Issue 247

Welcome back to E&O: SaMD, a paying subscribers-only weekly newsletter focused on the world of digital pharma products, prescription digital therapeutics and other FDA-regulated digital health.

 E&O: Software as a Medical Device

Here’s two quick notes before we get into new CPT billing code application rejections and the latest PHTI assessment, which used some curious numbers to conclude that mental health-focused PDTs should be more widely adopted… but first…

• The big news this week, of course, is Hinge Health’s successful (so far) IPO, which raised $437 million and values the company at a couple billion dollars. Next up: Omada Health. (One small part of Hinge’s business makes it relevant for this newsletter’s FDA focus — Hinge’s Enso is a 510(k) FDA-cleared device.)
• The American Medical Association is looking feedback on its plan to (maybe) create a new set of CPT billing codes focused on AI. “The potential new category of CPT code would be a mechanism to codify algorithmic analysis of clinically relevant patient data (e.g., biophysical signals, imaging data, lab results) to produce clinically meaningful output or conclusions that impact patient care. This framework is still under development and is tentatively titled Clinically Meaningful Algorithmic Analyses (CMAA).” It is hosting two listening sessions with industry to get feedback — the first one is next week. More here.

Was this forwarded to you? Click this link for more info on how to become a paying subscriber.

PHTI’s premature PDT pricing analysis (PDTs are cost-effective at a fictitious price point?)

In addition to the Hinge Health IPO, the other big news this week was the Peterson Health Technology Institute’s latest assessment, which focused on digital health programs for people with depression or anxiety. Notably, PHTI concluded that prescription digital therapeutics (Big Health’s DaylightRx and Otsuka’s Rejoyn) proved to be more clinically effective and more cost effective than what PHTI called “blended care” offerings from companies like Spring Health, Lyra, Headspace, Teladoc and others.

While I could dig into a few different parts of this latest PHTI assessment (many of my criticisms of PHTI’s diabetes assessment are relevant to this report too), I’m going to focus on PHTI’s finding that DaylightRx and Rejoyn “decrease net health spending” while the big mental health providers Spring, Lyra et al “increase net health spending”. Here’s a breakdown of PHTI’s pricing research for DaylightRx and Rejoyn.

PHTI admits that payment for PDTs is still evolving: “The reimbursement landscape for PDTs is evolving and varies across payers, influencing how providers access and integrate these treatments.”

So new that it’s not clear what the pricing is yet: Compared to the programs analyzed in the blended care category, DaylightRx and Rejoyn are brand new. Yes, they are commercially launched, but no commercial health plans pay for either yet.

PHTI claims no MAC pricing for G0552 yet: “Beginning January 1, 2025, Centers for Medicare & Medicaid Services (CMS) established three new payment codes that will enable reimbursement for FDA-cleared PDTs. The initial code covers the supply of the device (i.e., software). Medicare contractors have not yet established reimbursement rates for PDTs;”

That’s not entirely true. As E&O reported in mid-April, two Medicare contractors have established a reimbursement rate for the supply code G0552 for digital mental health treatment: $129. This rate could change, and I’m sure companies like Big Health are hoping it increases.

PHTI claimed to find publicly listed pricing for both Rejoyn and DaylightRx: “[H]owever, publicly available pricing for PDTs currently range between $200 and $400.”

One is a self-pay price and the other is a bit of a mystery: In its footnotes, PHTI sourced those two numbers to websites for the two PDTs. Otsuka charges patients willing to pay out of pocket just $50 plus the cost of a telehealth visit with a prescriber. The company said it will charge insurance companies $200 to cover one course of Rejoyn, but no insurance companies have agreed to pay for it yet. Otsuka has also said on the record that pricing Rejoyn at $200 is unsustainable. One Otsuka exec told STAT last August: “We’re probably going to lose a lot of money on this, but that’s the approach that you need to take to be able to understand the market learnings.”

The $200 pricing is not real — it’s part of a trial balloon that Otsuka is sending up to try to understand the market for PDTs.  I’m not sure where PHTI got its $400 pricepoint for DaylightRx. In its footnotes, PHTI links to a dedicated webpage for the earlier version of Big Health’s anxiety intervention, named simply Daylight. That page notes that Daylight is available to HCA Healthcare members at a special price of $99 (if the participant agrees to fill out a survey at the end). The site states that Daylight usually costs between $400 and $600. Again, this is not for Big Health’s FDA-cleared prescription-only digital therapeutic DaylightRx. In my own research, I found a cost-effectiveness study that Big Health sponsored ahead of the launch of DaylightRx. In that study Big prices the intervention at $400 per course of treatment. That may be where PHTI got the idea this was the correct price for the PDT. That price also lines up with the historical list prices for Big Health Sleepio and Daylight programs for self-insured employers.

PHTI decided to go with $200 for the supply and $80 for two months of provider work: “The model assumes the low end of the range at an annual reimbursement rate of $200 for the device supply and $40 per month for two months of billing of treatment management per user for a single treatment episode of depression and anxiety.” Again, PHTI decided to go with a price for Rejoyn that no payer is currently paying. It didn’t go with the $50 pricepoint that is actually in place right now for early self-pay Rejoyn patients. It didn’t go with the current MAC pricing for the G0552 supply code: $129. And it didn’t go with the discounted Daylight price of $99 that it linked to. Later in its assessment, PHTI does mentioned the $400 pricepoint again, which I think comes from DaylightRx’s own cost effectiveness study. PHTI uses that number as the high end of its price range, and states that still is a cost-effective price for commercial plans — even though there’s no evidence than any payer is paying that price for either of the PDTs mentioned in this report.

Remember: In its letter to CMS prior to the agency making its final decision about the G Codes in the Physician Fee Schedule last year, Big Health submitted invoices to CMS that showed its interventions were priced at around $800 per course of treatment. (That’s 2x to 4x higher than what PHTI is going with in its assessment.) Big Health also pointed to Pear Therapeutics’ pricing for reset-O, an early PDT, which was priced at around $1,200 before Pear went bankrupt. (That’s 6x the low end of pricing that PHTI came up with.)

PHTI concluded: “Assuming device reimbursement rates are set at $200–$400 per episode, the budget model estimates that PDTs will reduce net health spending of commercial payers because the small clinical improvements are estimated to offset the cost of the product. Device reimbursement up to $270 is estimated to reduce net health spending in Medicare. PDTs could deliver additional savings if they were used as an alternative to therapy and were to reduce the average number of sessions per episode.” So, as you read the PHTI assessment, it is worth keeping in mind that the report hinges on pricing that is unsustainable for PDT companies. And when PHTI concludes that the blended care companies like Spring, Lyra, Teladoc, and Headspace would warrant “broader adoption, if their prices were lower,” it’s worth remembering that those companies’ current prices have enabled them to build actual businesses.

P.S. If proponents of the new G Codes for mental health had hoped that the MACs might still be convinced to raise their reimbursement rate significantly higher than the initial $129 for G0552, the PHTI report isn’t doing them any favors. I imagine it is only making it more likely that the reimbursement rate will be locked in at this lower rate.

P.P.S. One of the other curious statements in the PHTI report in its PDT section is this sentence: “The cost impact of these solutions could be higher, however, if providers prescribe PDTs multiple times per year to the same patient.” In its final rule, CMS makes it pretty clear that the G0552 supply code is meant for “initial” set-up and intended to be billed just once “per course of treatment”. In fact, at least one commenter asked CMS to change the language so a prescriber could bill the supply code monthly for the same PDT prescribed to a single patient, and CMS rejected that request.

The AMA’s CPT Editorial Panel rejected these two billing code applications

At the AMA’s CPT Editorial Panel meeting earlier this month, two requests for new CPT codes that E&O has been tracking were rejected.

REJECTED: Remote Therapeutic Monitoring Oncology – 98XX1 – Establish code 98XX1 to report device supply for monitoring for cancer therapy.

When I first wrote about this code back in March, I couldn’t come up with a single software as a medical device company with an FDA clearance focused on monitoring cancer therapy. (I typically speculate about who is behind the application based on that.) Since the RTM supply codes are only relevant to FDA-regulated medical devices, I’m guessing that’s why this code was rejected. No SaMD fit the description?

REJECTED: Remote Continuous Temperature Monitoring – 99XX6 99XX7 – Establish two codes (99XX6, 99XX7) to report remote continuous temperature monitoring.

These two code applications could be from some of the wearable device makers who have FDA clearance for remote temperature sensing, which is typically used in menstrual tracking and fertility applications. There are other more niche medical applications for this continuous temp sensing though. So, as far as I can tell, this latest round of the AMA CPT Editorial Panel meeting yielded no new billing codes for digital health companies.

Links to E&O’s reports, databases, newsletters

Click below for dedicated pages for each of those categories:

• Read through the long-form E&O research reports here.
• Search and sort the E&O databases here.
• Skim more than 300 past issues of E&O newsletters here.