How to overcome the reimbursement challenges of Prescription Digital Therapeutics (PDTs)

Following on from our first article on the rapidly evolving world of PDTs and how companies can address the challenges and realise the benefits,  this second article focuses on the challenges PDT suppliers face when navigating the reimbursement process and what can be done to improve the outlook.

According to recent estimates, the market for PDTs will grow at a compound annual growth rate (CAGR) of 20.35%, and the market size is expected to be around US$17bn by 2030¹. However, the current reimbursement process can present significant challenges for PDT suppliers, which include pricing gaps and the creation of research and development bottlenecks. So, what tactical approaches can suppliers take to meet these challenges and ensure the future viability of PDTs?

The role of statutory health insurance (SHI) in the reimbursement process

In order to assess the challenges PDT suppliers face, it's essential to understand the role of the SHI and how it interacts with the healthcare sector and pharmaceutical companies. The typical reimbursement process for PDTs starts with a doctor's prescription, which the patients then submit to its SHI. The SHI contacts the pharmaceutical company or PDT supplier and initiates the compensation flow. After verifying the patient's service entitlement, the SHI receives an activation code from the pharmaceutical company, which is provided to the patient. This activation code allows the patient to access the service via an app or web application. 

Three significant elements characterise the reimbursement process for PDTs: 

First, a prescription from a doctor is mandatory. 

Second, billing transactions are carried out solely between pharmaceutical companies and SHI. 

Third, the SHI serves as the principal intermediary in these transactions.

Figure 1: The typical reimbursement process for PDTs

Key challenges PDT suppliers face 

In the EU, national authorities decide on the reimbursement and pricing of patented prescription drugs before they enter the market. A process that also applies to PDTs. In Germany, for example, PDT suppliers can set their manufacturer's price in the first year after a positive evaluation result in the trial phase. Within the first year after market entry, PDT suppliers are committed to proving a positive healthcare effect and negotiating prices with the SHI. This reimbursement rate is then effective from the 13th month after market entry. However, this often leads to a price gap with the initial manufacturer's price.

As a result, PDT suppliers encounter several key challenges:

•   Managing significant R&D, production and clinical trials costs while having development costs of around US$500,000².

•   Facing potential price reductions after negotiations with the SHI. For example, the average manufacturer prices in Germany in 2023 were €510, while average reimbursement rates were only €221³.

•   Securing certification as a PDT involves navigating complex regulatory requirements.

Developing a sustainable reimbursement model

Gaining acceptance from healthcare providers and patients is crucial for a sustainable reimbursement model. It's, therefore, critical that PDT supplies actively pursue strategic partnerships and alliances necessary to seize market opportunities and address the reimbursement challenges of PDTs. 

To improve the current outlook, suppliers should consider a number of approaches, including: 

•   Making strategic alliances with tech companies: This is essential to scale up and accelerate PDT development. 

•   Improving access to IT know-how and expertise: This will significantly reduce substantial R&D costs and narrow the gap between manufacturer prices and reimbursement rates. 

•   Encouraging strategic partnerships with healthcare providers: This will ensure the integration of PDTs into standard care protocols and help establish a sustainable reimbursement model. 

Finally, developing a sustainable reimbursement model demands a bold reimagining of current practices, and challenging the status quo with a provocative yet strategic mindset. It's about leveraging the collective strength of strategic alliances and partnerships to encourage innovation and distribute risks. If these challenges are mastered, current pricing problems and bottlenecks will be overcome to create a more sustainable reimbursement model that helps ensure the future viability of PDTs.

In the next article in this series on PDTs, we will discuss the capability model of the future that is needed to keep pace with technological developments, and how relevant competencies can be built today. 

1 Data Bridget Market Research (2024): Prescription Digital Therapeutics (Pdtx) Market Size & Statistics By 2030. Retrieved from databridgemarketresearch.com, 5th September 2024; 2 Die Techniker Krankenkasse (2024): Drei Jahre DIGA: in der Versorgung angekommen. Retrieved from https://tk-diga-report-2-2024-data.pdf, 16th August 2024; 3 GKV Spitzenverband (2023): Bericht des GKV-Spitzenverbandes über die Inanspruchnahme und Entwicklung der Versorgung mit Digitalen Gesundheitsanwendungen (DiGA-Bericht). Retrieved from https://www.gkv-spitzenverband.de/media/dokumente/krankenversicherung_1/telematik/digitales/2023_DiGA_Bericht_GKV-Spitzenverband.pdf, 29th August 2024