio LLC. No objections to the transactions were raised during the hearing, but two came up in filings prior to the hearing. Yes, there are back-up bidders waiting in the wings and there is at least one future hearing to discuss other objections to the sales, but these seem to be all but done deals.
The VA and South Carolina’s Department of Corrections object to the Harvest Bio deal: Interestingly, both the federal government and the state of South Carolina objected to the sale to Harvest Bio on similar grounds. The VA ended up dropping its objection but it originally didn’t like that the contract it had in place would transfer to Harvest Bio. (Unclear if this was settled out of court?) South Carolina’s Department of Corrections also didn’t know if its agreement with Pear could legally transfer to a new company under its state laws. It also worried that Harvest Bio LLC might go bankrupt like Pear did. The state’s agreement with Pear included prepayments for future prescriptions of reSET-O. These contracted payments were for around $1 million each. This objection is set to be discussed at the next hearing in early July, but it doesn’t seem likely this will hold up the entire asset sale.
HIPAA concerns with Harvest Bio LLC and the PHI plan: Another thorny issue for the asset sale to Harvest Bio is that the assets the NewCo bought include PHI. So, McCann and Langer were given five days to decide if they would like to acquire the PHI that comes with the reSET, reSET-O, and Pear Connect assets or if the PHI should be scrubbed before the transfer. Harvest has agreed to pay up to $100,000 to cover the costs of that process if they go that route. Another option is for Harvest to ask for the PHI to be de-identified. It will pay up to $200,000 to cover the costs of that de-identification process if it goes that way. I’ll keep tabs on the case if it continues to develop, but I suspect this one will be relatively quiet until the hearing in July.
CMS prices RelieVRx based on single blog post written by European futurist in 2017
Back in March of this year, E&O reported on the CMS HCPCS committee’s decision to create a new billing code, E1905, for AppliedVR’s virtual reality-based prescription digital therapeutic for chronic lower back pain, RelieVRx. Importantly, because CMS considered the device to be durable medical equipment (DME) it also set to work to determine how much it would pay for the device. CMS decided that RelieVRx was a subcategory of DME called “capped rental items,” which means the agency has to follow a particular methodology to come up with a price: “the fee schedule amount for capped rental items must be set based on a purchase price.”
More:
“In our search for an appropriate price we found a purchase price from 2017 cited in an article [posted on The Medical Futurist website] reviewing an earlier version of the RelieVRx device (then called the ‘EaseVRx’). This article describes a virtual reality cognitive behavior therapy device, incorporating pre-programmed therapeutic software together with a virtual-reality headset. We accept that there are some physical differences: the current RelieVRx device uses a self-contained VR headset with preloaded software, but the article describes a device performing the same functions with a VR headset driven by a locked smartphone pre-loaded with the therapeutic software (the article notes that aside from the VR app and wifi, ‘every other function is forbidden’). This article clearly describes this device as available to purchase: ‘you either buy the standard package for $2588, or buy the premium one for a little bit more than $3700.’ Despite the physical differences, we believe that the device described by the 2017 article, even if it is not the exact same version as the current model, presents to us the only purchase price known to CMS for an item described by E1905.”
Let that sink in for a minute: So, the committee decided that this five-year-old blog post written by a futurist in Europe was its only source for coming up with a payment rate for the first virtual reality-based digital therapeutic covered by Medicare!
Pricing details: So, based on all of that, this week the HCPCS committee gave AppliedVR a preliminary answer:
“Based on this 2017 purchase price of $2588, the 2023 average capped rental fee schedule amount for E1905 would be approximately $204.66 for months 1 through 3 and approximately $153.50 for months 4 through 13, for a total of $2,148.98 after 13 months of continuous use.”
Akili and Luminopia try to convince the CMS HCPCS Committee to create new billing codes
Akili is back in front of the CMS HCPCS Committee once again to try to convince them to create a new billing code that uniquely describes EndeavorRx. Akili proposed that the code’s description should read:
“AXXXX, Prescription digital therapeutic (PDT) providing sensory stimuli and simultaneous motor challenges for neural attentional control, FDA-cleared, per course of treatment”
Here’s an excerpt from CMS’ summary up Akili’s argument:
“According to the applicant, the HCPCS Level II code A9291 does not describe EndeavorRx, which embodies a mechanism of action therapeutically distinct from cognitive and/or behavioral therapy devices. EndeavorRx is a PDT that provides sensory stimuli and simultaneous motor challenges for neural attentional control as distinguished from using a CBT mechanism of action… According to the applicant, categorizing EndeavorRx as substantially equivalent to CBT devices may result in inappropriate expectations for treatment, clinical use, and the risks/benefits. Per the applicant, differentiating PDTs using the interference processing mechanism of action from PDTs delivering CBT will allow more clear and informed choices about treatment planning. According to the applicant, non-Medicare payers have a demonstrated need for a new HCPCS Level II code to facilitate efficient and accurate claims processing. According to the applicant, without a HCPCS Level II code to distinguish PDTs using the interference processing mechanism of action from PDTs delivering CBT described by HCPCS Level II code A9291, commercial payers and Medicaid agencies must manually process claims which is an arduous, inefficient, and costly process.”
In its preliminary response, CMS doesn’t seem convinced:
“This is a repeat application, previously submitted in B1 2022, application HCP220103YXJ32. Our prior determination was to revise existing HCPCS Level II code A9291, ‘Prescription digital behavioral therapy, fda cleared, per course of treatment,’ to instead read, ‘Prescription digital cognitive and/or behavioral therapy, fda cleared, per course of treatment.’ However, the applicant believes, and has stated that other payers agree, that their mechanism of action for EndeavorRx is different then what is described by existing code A9291. CMS continues to believe that HCPCS Level II code A9291, as currently revised, describes EndeavorRx. We welcome information from the applicant and other insurers to help us better understand what the mechanism of action is and how it is not cognitive and/or behavioral therapy.”
Luminopia pitches CMS on a HCPCS code for digital therapeutic for amblyopia
It looks like Luminopia might have more luck with its pitch for a new HCPCS code for its prescription digital therapeutic. Here’s its suggested language:
“AXXXX, Software-only digital therapy for amblyopia with a billing unit of 30 days”
CMS delivered a preliminary decision that showed it was clearly convinced of the need for a new code but it tweaked Luminopia’s language to broaden the scope:
“Establish a new HCPCS Level II code AXXXX, ‘Prescription digital visual therapy, software-only, fda cleared, per course of treatment'”
I’ll keep tracking these CMS deliberations and I’ll report back on where the final determinations land.
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