One of the earliest formularies on record is the 1816 Pharmacopoeia of the New York Hospital, which consisted of a simple list of all the drugs carried by the hospital pharmacy.1 Since that time, formularies have evolved significantly in both role and function. In mid-May the formulary moved another step up the evolutionary ladder with Express Scripts’ announcement that it would release a formulary focused on digital health in 2020.2 The goal of this new formulary is to ensure the safety, effectiveness, and usability of digital health technology tools available to Express Scripts’ members.
Available in 2020, the Digital Health Formulary will be a curated list of technology and software-enabled applications and devices that help patients prevent, manage, or treat a medical condition.3 Express Scripts states that each digital health solution included on its formulary must first demonstrate therapeutic value, effective usability, and stringent security and privacy standards; it must also be cost effective. With this new formulary, digital health now has an entry point into the managed care industry. But is digital health ready for this level of scrutiny?
Measuring Digital Health Effectiveness
Of foremost concern is whether digital health companies will be held to the same standard of randomized clinical trials to demonstrate their products’ therapeutic value. Consider that in 2017 the top 20 pharmaceutical companies invested 20.9% of topline revenues into R&D, amounting to $97.2 billion.4 In order to compete, the digital health industry would need to see its 2018 investment of $8.1 billion increase by 12 times to match pharma’s capability.5
Obviously, a 12-fold increase is unrealistic. Formulary decision makers will need to find a new middle ground on how best to clinically evaluate digital health solutions. One possibility is adapting the iterative research and assessment approaches used within the engineering and computer science fields where interventions undergo multiple cycles of development and optimization.6 These approaches, coupled with robust clinical data collection and patient-reported outcomes, can enable development of a framework that can support the dynamic nature of digital health solutions.
Assessing Usability, Security, and Privacy
Along with new effectiveness frameworks, the industry will need to grapple with usability, security, and privacy. While these components are not new, the degree of skill needed to assess them is. As a result, managed care organizations will need to invest to ensure they promote solutions that patients want to use while also minimizing their risk. Unfortunately, digital talent within payers is in short supply, being typically attracted to technology companies or health tech startups.7 As digital health companies engage payers, it would serve them well to explore whom they can collaborate with to ensure a fair and competent assessment.
An important catalyst in advancing digital health solutions is the FDA’s Software Pre-certification Program. In short, the FDA believes that software is different than traditional medical devices because it is updated frequently; therefore, the best way to ensure that safe and effective software products reach the market in timely fashion is to shift agency scrutiny from review of a product to review of the digital health company. The agency’s theory is that a trustworthy software developer is likely to put out products that meet its standard.8
Economic Value of Digital Health Products
Once through the assessment gauntlet of effectiveness, usability, privacy, and security, we are left with the economic review. Perhaps the most important point to assess is also the least defined. In its press release, Express Scripts describes “cost effectiveness” as pricing in-line with the effect a solution will have on an intended medical issue. While rational, it leaves the door open to variances depending on how one defines the population and the extent of effect. In order to blunt the potential for large swings in cost and utilization, payers could turn to their fee-for-service experience and shift reimbursement to a function of effect obtainment. In short, payers may pay for solutions that work and nothing for solutions that don’t.
As digital health companies begin to summit the managed care mountain, they should realize that they are only halfway through the journey. The Digital Health Formulary represents a market access entry point; however, success will be determined by the ability of digital health companies and products to express their value. As for Express Scripts, it can enjoy first mover status and with it the potential to share the digital health market and establish new revenue streams.
References:
1. Summers KH, Szeinbach SL. “Formularies: The Role of Pharmacy-and-Therapeutics (P&T) Committees.” Clin Ther. 1993;15(2):433-441.
2. Express Scripts. “Formulary information.” https://lab.express-scripts.com/about/formulary-information. Accessed June 11, 2019.
3. Express Scripts. “Express Scripts Simplifies Digital Health Technology Marketplace for Consumers and Payers [press release].” https://www.prnewswire.com/news-releases/express-scripts-simplifies-digital-health-technology-marketplace-for-consumers-and-payers-300851128.html. Published May 16, 2019. Accessed June 11, 2019.
4. LaMattina J. Pharma “R&D Investments Moderating, But Still High.” Forbes. https://www.forbes.com/sites/johnlamattina/2018/06/12/pharma-rd-investments-moderating-but-still-high/#7e52d9a76bc2. Published June 12, 2018. Accessed June 11, 2019.
5. Day S, Zweig M. “2018 Year End Funding Report: Is Digital Health in a Bubble?” Rock Health https://rockhealth.com/reports/2018-year-end-funding-report-is-digital-health-in-a-bubble/. Accessed June 11, 2019.
6. Murray E, Hekler EB, Andersson G, et al. “Evaluating Digital Health Interventions: Key Questions and Approaches.” Am J Prev Med. 2016;51(5):843-851.
7. Gilbert G, Fernandes LA, Sawant A. “Digital is Reshaping U.S. Health Insurance—Winners are Moving Fast.” McKinsey & Company. https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/digital-is-reshaping-us-health-insurance-winners-are-moving-fast. Accessed June 11, 2019.
8. U.S. Food and Drug Administration. “Digital Health Software Precertification (Pre-Cert) program.” https://www.fda.gov/medical-devices/digital-health/digital-health-software-precertification-pre-cert-program. Published May 29, 2019. Accessed June 11, 2019.
