In June, the Food and Drug Administration announced an initiative to ramp up regulations in the digital health space. The announcement comes on the heels of the 21st Century Cures Act which, among several proposals, starts to outline the role of FDA in overseeing digital health solutions.
While the recent report remains vague regarding specific regulations, the team at Healthbox has outlined two possible regulatory scenarios and the potential implications of each on digital health solutions:
Scenario 1: FDA opts for a light touch and modest regulatory barriers
In this scenario, FDA may evaluate whether solutions provide enough functionality (for instance, can I use it?) and basic value (does it help me?) while preventing patient harm (would a doctor recommend it?).
Clearing this hurdle would be similar to a newly developed iPhone app being approved for sale in the App Store. We don’t think this scenario would have a particularly significant impact, as most subpar solutions already lack market traction and fail without reaching a major healthcare stakeholder be it provider, payor, investor, and others.
If anything, this modest regulation might actually benefit patients who interact with direct-to-consumer digital health solutions by weeding out deficient products with inappropriate or even harmful content.
Scenario 2: FDA requires a high degree of clinical validation and outcomes
Alternatively, FDA could choose to significantly up the standards by requiring solutions to prove their value — their ability to decrease mortality, improve patients’ quality of life and other outcomes — before being allowed to be sold.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
A move like this would have a big impact on the market. Perhaps most notably, the time-to-market and costs to launch digital health solutions would sharply increase as companies are forced to navigate the approval process. Remember that FDA has historically been overwhelmed with the volume of digital health apps for review.
While this raises the bar for companies, an official government stamp-of-approval may increase the likelihood and speed with which payors and providers adopt these solutions once they’re actually available. As a case study, leaders in the digital therapeutics space such as Omada Health and Pear Therapeutics have proactively worked to clinically prove the value of their products, despite the added costs, and appear to be reaping the benefits.
On the investment side, added regulation could force investors to treat early-stage digital health startups less like traditional technology and more like specialized healthcare-exclusive investments (a la medical devices and therapeutics). This could limit the amount of capital individuals or angel groups are willing to invest in early-stage digital health solutions by requiring a greater level of expertise and sophistication to effectively navigate the increase in risk.
Restricted early-stage funding combined with the additional regulatory and financial burdens placed on resource-strapped startups could stifle digital health innovation. As such, the government should consider implementing any of a number of solutions designed to overcome these issues, for example:
- Instituting government-sponsored funding, much as the NIH does for drug discovery research. It would probably be comparatively less expensive but the paradigm would remain the same. This would enable digital health technology companies to skip early stage venture investors and apply for grant funding instead.
- Increasing the value of the agency’s approval by tying it to CMS reimbursement. Unlike 510(k) clearance for medical devices or CLIA certification for diagnostic laboratory tests that do not guarantee reimbursement, this approach could help the high-quality vendors that receive regulatory approval to more easily grow and succeed.
While FDA’s plans remain uncertain, their increased involvement would represent a paradigm shift that all industry stakeholders are watching closely.
Should they opt for more significant regulation of digital health, we urge the agency to consider simultaneously rolling out programs to offset the decline in available early-stage venture capital that could result with a higher regulatory bar.
Whether this takes the form of expanded grant funding, a public investment vehicle, or something else altogether would depend on the appetite of the current administration. Regardless, the goal should be to continue driving forward the innovation engine that is digital health rather than discouraging growth with overly burdensome regulations.
Photo: Waldemarus, Getty Images
