Special Guest: Andrew Matzkin
Andrew is a Partner at Health Advances and co-leads the firm's Digital Health and Health IT Practice
With the new year in full swing, I’m excited to be launching a new series for In Silico. In addition to publishing biweekly articles moving forward, I’ll be interviewing special guests periodically to hear their perspectives on the latest in digital health, and sharing our conversations with all of you.
Today, I’m thrilled to share my recent conversation with Andrew Matzkin, a Partner at Health Advances, a leading strategy consulting firm that focuses exclusively on the healthcare industry. Andrew joined Health Advances in 2009 and co-leads the firm’s Digital Health and Health IT Practice. He is also a Strategic Advisor to the Digital Therapeutics Alliance and has a BA from Yale and an MBA from Harvard Business School.
Scott: Hey Andrew, thanks so much for taking the time. Before we dive in, could you tell us a bit about yourself, your background, and how you got into digital health?
Andrew: I'll keep this short because I'm sure this is the least interesting part. I'm a career consultant and an MBA, and coming out of business school I knew that I wanted to focus on new innovation and technology in healthcare. I spent some time first at Bain and then in 2009 I joined Health Advances and haven't looked back.
A few years into my time at Health Advances, being in the Bay Area, I started to see what was happening with digital health — Rock Health had just formed and the venture dollars were slowly starting to shift from medical devices to digital technology. So I started pushing for us to formalize a digital health practice within Health Advances, which had been focused primarily on the life sciences up to that point. We ended up getting into digital health pretty early, and it took a few years before the dollars really exploded and incumbent companies, especially on the life sciences side, started getting serious. And that's what really opened up a consulting market.
Scott: On that note, what has the trajectory looked like for digital health related consulting and how has it changed over time?
Andrew: So from 2010 to 2015, there was an enormous amount of venture money going into early stage startups, and it took some time for those companies to develop their technology and start to get technical validation. Most of the companies in that period were too small to even think about consulting services. At the same time, the large life sciences companies weren't really thinking about digital seriously yet. There were pockets of individuals who began saying that there's a way to create more value for customers and drive additional revenue through digital, but they were fighting an uphill battle because no one else in their organizations had wrapped their heads around it.
As we got into 2015, we started to have a small but growing number of digital health companies that had matured enough and raised enough money, or in some cases generated enough revenue, to actually think about consulting services. On the life sciences side, incumbent companies also started to get more serious about digital, but in most cases, it was still buried within existing functions rather than being a corporate level initiative. But they were starting to spend money to understand the landscape and map out a strategy, and we started doing a lot of work in those areas. The other important thing that began happening around this time was that big tech companies were getting very serious about healthcare. Since then, things have really taken off, so over time, our work has shifted from the big life sciences companies, who were the earliest people to actually spend some money on digital health consulting, to a more representative mix of all stakeholders.
Scott: When people talk about the exciting potential of digital health, the topic of regulation often feels like an elephant in the room. So I want to start there and get your thoughts on the FDA’s response to digital health to date. What do you think is the most productive thing the agency has done to facilitate innovation in the space?
Andrew: I think that the progress at the FDA in terms of openness and clarity with digital health regulation is one of the most important and positive developments for the field as a whole. I think they deserve a ton of credit. The healthcare system, in many ways, is not set up to accommodate digital, so all of the stakeholders — regulators, payers, providers, and patients — are trying to figure out what to do with digital and how to integrate it into the business of healthcare. I think the FDA has done among the best jobs of that, and they’ve certainly moved faster than payers and providers.
The single most important thing the FDA has done is clarify the regulatory framework for software as a medical device (SaMD) and delineate which kinds of medical software applications will be regulated and which will not (under the general wellness guidance).
There are still some important areas of regulatory uncertainty that the industry is looking for clarity on. One example is how to regulate software updates, especially for applications that can learn and improve over time, like machine-learning algorithms. Another example is how drug-digital combination products should be regulated and what the implications are for product labeling. But the FDA is aware of these questions and is working on them, so I think we'll make lots of progress over the next couple of years.
Scott: From a strategic perspective, do you think digital health companies are generally trying to avoid the need for FDA clearance where possible? Or is there more nuance in how companies are approaching regulators?
Andrew: There's definitely some nuance, and it ultimately depends on the claims you need to make to drive product adoption, and the indications and patient populations you’re targeting. If you can achieve commercial success by making claims that fit squarely in the wellness realm and you’re focused on a low risk condition and patient population, you may not need any regulatory clearances. You can still generate compelling evidence to support your product without ever going through a regulatory pathway, as Big Health has done with Sleepio.
The equation changes if you’re planning to ask payers to cover a product directly — regulatory clearance becomes a really big asset, and in some cases, a prerequisite, for coverage. FDA clearance also becomes more important in higher risk indications and vulnerable patient populations. As an example, it’s hard to see a wellness pathway being viable for products intended for pediatric patient populations, or for a condition like clinical depression, where there’s a risk of suicidality.
I think smart management teams are nuanced about their regulatory strategy. Some companies have also pioneered phased approaches, where they start with a wellness type offering, bring it to market as a minimum viable product, get traction, generate data, and then use that data to pursue clearance for a more sophisticated, medical version. I think that's a really promising approach, and you can look at Happify as one example, or Click Therapeutics as another.
Scott: I want to focus for a moment on the group of digital health companies that have decided to pursue regulatory clearances, and talk about their business models. We’ve seen a variety of different approaches, from cash-pay models to reimbursement coverage. What do you make of all this, and what are the biggest roadblocks preventing digital therapeutics from getting covered?
Andrew: First of all, it's important to remember that there's still only a handful of prescription digital therapeutics with clearances on the market, and they've only been on the market for a year or two, so we're very much figuring out what this looks like. So far, it's been a slow, I would say, painful process of going payer by payer and trying to find a way for them to cover the product.
That’s because there’s a lot of open questions around how digital therapeutics should be reimbursed. Should they be covered under the pharmacy or medical benefit? What kind of pricing is appropriate? What does the patient eligibility look like? How do the logistics work — how do you actually process prescriptions, dispense treatments, and submit claims?
Given these challenges, I think it's really interesting that Pear Therapeutics has decided to pursue a direct to consumer, cash-pay model with Somryst. And they've got a system set up with a telemedicine partner that writes the prescriptions and refers you to a digital pharmacy which can actually do the dispensing. But this isn’t their end game as the cash-pay price point is very high ($899). It's more of a stop gap to get some real world data and improve the product as they build towards the big end market, which I believe is broad coverage by payers and distribution at scale through physician prescriptions. That's going to be a long road and we're going to learn a lot in the next two or three years about how scalable that model is.
One topic that doesn't get nearly enough attention in this space is where the price points for digital therapeutics will land. What are payers ultimately willing to pay for these products? Companies that have developed products backed by rigorous evidence and regulatory clearances will want higher prices — not drug-like prices, but certainly much higher than typical App Store prices. Will digital therapeutics end up costing several hundreds or even thousands of dollars, or will they end up costing only a couple hundred? And if it's the latter, what does that mean for the prescription digital therapeutic model? You can't go through a three or four year development process with phase one, two, and three clinical trials if the price points at the end of the day aren't high enough to sustain that.
Scott: That makes a lot of sense, and we’re certainly starting to think about these questions with the digital therapeutic we’re developing at Luminopia.
Scott: I want to switch gears a bit and talk about the burst of digital health activity that has come during the COVID-19 pandemic. How has the past year accelerated digital health adoption and which of the changes we’ve seen do you think are temporary and which are here to stay?
Andrew: I think some of the impact was pretty obvious; the shift from in-person to virtual visits was dramatic and rapid, and that was facilitated by temporary changes in coverage and reimbursement rates. I think virtual visits are very much here to stay — although some aspects of reimbursement might tighten after the pandemic ends, there's no question we've learned that a lot of healthcare interactions don't need to happen in-person. A critical point is that clinicians have realized this and actually prefer virtual visits in a lot of cases, and now they’re going to be an advocate for virtual visits in a way that they never were before.
Another area that's been interesting to follow is remote patient monitoring. Even before COVID-19, Medicare and commercial insurers were starting to enable reimbursement codes and coverage for remote patient monitoring with chronic care management. The pandemic has significantly accelerated provider awareness and usage of these codes (although we're still waiting to see data from Medicare on exactly how much adoption has increased). There are also a number of digital health companies taking advantage of this trend and getting traction developing provider facing tools that help them implement remote patient management and, more importantly, bill for it.
The third area is what has happened in mental and behavioral health specifically. Early on in the pandemic, FDA announced that they were going to apply enforcement discretion for digital therapeutics targeted at psychiatric conditions, and a whole bunch of companies have taken advantage of this window to get something out on the market. It’s been enormously valuable for these companies to get feedback from users and begin building an evidence base, but maybe more importantly, to expose clinicians to these tools and let them see the value. That’s been true on the employer and payer side of the world, with companies like Lyra and Ginger but also on the clinical side of things with virtual therapy and CBT-based digital therapeutics. I think that’s another trend that’s here to stay.
Scott: I have to thank you again for taking the time Andrew. It’s been fun and insightful to hear your perspectives on the latest in digital health, as someone who’s seen the industry from all angles, and I’m excited to watch your team at Health Advances continue to push the field forward.
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