Digital Therapeutics Market Poised for Explosive Growth with $6 Billion Opportunity in Five Years

A relatively new mobile health platform, mHealth, has officially launched its digital therapeutics offerings, preparing to make a strong push into the healthcare sector. Digital therapeutics, often referred to as “software-based medicines,” integrate applications and devices within the mHealth platform. Although the industry is currently comprised of only dozens of startups, Joseph Riley, a partner at Psilos Group, states that this market will flourish over the next five years, growing to include nearly hundreds of companies and generating approximately $6 billion in revenue.

“The potential of digital therapeutics is enormous,” he said. Riley believes this software platform is “equivalent to having a personal health coach at your fingertips 24 hours a day.” This is achieved through the combined efforts of healthcare providers and taxpayers seeking to reduce medical costs and improve treatment outcomes. Digital therapeutics can deliver targeted treatments and provide health information where needed, typically through smartphone applications in patients’ hands.

“Digital therapeutics startups treat software as a drug, capable of amplifying the therapeutic, preventive, and healthcare effects delivered by physicians while modifying patient behavior, particularly in the management of costly chronic diseases. Most importantly, digital health is reshaping the medical cost curve,” stated Psilos Group in a recent report.

Riley provided several examples to illustrate the unique concepts behind digital therapeutics companies. One such company is Sync Project, a team composed of neurologists, tech entrepreneurs, and musicians that has developed personalized music playlists to help individuals manage anxiety, stress, pain, fatigue, insomnia, and even Alzheimer’s disease. Other examples include Pear Therapeutics, which offers support to individuals struggling with substance use disorders; Akili Interactive Labs, which is developing a gaming platform for patients with cognitive impairments; and HealthMine, Canary Health, Telcare, Omada Health, and WellDoc, all of which are developing mobile platforms for the treatment of chronic diseases such as diabetes.

“Daphne Zohar, co-founder and CEO of PureTech, stated, ‘The concept behind Akili is that physicians will prescribe this treatment... You will receive a prescription code, download it, and use it for a specified duration.’ An investor in Boston-based Akili noted in the Akili Psilos report, ‘This is a genuine therapeutic intervention, offering efficacy comparable to pharmaceuticals but without their side effects. This is indeed one of the initiatives we are pursuing.’”

Riley believes that the following six factors determine the characteristics of digital therapeutics:

1. Increased healthcare costs;

2. Shift toward a value-based care and reimbursement model;

3. Through health management, employers seek to efficiently improve employee health.

4. The Consumerization of Healthcare

5. The Rise of Smartphones and the “Quantified Self” Movement

6. Strong support from investors, particularly venture capital funds.

Even the federal government has begun to support these initiatives, with the Centers for Medicare & Medicaid Services (CMS) now rolling out new diabetes prevention programs that incorporate digital therapeutic tools.

“We are now entering a world where digital healthcare converges with values,” said Riley.

This platform may be quite simple, with the function of delivering personalized health tips and inviting employees to participate in a weight-loss challenge. For example, a patient with diabetes might take on a dietary challenge, while their healthcare provider shares exercise tips via smartphone or directs them to websites offering stress-management techniques—such as strategies for overcoming medication dependence, alcohol abuse, or smoking addiction—and access to support networks. Furthermore, some companies have integrated the platform with sensors and wearable devices, such as patches, activity trackers, or blood glucose monitors, enabling users to receive targeted data based on their physiological parameters.

According to the report by Riley and Psilos, the benefits of such a platform include reduced use of prescription medications and associated costs, improved medication adherence, increased preventive care, reduced adverse health outcomes—particularly emergency department visits and hospitalizations—and ultimately, improved clinical outcomes.

Pear Therapeutics Successfully Secures $20 Million in Venture Capital to Help People Address Substance Use Disorders

“These products have demonstrated clinical data supporting abstinence habits, enhancing treatment retention, improving quality metrics such as the Addiction Severity Index (ASI), and significantly reducing the need for clinical interventions,” Tim Petersen, Managing Director at Arboretum Ventures and an investor in Pear Therapeutics, reported in Psilos. The company now aims to expand its platform to treat conditions such as schizophrenia, post-traumatic stress disorder, anxiety disorders, major depressive disorder, insomnia, and chronic pain—a market long targeted by many large companies, including Apple, Samsung, and Fitbit.

“We are continuously learning, but in many broad areas of healthcare, such as population health and disease management, there is a lack of consumer engagement. This critical missing element often slows our progress,” said James Park, CEO of Fitbit, during an investor conference call in May 2016. As noted in the Psilos report, “Because our devices and services have already proven to be highly profitable, Fitbit has provided consumers with many incredible opportunities, such as health engines. I can say that we are better positioned than any other individual entity to help people manage their own health and that of their families. Meanwhile, we collaborate with insurance companies and employers to jointly participate in and build the healthcare system.”

Riley believes that, overall, the market faces the same challenge: it needs to address patient access issues so that the market can deliver the information users desire. At the same time, the market requires users to take the platform seriously and grow with it, ensuring its sustainable development even after the initial novelty wears off. As he stated, users must shift from mere health management to “comprehensive lifestyle changes.”

In other words, viewed from the opposite perspective, this is why all companies in this market are emphasizing clinically validated solutions. They aim to conduct multi-site, randomized trials to verify data validity and seek approval for their technologies from the U.S. Food and Drug Administration (FDA). This would encourage consumers to take the platform more seriously, while also enabling the companies to generate sufficient profits to recoup their investments by offering the platform to healthcare providers, taxpayers, and large enterprises.

“If you want others to pay for your large-scale experiments, you must understand how they work,” said Riley.