Hello HoH readers!

Welcome to this week’s edition of Healthcare and Innovation at the Crossroads.

During this week, I was back in Berlin for work. Although I enjoy traveling as part of my job, avoiding the hassle of commuting through airports and train stations has its advantages. Being in the office allows me to spend more time working efficiently.

Instead of traveling, I spent my time having productive working sessions with my project teams. As an ESTJ* with a strong E, I enjoy working with a team to develop ideas and advance thinking by building on each other. It's extremely satisfying to see what can be achieved when a committed and diverse team comes together.

Moreover, my wife and I finally managed to have a date night after a while. Juggling two busy schedules while taking care of three kids (aged 9, 7, and 3) doesn't leave much space in the calendar. We found a cool restaurant in Berlin, and if you ever need a recommendation, feel free to hit me up!

Feel free to share your comments and feedback below. I hope you enjoy reading this newsletter.

Take care,

Andre

* In personality psychology, the Myers-Briggs Type Indicator (MBTI) is a self-report questionnaire that identifies psychological preferences in how individuals perceive the world and make decisions.

Akili cuts 40% of workforce, plans shift to non-prescription model and What Does Pear Therapeutics’ Bankruptcy Mean for PDTs? and SmileDirectClub files for bankruptcy

Welcome to the world of Digital Therapeutics (DTx) in healthcare. It's a dynamic combination of technology and healthcare that promises to transform the future of health. DTx are sophisticated software solutions that prevent, manage, or treat various physical and mental conditions. They are based on evidence-based approaches and can complement or even replace traditional medical interventions.

To enter the market, innovators have two main paths to choose from.

The first is a carefully planned approach that involves prescriptions and payer reimbursements. This pathway is marked by rigorous validations and regulatory compliances that ensure DTx solutions are integrated into formal healthcare ecosystems. Medical professionals endorse these solutions, and insurance payers provide support, which leads to greater trust and a wider reach.

The second pathway is direct-to-consumer (DTC), and it's all about autonomy and immediacy. Consumers embrace DTx solutions through a direct engagement approach and pay for them out-of-pocket. This pathway is characterized by agility and consumer choice, and innovations can reach the market more quickly.

Choosing between these two strategic pathways is both a strategic and medical decision. The prescription pathway offers credibility and structured integration, while the DTC pathway provides agility and consumer immediacy.

Let's focus on two stalwarts: Akili Interactive and Pear Therapeutics.

Akili Interactive has emerged as a revolutionary player in the digital therapeutics world. With the FDA's approval, Akili created EndeavorRx, a video game designed to treat ADHD in children. However, despite their best efforts, revenues could have been better, and payers have expressed doubts about the product. In response, Akili is taking a new approach focusing on the consumer: they plan to release a nonprescription version of EndeavorRx by 2024. This new strategy aims to increase access and revenue, hoping to achieve margins of 60%-70% by 2025.

To make this happen, Akili is also making some strategic sacrifices by letting go of 40% of its staff. The strategic shift will allow them to focus on creating a stronger brand and better consumer awareness. Meanwhile, they will continue to offer their prescription product, maintaining a bridge to the therapeutic needs of their clients.

Pear Therapeutics, a pioneer in digital therapeutics, recently faced the harsh reality of bankruptcy. The company ventured into uncharted territories by offering digital prescriptions for challenging conditions like substance use disorders. However, their journey was tumultuous, with many ups and downs. Pear's story highlights the challenges that contemporary digital health companies face. They are met with skepticism from physicians and payers and need help with scaling their products and becoming profitable.

Pear had some commendable milestones in their initial chapters, such as getting FDA approvals for reSET and reSET-O for treating substance use disorder and opioid use disorder, respectively. However, the pricing of their products and a maze of reimbursement challenges made their narrative more complex. They reached a critical crossroads, where, despite their technological innovations, their digital therapeutic applications faced robust scrutiny for adoption and scalability.

Both stories, showcasing successes and challenges, provide valuable insights into the dynamic and fragile nature of the digital therapeutics industry. They represent the journey of strategic transformation, where business models strive to align with market demands, economic feasibility, and therapeutic efficacy. These accounts hold the key to unlocking future developments and serve as a reminder of the importance of being adaptable, persistent, and skilled in navigating the various stages of innovation in digital therapeutics.

Akili draws lessons from Pear Therapeutics' struggles, refining market strategies to navigate industry complexities. Pear's experience highlights the challenges of high costs and intricate reimbursement processes.

Although DTC has its advantages, it also comes with some unique challenges. SmileDirectClub, an innovative treatment model in dentistry that is not a DTx player, has recently been in the news for all the wrong reasons. The company offers at-home clear aligner therapy and has filed for Chapter 11 bankruptcy due to a series of legal battles and economic difficulties. With almost $900 million in debt, the company must secure additional funding by November 23 to continue operations, or it may have to shut down.

SmileDirectClub has been struggling with continuous net losses since its 2019 IPO. It had planned to introduce a premium treatment offering in 2022 to revamp its business model, but with dwindling profits and share values, it now finds itself in a desperate situation. The Chapter 11 filing allows SmileDirectClub to reorganize its capital while retaining control over its business operations.

How does DTx work in Germany compared to the US situation (reflected by the stories about Akili and Pear)?

DiGA is a German health legislation that took effect on December 19, 2019. It aims to make the medical space more accessible by allowing doctors to prescribe DTx apps, just as they would prescribe medications. The DiGA framework regulates all medical devices and digital technologies and governs how these health technologies can and cannot be given to patients in the country. This means that the federal Ministry of Health determines which app costs are covered by the healthcare system. In the German healthcare system, prescribed medication and digital health applications are ultimately paid for by the German healthcare system or insurance (not the patient).

However, for healthcare technology to be prescribable, it must be on an approved list known as the 'DiGA Directory'. Digital Healthcare companies can be included on this list following an assessment phase by the Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte, as it is called in Germany). Being included in the DiGA Directory is a huge opportunity for digital health companies globally since their application will begin being prescribed by doctors across the country, and the German healthcare system will pay for their use.

I won't delve into specifics today, but let me say this: the DiGA process poses particular challenges, and DTx innovators in Germany can attest to that. It offers a straightforward route to reimbursement. However, setting a price with regulators that enables a profitable business and encouraging doctors to prescribe it in the first place remain challenging to achieve.

Germany has a well-established public healthcare system that offers comprehensive medical care to all residents. The system is funded by employer and employee insurance contributions, with heavy subsidies from the German government to ensure that people on low wages or out of work can still access necessary medical treatment. In Germany, it is mandatory by law for every resident to have public health insurance, except for a small percentage of the population with private coverage. Paying out of pocket for medical treatment is rare among residents. It is difficult to establish a business on it.

To summarize everything in a single image…

Solutions offered by companies like Akili, Pear, and SmileDirectClub are highly relevant and have great potential to contribute to the healthcare industry. Although it is still early days for these solutions, many challenges need to be addressed, such as shortages of healthcare professionals and limited access to care. At the same time, technological advancements are opening up new possibilities for treating various conditions. Regulatory pathways and reimbursement listings will become more streamlined, making it easier for these innovative companies to build viable businesses and gain wider acceptance from healthcare providers.

I would love to get your thoughts and comments!

Mental health disorders, impacting over 970 million people globally, are on the rise. A substantial review reveals that physical activity, including variations like walking, resistance training, and yoga, could lessen depression symptoms by 43% and anxiety by 42%, acting faster than medications.

This comprehensive analysis, involving 97 reviews and 1039 trials, showed that short and mid-duration high-intensity exercises are particularly effective, benefitting diverse groups, including pregnant and postpartum women, and individuals with depression, HIV, or kidney disease.

The study underscores the significant role of physical activity in improving mood and mental well-being, offering a potent alternative to conventional drug treatments.

Name: Brunello di Montalcino Bramante Cosimi 2015

Territory: Il Poggiolo Montalcino, 450 meters above sea level

I’ve been to Montalcino multiple times, and each time was nothing short of spectacular. We would travel from vineyard to vineyard, taste wine, and stock up. So many good memories. The good life was bottled.

Grapes: Sangiovese Grosso (Brunello)

Sangiovese Grosso, known as Brunello in Montalcino, is a grape variety celebrated for its robust character, rich flavors, and the exceptional quality of wine it produces, epitomizing the essence of the prestigious Tuscan winemaking tradition.

Tasting:

Dressed in a rad, ruby red, this wine is all about vibing with your senses. It hits you with spicy charisma, wrapping you up in a velvety hug, while the tannins groove between classy and sweet - crafting a sip that’s nothing short of a harmonious fest!

Occasion:

This bottle’s a vibe, destined to spark moments of deep dives, high-fives, and real talks. Gracing your table, it flips the script on meals and chats, turning the usual hangs into epic tales of life’s awesome snapshots. I loved it.