With increased pressure on the healthcare system to provide improved population health outcomes with lower costs, technology has increasingly played a larger role in modernizing care. Innovation in technology has facilitated the digitization of several crucial areas in healthcare—and areas such as telehealth have been normalized by COVID-19. While patients and providers increasingly understand the therapeutic potential of novel digital solutions, it continues to be a challenge to convince Payers of the therapeutic and economic impact of software-based treatments.

True innovation in software-based treatments has been stunted due to the existing reimbursement environment supporting digital health solutions. The current landscape discourages developers from taking risks to develop true software-based treatments that extend beyond disease management tools and wellness-based solutions.

Many of these digital health solutions companies, which could be developing disease-modifying therapeutics, are hesitant to deploy their limited capital to build products where they will eventually have to convince health plans of their treatments' therapeutic potential. Instead, they have pursued an employer-based model as wellness solutions - because it represents an easier path to reimbursement with 'lower' clinical and regulatory barriers.

While these point solutions have their own set of values in helping the patient and providers manage disease conditions, it is unfortunate to see innovation in meaningful disease-modifying treatments stifled due to perceived business model challenges.

The surge of pandemic-era investments has sprouted many digital therapeutics companies in recent years, but one must understand that not all software-based treatments are created equal.

While I welcomed the increased share of voice of digital therapeutics in the marketplace, it also added a lot of complexity and difficulty for employers and health plans to assess the validity of claims being made. With its colorful branding, cheerful illustrations, and carefully worded claims, one may find themselves easily over-excited by the promises made by some of these solutions. Some have attempted to run the same emotional benefits playbook and tout promotional languages based on ungrounded (or at least on very shaky grounds) and mistreating this as a consumer space. Mike Joyce and his team at McKinsey identified this need for the more clinically-focused cohort to clearly distinguish themselves away from the wellness category back in 2018 when digital therapeutics were just starting to take off.

Prescription Digital Therapeutics (PDT) companies like Pear Therapeutics and Akili, in my opinion, failed to commercialize primarily due to the inability to break through this clouded perception. Sure - the PDT category was in its infancy at this time - the product, the evidence, and the outcomes were not as sophisticated as they could have been. While there were a variety of reasons for their eventual downfall, I applaud their courage to walk down the reimbursement pathway appropriate for these products. Unfortunately for them, the perception of software-based treatments was too unfavorably tainted by the mixed constituents in the category during their commercialization efforts.

That is why I find the evolving Prescription Drug Use Related Software (PDURS) pathway very exciting and hopeful. A few thought leaders (Marty Culjat, Grzegorz Bulaj) have published a deeper analysis of what this guidance is and what it means - you may find these links useful. This guidance was a voluntary release by the Food and Drug Administration (FDA), which perhaps indicates its recognition of the therapeutic synergy that exists between pharma and software and its willingness to promote continued innovation. It provides developers a defined pathway to add their software-based treatments onto drug labels and be clinically evaluated under similar scrutiny as a drug. This, in my opinion, provides a dedicated separation and opportunity for disease-modifying software-based treatments like PDTs to demonstrate their therapeutic capabilities.

My initial assessment indicates this would allow software-based combination treatments to be reimbursed through the traditional Pharmacy Benefit model of existing pharmacotherapies (theoretically with their own NDCs). A few Payers have validated that this would circumvent long-standing access challenges of PDTs and associated coding, reimbursement, and payment questions. Lowered access barriers could also reignite the possibilities of treatment developers' self-commercialization plans, assuming a very focused unmet need and a plan that is properly risk-adjusted and carefully thought out.

While the realities of the reimbursement and payment landscape of this combination pathway remain speculative, I am optimistic that this guidance would promote innovation by incentivizing more developers to solve challenging therapeutic problems with more robust clinical evidence packages.

Briefly allow me to imagine what this future would look like.

Evidence generation is already becoming increasingly sophisticated each year. There have been an increasing number of value assessment papers published on digital therapeutics, just within the past 2-3 years. And more and more stakeholders are having discussions around the nuances of digital therapeutics at important forums like AMCP, Asembia, and the American Medical Association.

In addition to the FDA's involvement in promoting innovation in this category, CMS is also seen doing its part with the recent release of its CY2025 Medicare PFS Proposed Rule. This included the addition of HCPCS codes to "cover and reimburse qualified billing providers for Digital Mental Health Treatments (DMHTs) authorized by the FDA and prescribed or ordered by a physician in conjunction with a behavioral therapy plan," as Michael Pace reports.

All these discussions would naturally lead to an increased understanding of the need to evaluate and pay for treatment solutions differently than disease management solutions. With combination products through the PDURS pathway now in the picture, one or two success stories through this pathway alone may be what is needed to open up the floodgates of capital, given the high competitive pressure that exists in this industry.

Fast forward a few years, with more drug-software combination products in the market due to reduced access barriers, I anticipate more and more key stakeholders gaining comfort and confidence in using, prescribing, and paying for these novel therapies. And this increased comfort and confidence should help accelerate the adoption of standalone, complementary PDTs as well. I don’t foresee a scenario where the standalone PDT category transitions out - as there will still be unique therapeutic use cases where a standalone product may make more sense.

But perhaps the granular details of this vision are best left for another thought piece.

At the end of the day, institutions with established commercial engines may be best positioned to utilize this guidance for the highest potential of positive impact on the healthcare industry. These stakeholders could be pharma manufacturers (regardless of size), or any entity with a portfolio of products in the market. Even the smaller-size biotechs with 1-2 blockbuster assets may be the greatest beneficiaries of this guidance—as long as they possess the capital and agility needed to harness the opportunity and use the first mover advantage to break through the competition.

Regardless, digitizing any portfolio will not only allow manufacturers to differentiate their products but also help them form closer relationships with their patients, develop more engaging treatments, improve patient and provider experience, and ultimately drive better health outcomes. Commercially, this guidance could help build creative defensive moats for their portfolio, drive better cost arguments for in-market products, and extend the value of sunsetting blockbuster drugs.

As more stakeholders realize the value of this opportunity, I expect the PDURS guidance to drive healthy competition in the delivery of therapeutic and economic value, especially in categories crowded with high-cost, me-too products. This catalyst may be what the industry needs to collectively raise the bar of what traditional pharmaceuticals could achieve.

As new tools are made available and new rules are brought into play, the stage is set for digital and pharma innovators to reimagine what could be built in this emerging era of modern digital medicine.