This is Why Investors are Aligned on the Value of Digital Therapeutics
Digital therapeutics are the next evolution in digital health, with companies in that space receiving a massive amount of VC support.
Chronic disease is a big problem.
According to the CDC, 90% of the $3.5 trillion spent each year on healthcare in the US is for the treatment of chronic and mental health conditions. Yes, you read that correctly: 90%. Now, add in the estimated annual costs to treat individuals with chronic conditions, which range anywhere from $5,300 to $6,032 per patient.
For decades, most chronic diseases have relied upon a combination of behavioral modifications and pharmaceuticals to provide patients with relief. However, the massive financial and procedural burden of chronic disease has led to a need for new solutions to monitor and manage these conditions.
This is where digital health has stepped in. This market has gained critical mass within the last decade with the rampant success of startups in the digital healthcare space. Now is a great time to build off these successes, especially due to the fact that promising results have generated interest from investors. Digital health solutions are one of the most effective, viable, and financially-attractive ways to address the unmet needs of chronic disease management.
Why Digital Therapeutics Get So Much Attention from Investors
While digital therapeutics are categorized under the umbrella of digital health, they vary from mobile health applications (e.g. “Wellness Apps”) to wearable patient monitoring devices that must be prescribed by a physician. Digital therapeutics “deliver evidence-based therapeutic interventions to patients…to prevent, manage, or treat a medical disorder or disease. They are used independently or in concert with medications, devices, or other therapies to optimize patient care and health outcomes.”
Even better, digital therapeutic treatments are eligible for reimbursement through a patient’s insurance. For a neophyte market, the fundraising happening in the digital therapeutics market has been nothing short of exceptional. Companies in this sector have collectively raised more than $1 billion since 2018. In fact, several are exceeding $100 million in funding, suggesting that VCs see massive potential in this industry.
In fact, $1.3 billion has been raised by these 6 startups alone.
High Value and High ROI
Jaunt ran an analysis of the digital therapeutics market and determined 5 key reasons why these therapies are so fundable:
- Digital therapeutics collect massive amounts of data. The patient information collected through digital health therapies can personalize treatment for patients, enable data-driven care for providers, and improve the analysis of population health outcomes.
- Chronic conditions are having an intensifying impact. Even commanding 90% of US healthcare spending, chronic conditions continue to increase in prevalence and intensifying their burden on the healthcare system.
- They are supported by clinical evidence. There is a growing body of clinical data that demonstrates how digital therapeutics are effective.
- There is a void in the market. Many chronic conditions have unmet needs, such as treatment-resistant depression and opioid addiction. These market gaps are opening the door for new therapies.
- There is strong market growth. The estimated market value for digital therapeutics continues to grow in spite of common early adoption hurdles.
Immense Value for Multiple Stakeholders
The benefits for the stakeholders across the healthcare spectrum make the potential for digital therapeutics clear.
- Patients: Digital therapeutics provide patients with personalized and flexible care for many chronic conditions. Patients also benefit from increased access to clinically-validated therapies.
- Providers: Physicians can support patients remotely and monitor their response to treatment without an office visit, leading to a lower cost of care. Digital therapeutics are a novel tool that can address the unmet needs of patients.
- Payers: The data generation and analysis of population outcomes is extremely valuable to payers. While digital therapeutic formularies are still a few years away from being the norm, the pharmacy benefits manager Express Scripts launched its Digital Health Formulary in December 2019.
- Pharmaceutical companies: Through digital therapeutics, pharmaceutical companies are improving the efficacy of their existing therapies. Many have been major investors in digital therapeutic startups (see Bayer, Otsuka, and Sanofi’s investments into digital therapeutic startups).
Digital Therapeutics are a High-Value Solution Across the Board
There is a growing need for technologies and therapies to help any of the 126 million Americans who are currently living with chronic conditions. However, we believe that the critical mass for digital therapeutics is still a few years away before there is widespread stakeholder adoption. That signifies an open field, rich with opportunity.
In the meantime, strong fundraising in digital therapeutics clues us in on how the healthcare market – and investors – are looking to this type of innovative solution to alleviate the burden of chronic conditions. As more data and evidence is collected, more opportunities will arise.
For more information on the digital therapeutics market, including a comprehensive market opportunity analysis, please contact us or send an email to firstname.lastname@example.org.