Navigating the Minefield: How to Unlock the Potential of Digital Therapeutics Through Clinical Trials

In yesterday's“Triple Growth Rate and Four Major Challenges! Digital Therapeutics Clinical Trials in Progress”In this article, we provide a detailed overview of the current status of clinical trials for digital therapeutics in China and highlight some of the key challenges faced.

So, in the face of this “minefield” before us, how can the digital therapeutics industry clear its critical bottlenecks? VCBeat (WeChat ID: VCBeat) has invited diverse stakeholders from across the industry to share their perspectives, synthesizing the essence of their insights into this article in the hope that it will serve as a reference for the sector.

Clinical trials for digital therapeutics are so arduous that, as a matter of conventional thinking, we inevitably wonder at this juncture whether it is possible to streamline this process or even exempt it from clinical trials. In theory, such feasibility does indeed exist.

According to the “Measures for the Administration of Medical Device Registration and Filing” promulgated in August 2021, once a product is classified as a medical device, clinical evaluation is required, except in very few cases where it is exempt. Clinical evaluation comprises two pathways: equivalence comparison with predicate devices and clinical trials. Notably, neither the exemption from clinical evaluation nor the equivalence comparison pathway within clinical evaluation requires the conduct of clinical trials.

For medical devices exempt from clinical evaluation, the "Catalog of Medical Devices Exempt from Clinical Evaluation" released in October 2021 and its subsequent updates clearly stipulate such devices, which are basically divided into two scenarios.

One category comprises medical devices with well-understood mechanisms of action, finalized designs, and mature manufacturing processes, where same-variety devices have been marketed and used clinically for many years without records of serious adverse events and without changes to their conventional intended uses; the other category includes those for which safety and effectiveness can be demonstrated through non-clinical evaluation.

As there is currently no official definition or classification for digital therapeutics medical devices, it cannot be ruled out that certain types of digital therapeutics may be covered by the Catalogue of Medical Devices Exempt from Clinical Evaluation and its subsequent updates.

If a digital therapeutic is not included in the catalog of devices exempt from clinical evaluation, the registration application must undergo clinical evaluation. However, if equivalence can be demonstrated by analyzing and evaluating clinical literature and clinical data of similar medical devices to prove the product’s safety and effectiveness, clinical trials may not be required.

However, the pathway for comparison with products of the same variety is also not easy to implement.

“First, it is necessary to obtain data on predicate devices of the same variety. When determining substantial equivalence between the subject device and the predicate device, assessments must be conducted in terms of basic principles, structural composition, performance indicators, and scope of application. If legal authorization can be obtained, a comparison with the predicate device may be feasible. However, in most cases, such data constitute trade secrets and are difficult to acquire,” Fang Qiuxue, Marketing Director at SLANHEALTH, told VCBeat.

“Secondly, it is necessary to demonstrate the differences between products. In theory, any difference between the product under application and products of the same variety may affect its clinical risks and benefits; therefore, identifying all differences and providing corresponding justifications poses a significant challenge. Finally, there is the collection of relevant clinical data. Generally, completed clinical study data are often difficult to obtain; more commonly, clinical literature data on products of the same variety are collected.” She stated.

It is evident from the above discussion that, provided specific conditions are met, regulatory approval can indeed be obtained without conducting clinical trials. This allows companies to save the substantial costs and extensive time associated with clinical trials, thereby accelerating product market entry.

Nevertheless, even if approval is secured through exemptions from clinical trials after considerable effort, these products will still face skepticism from various quarters. “Some entrepreneurs from non-medical backgrounds may believe that the clinical value of their products does not need to be demonstrated, especially since certain Class II medical devices can also obtain approval without clinical trials. However, as investors, we remain highly focused on the first major hurdle for any product: whether it possesses sufficient clinical value. This distinction determines whether the underlying technology is pseudoscience or genuine science, unless the principle it employs has a long history and has already been proven effective,” stated Liu Xiao, Executive Director at YuanBio Venture Capital, in a previous interview with VCBeat.

VCBeat believes that, from the perspective of individual enterprises pursuing profit maximization, opting for exemption from clinical trials is understandable and compliant with laws and regulations. However, for the digital therapeutics industry, which is still in its early stages of development and where most niche sectors still need to demonstrate their value, such an approach may be premature.

“I believe that for digital therapeutics, the balance must tip decisively toward efficacy and quality. Why? Traditional interventions have all been validated and are widely trusted. Digital therapeutics, however, are not traditional; people are prone to skepticism about their effectiveness simply because they have not experienced them firsthand,” said Qin Lu, CEO and Founder of Fanju Technology.

“The current ‘hype’ around digital therapeutics is still largely confined to marketing, which is distinct from large-scale clinical application. If a significant discrepancy between actual outcomes and promotional claims emerges during real-world use, it could trigger an even stronger backlash. I believe every digital therapeutics company should embrace this sense of responsibility and prioritize the healthy development of the industry. We must ensure high quality so that digital therapeutics can truly deliver therapeutic efficacy,” she added.

It is not difficult to see that clinical trials are crucial for digital therapeutics, yet they pose significant challenges. Industry veterans have offered their insights on how to successfully conduct these trials and lay a solid foundation for future development.

First, digital therapeutics companies need to re-examine themselves, truly regard themselves as medical practitioners, and strive to make up for their shortcomings in the medical field.

Liu Xuan, Vice President of Ningdong Medical Technology (Shenzhen) Co., Ltd., stated during the discussion: “A basic understanding of regulatory requirements for digital health reveals that they are essentially equivalent to those for medical devices. Quality inspection, product characterization, classification, and clinical evaluation are all indispensable. Digital therapeutics companies must position themselves as genuine healthcare enterprises, rather than viewing themselves primarily as internet or IT companies. The healthcare industry has very specific regulations regarding data security, patient privacy protection, product stability, corporate quality management, and standardized operating procedures (SOPs).”

“Looking back, you will find that a successful digital therapeutics company must be built on a team that combines medical experts with digital science specialists. In terms of overall architecture, it must largely align with what we understand as the traditional framework for medical device companies. Only with such a framework in place can there be a mechanism for dialogue with regulatory authorities; otherwise, there is no solid basis for engagement. I believe a significant issue is that many startup digital therapeutics companies still position themselves as internet startups or algorithm companies, rather than as healthcare enterprises. Consequently, there is a gap in their communication with regulators.”

However, this challenge is substantial, as the scarcity of medical professionals permeates nearly every aspect, including product development and clinical development. Consequently, digital therapeutics startups find it difficult to assemble complete teams in their early stages. Nevertheless, companies must still strive in this direction.

Qin Lu also agrees with this view. She believes that companies entering the digital therapeutics industry from other sectors can be divided into two categories. The first category includes those with prior experience in the healthcare industry, such as companies transitioning from the field of healthcare informatization to digital therapeutics. Due to their existing understanding of healthcare, these companies find the transition relatively easier, requiring only the recruitment of skilled digital science talent, which is comparatively more accessible. The second category comprises internet and software companies without prior healthcare experience. These entities need to build integrated teams, a process that presents greater challenges.

“When friends visit our company, they often discuss with me whether the visual fidelity of our products could be higher, whether the interaction could be simpler, or whether the controllers could be better optimized. In reality, these points do not address the core medical considerations. The key to digital therapeutics lies in the product’s efficacy. For example, we designed a test scenario for children featuring a light-blue classroom. This design choice was made to ensure therapeutic effectiveness and is the result of multiple rounds of fine-tuning. We needed to consider whether the environment might trigger agitation in the subjects and aimed to avoid inducing conditions such as epilepsy. Therefore, the entire development process of digital therapeutics does not follow a purely software-development mindset.”

“We actually spent very little time discussing software development strategies. The vast majority of our discussions focused on questions such as: What feedback will a pediatric patient provide in response to a behavioral task? Which neural pathways can be stimulated? And what therapeutic outcomes can be achieved? To use an imperfect analogy, if your team includes ten software professionals, you need at least twenty medical professionals. Only with such a team composition can you develop genuine digital therapeutics; otherwise, you may merely be creating ordinary software,” she stated.

Secondly, digital therapeutics companies must recognize that the healthcare industry operates on long cycles, requiring sustained long-term investment and carrying the risk of failure. Enterprises must have the patience to commit to the healthcare sector for the long haul and be mentally prepared accordingly.

Qin Lu candidly acknowledged a significant difference in product development cycles between software and internet companies versus traditional medical enterprises. The software industry evolves rapidly, typically operating on a weekly basis, with products potentially undergoing multiple iterations within six months. In contrast, the medical industry operates on an annual cycle, and those unprepared for a protracted effort will find it extremely difficult to adapt.

Taking Fanju Technology’s digital therapeutics product as an example, it underwent an extensive design and R&D process. In the early stages, it was necessary to define the cognitive task training protocols and continuously calibrate them for the targeted neurological disorders. Ultimately, this resulted in a scenario capable of eliciting responses from specific neural circuits to the tasks, thereby achieving the therapeutic training objectives.

“During the clinical trial phase of product development, we must conduct training with pediatric patients for at least three months for every minor adjustment in each scenario to capture changes in their brain nervous systems before and after training, thereby confirming whether the training is effective. This process involves the collection of biological data from the patients, such as electroencephalogram (EEG) and magnetic resonance imaging (MRI). If testing demonstrates efficacy, the scenario can be standardized and further optimized to form the final product.”

“However, generally speaking, this process cannot be that fast. It is unlikely to hit the mark right away; instead, continuous adjustments to the scenarios are required based on feedback—for instance, identifying where stimulation can be intensified to elicit stronger responses from specific neural circuits. After each adjustment to the scenario design, another three months of trials are needed to evaluate the outcomes. Everything is highly cumbersome, from recruiting pediatric patients to other aspects. Our company has been established for ten years. We have focused on digital therapeutics since 2016, when we developed our first product prototype. Yet after all these years, we have only launched three products, two of which are currently undergoing regulatory approval. Developing a high-quality digital therapeutic is indeed a challenging endeavor; it is not as simple as designing a scenario as one might imagine.” Using her own products as an example, she urged digital therapeutics companies to maintain sufficient patience.

Liu Xuan also explained that clinical trials are a scientific process, and the results may or may not meet expectations; therefore, companies need to be mentally prepared. “There are far too many instances where clinical trial outcomes fall short of expectations. Favorable internal test results do not guarantee positive outcomes in clinical trials. This makes pilot studies and preparatory work particularly important.”

“Because clinical trials are conducted under strictly defined, managed, and controlled protocols. While theoretical outcomes may be favorable, deviations can occur during management—whether in study design or execution processes—and even slight deviations may lead to unsatisfactory results. Digital therapeutics companies entering the clinical domain must work closely with clinical teams, adhere to the scientific standards required in clinical research, and carefully design and implement their studies.”

Furthermore, digital therapeutics companies must establish a robust evidence-based foundation from the outset to ensure their products genuinely meet clinical needs and achieve successful translation, thereby preventing early strategic missteps.

Fang Qiuxue believes that digital therapeutics should prioritize an evidence-based foundation targeting specific indications from the outset, with clearly defined clinical starting and endpoints, as well as demonstrated clinical efficacy. “Currently, I am reviewing domestic literature, and clinical studies on digital therapeutics, including double-blind trials and controlled trials, are relatively scarce. In international literature, some digital therapeutic products for language-related disorders require at least four years to conduct double-blind, evidence-based studies. This demonstrates that proving the efficacy of digital therapeutic products, as well as gaining acceptance, requires a solid evidence base. If we merely make claims without such support, any product or medical technology entering the market or healthcare systems will face greater challenges.”

“Furthermore, from a product development perspective, it is essential to integrate clinical needs, patient experience, and evidence-based medicine from the outset. Efforts should be made to avoid changes during the period between the completion of R&D and regulatory submission, as such changes can lead to risks including prolonged timelines and increased costs. As a platform service provider, we frequently encounter similar issues when serving our clients. Therefore, functional planning for the product should be thoroughly considered at the initial stages of medical strategy formulation and product design.”

Liu Xuan pointed out that many digital therapeutics are technology-driven, originating as bright ideas from engineers. However, due to insufficient communication with clinical practice during the early design phase, these products often fail to align with clinical needs and cannot be seamlessly integrated into the overall diagnosis and treatment workflow, potentially even creating “pseudo-demands.” Therefore, she believes that digital therapeutics companies should engage in more extensive communication with clinicians and conduct basic market research before making significant early-stage investments.

“China is not short of engineers; there are many top-tier ones. However, digital therapeutics companies are fundamentally healthcare companies, and their challenges cannot be discussed in isolation from clinical settings and medical terminology. This should be taken into account from the outset: specifically, which disease area are you targeting? How do stakeholders in this field—from leading experts and department heads to primary care physicians—perceive your product? Is your design intended to assist them or create obstacles? To enter a specific segment of the care continuum, you must engage with the professionals working in that segment, which can help us avoid many detours.”

Finally, digital therapeutics is clearly an emerging industry, but the purpose of innovation is to better achieve efficacy and safety, not to innovate for the sake of innovation. Incremental innovation may be a wiser choice.

Liu Xuan emphasized that digital therapeutics companies need to understand their products and select a regulatory framework that facilitates dialogue with authorities, integrating their products within this framework rather than pursuing innovation for its own sake or making their offerings overly unconventional. “Regulators are most averse to reviewing submissions based on unfamiliar conceptual frameworks. Companies can adopt a more aggressive evidence-based approach within the general paradigm of medical devices, while clearly defining their product within the appropriate classification. It is essential to articulate the nature of the product clearly in formal documentation using standard medical terminology.”

“In clinical trials, the situation is much the same; many approaches can be adapted through cross-disciplinary learning. The indications for your product certainly preexist and do not represent a novel disease. Therefore, there must be corresponding traditional products available for comparison. In fact, it is more critical to clarify exactly what type of product you are developing and which type of trial should be conducted. Of course, digital therapeutics must incorporate your own innovations. This places considerable demands on either your internal team or the Contract Research Organization (CRO). Overall, however, innovation should be articulated through the lens of medical product development. This applies equally to regulatory approval and clinical trials. You need to align your approach with the standard structure of conventional medical products, thereby engaging in routine compliance-related dialogue.”

"This requires team members with a medical background, particularly those with hands-on experience in product operation. Meanwhile, CROs also provide certain guidance, such as on specific indications, product functions, and their roles in medical practice. Once these issues are clearly defined, it signifies that the corresponding product design strategy is gradually becoming clear. 'It is not to say that consulting a CRO will automatically lead to success; you may still need to make some adjustments to identify what is lacking. In fact, the preparatory work in the early stages requires considerable time,' she stated."

From an industry-wide perspective, even biopharmaceutical companies with substantial financing volumes find it challenging to establish a comprehensive framework for medical product development and clinical trials. For digital therapeutics companies, partnering with a suitable CRO may be a viable option.

Liu Xuan stated to VCBeat, “This industry has matured, with numerous CROs and CXOs available. I recommend that companies actively collaborate with them. Experienced institutions are highly professional. While you may perceive their services as expensive, they are likely far more cost-effective than building an in-house team, and offer a higher probability of successful implementation.”

“Seek consultation from enterprises with substantial experience. Although digital therapeutics (DTx) projects are relatively asset-light, the process—from designing the framework to communicating with reviewers—is far from straightforward due to their unique nature. Indeed, many such products have no exact precedents worldwide. In this context, experience becomes crucial. If you can identify suitable partners and engage in close, proactive collaboration to implement key tasks step by step, you will be better positioned for success. For instance, assess whether your clinical resources are sufficient and whether patients are willing to participate in clinical trials. By addressing these practical considerations, experienced institutions can also advise on whether product adjustments are needed and in which direction, thereby helping the project quickly get on track.”

She remarked that the challenges facing digital therapeutics are increasingly similar to those encountered by innovative biopharmaceuticals: “If we do not have an in-house team dedicated to research, we will face the same predicament that plagued the biopharma sector over the past 5–10 years—a bottleneck that seems impossible to overcome. The obstacle is not necessarily due to inferior products; rather, it often stems from selecting inadequate CROs or having an underperforming clinical team. Therefore, I recommend partnering with companies that have proven hands-on experience in product development and, crucially, demonstrate patience for smaller-scale projects. Although the financial investment may be lower, the complexity involved can be even more troublesome than that of larger projects.”

“Of course, many companies still find themselves lost and unsure of what to do even after engaging a CRO. That is indeed the case, as achieving successful translation is quite challenging. However, one should not give up eating for fear of choking—that is, avoid working with CROs simply due to high costs and uncertainties. Even established pharmaceutical and medical device companies with robust medical and clinical teams often seek CRO consultation. Healthcare is a heavily regulated industry, and it is no easy feat for a young company to develop a product. If you fail to make progress, what you waste is time—and for startups, isn’t time the most critical resource?” she added.

The good news is that, compared to a few years ago, CXO providers in the digital therapeutics sector have successfully implemented numerous projects and have become more mature. Companies such as SLANHEALTH, Xunjia Technology, and Wuhan Tacro Technology Co., Ltd. have all established their presence in the field of digital therapeutics.

These institutions have gained some understanding of digital therapeutics (DTx) and have employed various measures to address certain pain points within the field. SLANHEALTH has evolved from an initial DTx product company into one of the few contract development and manufacturing organizations (CDMOs) in China specializing exclusively in digital therapeutics, completing real-world studies involving up to 40,000 cases. With profound insights into the challenges associated with DTx clinical trials and even the entire development lifecycle, SLANHEALTH has proposed targeted solutions.

Fang Qiuxue stated that the end-to-end development of digital therapeutics is a systematic endeavor, with each stage—from mechanism discovery, design and development, and validation of efficacy to clinical trials and product registration and approval—being closely interconnected. “Taking product registration as an example, the choice of jurisdiction should not be based solely on cost; rather, it requires a comprehensive evaluation of multiple dimensions, including resource alignment in the target region, the ease of regulatory communication, and the timeline for approval. Among these, establishing smooth communication channels with regulatory authorities is essential. In assisting clients with registration efforts, we recommend suitable jurisdictions based on the aforementioned considerations and engage in extensive preliminary discussions with regulators regarding the product.”

Addressing the issue of missing data that digital therapeutics clinical trials may face, Fang Qiuxue stated that data collection is completed through automated methods, such as wearable devices. “If patients are required to manually enter data, patient compliance issues and data missingness become very high over the long term. Traditional institutions rarely consider these problems, which creates significant obstacles for startup digital therapeutics companies in conducting clinical trials.”

Furthermore, she believes that a reputable institution must also establish a professional follow-up team. This is because, in addition to convenience, adherence to digital therapeutics depends on the intervention provided by such a dedicated follow-up team. Such a team can significantly reduce patient attrition rates and greatly facilitate the validation of clinical trial outcomes.

“These were pain points we identified when we were still a product-focused company. As our business gradually transitioned toward the CDMO model, we systematically addressed and improved these areas. For instance, the establishment of an out-of-hospital follow-up center has significantly enhanced patient compliance in clinical trials. We have also collaborated with smart wearable device manufacturers and IVD (in vitro diagnostic) equipment companies to streamline data collection in digital therapeutics clinical trials, thereby addressing issues related to patient dropout rates and the convenience of data acquisition,” she stated.

According to VCBeat, the industry generally believes that in addition to digital therapeutics companies needing to strengthen their core competencies, address weaknesses, and conduct robust clinical trials, changes in the external environment are also required. Such changes are gradually taking shape, and results may be seen soon.

Qin Lu stated that it will take time to explore and establish guidelines or standards tailored for clinical trials of digital therapeutics. “During our communications with regulatory authorities, they have used our case as a sample to inform future reviews or serve as a reference for guideline development. This process requires time and cannot be undertaken arbitrarily. We cannot make impulsive decisions about what to modify and what to leave unchanged. I believe that as more cases accumulate, positive outcomes will emerge. Let’s allow some more time for this to unfold.”

At this year’s Two Sessions, Zhong Daidi, a deputy to the National People’s Congress, vice chairperson of the Chongqing Municipal Committee of the China Association for Promoting Democracy, and professor at the College of Bioengineering of Chongqing University, also put forward six recommendations aimed at promoting the high-quality development of the digital therapeutics industry by establishing a scientific regulatory framework. Among these, Recommendations 2, 3, and 4 are all related to clinical trials.

First, establish a standard system, develop product evaluation capabilities, and formulate technical review rules. Accelerate the development of standards related to product functionality, performance, safety, and testing. Streamline the regulatory framework for digital therapeutics products, explore a filing-based registration system for digital therapeutics, strike a balance between regulatory efficiency and cost, standardize industry order, and promote orderly and high-quality industry development.

Secondly, we must strengthen technological innovation, proactively lay out patents and independently controllable technologies, and seize the first-mover advantage in the market. Key research projects should be deployed in areas such as digital therapeutics product technology, testing and regulatory technology, deployment and operation/maintenance technology for digital therapeutics services, and clinical technologies based on digital therapeutics, with increased investment in scientific research. We should enhance collaboration among industry, academia, research institutions, and healthcare providers, integrating the strengths of research institutions, medical institutions, technology companies, and investment firms related to digital therapeutics to jointly promote the translation of scientific and technological achievements. Additionally, we must cultivate targeted talent in relevant technical, clinical, and management fields.

Finally, establish specialized clinical evaluation bases to conduct pilot programs for clinical evaluations, and gradually develop standardized clinical evaluation guidelines. Intensify publicity and training efforts to encourage the adoption of digital therapeutics and other measures within the tiered diagnosis and treatment system.

He believes that the most prominent contradiction in digital therapeutics at present is that the industry is in its early stages, with stakeholders yet to reach a broad and comprehensive consensus. The regulatory framework has not been fully established, hindering standardized and scaled development of the industry. Meanwhile, developed countries are exploring evaluation systems for digital therapeutics. China should seize this window of opportunity to rapidly establish a regulatory system, guide enterprises in technological R&D and forward-looking patent layout, and develop international standards centered on the “Chinese approach.” This will help China secure first-mover advantage, command high-end discourse power, and prevent and mitigate various hidden risks.

The Future of Clinical Trials for Digital Therapeutics: Reasons for Greater Optimism

It is undeniable that digital therapeutics faced a series of setbacks in early 2023. Industry leader Pear filed for bankruptcy protection in court just last week and plans to sell its business or assets. Better Therapeutics had encountered difficulties earlier and, despite securing $6.5 million in private financing recently, is still seeking additional funding to sustain operations. Akili’s current situation also remains far from optimistic.

However, it may be somewhat pessimistic and unscientific to evaluate digital therapeutics based on their performance in financial markets and conclude that the sector is on the verge of extinction. In the early stages of development, any industry is highly likely to experience a certain degree of bubble formation. This pattern has been evident in historical cases such as the dot-com bubble of the last century, as well as more recent bubbles in AI, blockchain, and the metaverse. As the saying goes, “Only after the glitz fades can true value be revealed; only when superficiality dissipates does sincerity emerge.” Once the bubble bursts, the future direction of the industry will ultimately depend on its intrinsic real value.

As a sector within the healthcare industry, the value of digital therapeutics should clearly not be assessed by Wall Street, but rather by hospitals, patients, and all stakeholders involved in the medical care process. Admittedly, digital therapeutics are still imperfect and have many shortcomings; however, it is also a fact that they have already demonstrated advantages and significant potential in certain scenarios, gaining recognition from various parties.

On the other hand, digital therapeutics are data-driven. Benefiting from the continuous improvement of China’s digital infrastructure in recent years and the massive amount of data generated by its large population, the pace of evolution and iteration of digital therapeutics in China has exceeded expectations. This rapid advancement may enable China to establish an internationally leading industry landscape in the future, serving as a significant manifestation of the country’s growing emphasis on the digital economy.

As previously stated, healthcare is a field that demands patience and long-term dedication. The digital therapeutics industry should confront skepticism with composure, correcting flaws where they exist and striving for improvement where they do not. It must remain grounded, solidifying its foundation in evidence-based clinical practice while adhering to rigorous standards of quality and self-discipline. As the saying goes, “The sharp edge of a sword is forged through grinding; the fragrance of plum blossoms emerges from bitter cold.” Ultimately, digital therapeutics will usher in an era of its own.

References:

Zhao Zidong, Hualong.net: “Wind from Bayu | Zhong Daidi: Proposes Building a Scientific Regulatory System to Promote High-Quality Development of the Digital Therapeutics Industry”