When I told colleagues mid-way through my rather standard pharma career that I would move laterally into our emerging Digital Health function to a role, remit, and structure that was yet to be defined, I encountered a lot of well-meaning skepticism.
In their eyes, digital health is certainly seen as intriguing, but it carries a somewhat mixed reputation.
Despite its considerable hype and media omnipresence, there are only a small number of success stories out there, and tangible examples from big pharmaceutical enterprises are especially few and far between.
In this article I address some of the most prevalent concerns that big pharma holds with respect to digital health, and the implicit question behind: is this something worth persisting with?
Myth 1: So much investment, so little to show for!
Most large pharma companies have already invested significantly into digital health, yet few efforts ended up having a tangible impact for patients at scale.
This is not for a lack of trying, since there is much activity and enthusiasm across the pharma industry in this space.
In my company and others, early-stage solutions and proof-of-concepts (PoCs) abound.
This proliferation at the beginning of the innovation process seemed to have led to the expectation in-house that conquering this field would be fast, straightforward, and comparatively economical in relation to the molecule business.
Yet after numerous failed or imperfect attempts to move projects past PoC, we are now waking up to the reality that it is anything but.
In digital health, it is quite easy to get started, however few projects manage to go the distance. The move from PoC to launching at scale is particularly tricky.
At this stage the challenge turns from technical (can this work?) to strategic (which markets, customers, and business model, and what organisation do we need to build to achieve this?).
It requires a different kind of team and a serious commitment to building infrastructure. The initiative also becomes more visible externally, when healthcare professionals and patients start to get involved.
Suddenly teams and senior leadership are faced with decisions that are infinitely more complex, consequential, and resource-intensive —especially (but not only) for a large pharmaceutical enterprise who has a lot at stake and needs to weigh and align the objectives of the new and the established business at every step. In the face of such complexity many efforts falter.
Most pharma companies overinvest at the early stages of the innovation process (funds, focus, and commitment) and underestimate what it takes to build, launch, and operate those solutions at scale.
To boost the success rate of internal digital health efforts reaching patients at scale, there needs to be a deliberate consolidation of efforts after PoC and a strong commitment from executive leadership to build up the required infrastructure for a narrow lineup of initiatives.
Myth 2: There are so many solutions out there already, can we not just leverage those?
It’s important to distinguish wellness or engagement solutions, which are ubiquitous, from regulated medical-grade digital products (known as Software-as-Medical-Devices or SaMDs).
These can look the same to the lay observer, yet they are as different from one another in their effectiveness, sophistication and evidence requirements, as a toy is from a pacemaker.
Creating and scaling innovative consumer technology is a challenge in itself, but once we enter the arena of digital medical devices, the endeavor becomes 10-100x more complex and expensive.
Developing and commercialising such SaMDs requires substantial R&D, clinical evidence, regulatory submissions, global and in-country infrastructure, custom operating procedures and certifications, an expert workforce, and large-scale capability and ecosystem building inside and outside the company.
Such high barriers to entry are precisely why the healthcare sector has thus far resisted the large-scale digital disruption seen in other industries like media and travel.
Bringing a digital health product into clinical care at scale is a feat that only a handful of companies have achieved, mostly outside of big pharma.
Those that are now thriving had the advantage of significant VC funds, a singular focus, and permission to fail and learn fast, giving them the ability to optimise for speed, and yet they still needed the better part of a decade to get where they are today.
Looking at the leading digital health companies of our time, we also realise that their revenues are still at a moderate level.
Big pharma can and should look to partner externally where quality digital health players are available, however in many disease areas these remain elusive and also may have other strategic priorities.
Myth 3: Digital Health will never make money!
It is certainly fair to acknowledge that it will take time for digital health companies to start generating the kinds of revenues that pharma is taking for granted when it comes to its medicine blockbusters.
However, specifically in the area of regulated medical software, we see clear reasons to believe that eventually such products will be able to bring in significant profits.
Pear Therapeutics, a frontrunner in the digital therapeutics space, went public in late 2021 at a valuation of $1.6bn and sells a three-month course of its insomnia app Somryst for $899.
In Germany most of the digital therapeutics that have been vetted by regulators are priced at €400-500 per course.
It is easy to imagine that, after an upfront investment into development and infrastructure, on a global scale such high margin products could evolve into very interesting businesses.
Myth 4: Tech companies are so much better at this!
It is important to note that such challenges are not a phenomenon exclusive to digital health, but instead extend to any tech-powered movement seeking to disrupt established industries.
VC-backed tech startups are infamously reliant on ultra-deep pockets and patient investors accepting long-term negative profit margins as the price to pay for winning the race to market.
Unicorn contenders and their backers are firm believers in achieving scale first, profit second.
Uber, despite launching over a decade ago, has only last year reported its first profitable quarter ever on an adjusted basis (Uber’s and key rival Lyft’s operations have yet to become profitable on a net basis).
Yet almost no-one would challenge the notion that Uber and Lyft are successful businesses.
We in pharma have to adjust our expectations that disrupting an industry as regulated, fragmented, and sensitive as healthcare will take time.
We also need to recognise that such high barriers to entry are actually a good thing.
Much like in pharma, for those that persevere, blue ocean markets await with lower levels of competition and near-infinite potential. Stamina, however, is of the essence.
The truth: It’s still going to take a lot more time, funds and effort
Despite early successes and with all the promise such solutions hold, it’s important to recognise that the Digital Health industry is still nascent, digital medical products only exist for a handful of years and the regulatory, reimbursement and data privacy frameworks have yet to catch up.
Many health ecosystems are not ready to make this a clinical reality yet. Some maturation can be facilitated through the companies in the space, but much has to develop organically.
On a few occasions, regulatory and data privacy frameworks have arguably moved in a less favorable direction. Sometimes it’s a case of two steps forward, one step back.
In Germany, the pioneering reimbursement pathway for digital health products (DiGa) is showing early promise and offers a blueprint for other nations. In one year, the 20 approved solutions were prescribed 50’000 times and €13 million were reimbursed by insurers.
Yet at the same time, everyone from the insurers, healthcare providers, and digital health companies are critical of their early experiences with DiGa.
Many StartUps entered the DiGa process, only to then voluntarily withdraw their submissions, often because of a perceived prohibitive evidence bar.
It’s also important that reimbursed doesn’t equal prescribed; in Germany only 4% of providers are currently prescribing digital solutions, due to a mix of unawareness, inexperience, and skepticism.
Opting out of digital disruption is not an option; our choice is in how to shape it
None of these early hiccups make the digital disruption of healthcare any less inevitable.
But it also shows that transformation of such a complex, high-stakes, and contested industry will take a long time to complete and we are going to spend many years moving through the ‘messy middle’ of it.
The real challenges in digital health are not technological, but healthcare system-related, and maturation will take time and concerted effort by everyone in the field.
Those on the pharma side skeptical of our investment into digital health I invite to embark on a time travel back a little more than a century, to 1898, a time when the industrial revolution changed the face of Europe and disrupted every single trade and profession beyond the imaginable.
A young, visionary entrepreneur from the small town of Basel, Switzerland, after buying and failing to make a local drug factory profitable, took a step back to imagine how those emerging technologies and infrastructure could be leveraged to improve how people managed and treated diseases, not just in his hometown, but all around the world.
Traditional medical practices of the time consisted primarily of symptomatic treatment, such as bloodletting, blistering, and high doses of mineral poisons.
Instead Fritz Hoffmann believed medicine was about to undergo a major transformation and that the future of healthcare lay in the standardised, industrial manufacturing and worldwide distribution of medicines.
I am certain many of his contemporaries thought he was utterly mad. Early on the young company faced several crises, but continued to invest in fast-paced international expansion.
Roche and its peers persisted. And the rest, as they say, is history.
The article is reflective of the author’s personal opinion and not representative of views of the company she works at.
