DiGAs in Germany: Adoption is King!
By: Heal Capital
Tags: Digital Therapeutics, Founders, Digitalisation, Germany, Venture Capital

For many people around the world, 2020 has been a long, slow-moving year with the ongoing pandemic. But for the Federal Institute for Drugs and Medical Devices (BfArM) and digital therapeutic start ups, the year must have passed at breakneck speed. Already, the one year anniversary is fast approaching of the Digitale-Versorgung-Gesetz (DVG), a policy passed allowing verified digital therapeutics to be reimbursed by the national health insurance fund (GKV).

The DVG not only symbolises a leap forward in the digitalisation of Germany’s healthcare ecosystem, but places Germany at the forefront for HealthTech policy as one of the first countries to offer reimbursements for digital therapeutics. Digital therapeutic startups are looking towards Germany with anticipation, especially with a market access of 73 million GKV insured persons. The DVG has put the limelight on Germany, potentially establishing it as the blueprint for policy on incorporating digitalisation in healthcare. Despite the DVG being a big advancement for the field of digital healthcare, adoption remains one of the biggest challenges for digital therapeutics.

In this article, we will review what has been accomplished so far and what must still be done. We will further provide insight on some of the adoption challenges.

First stage of adoption: BfArM

The DVG is far from being a perfect solution, but it is a strong launchpad with which Germany has catapulted itself to the forefront of digital health provision. Since BfArM published the application portal for DiGAs in May, 43 applications have been submitted to the Fast Track process.

Once submitted, developers have 3 months to demonstrate that they meet the standards for safety and functionality, data protection, information security as well as quality and interoperability with future digital health platforms.

As of now, nine DiGAs have been approved, four of which focus on mental wellbeing, with Somnio addressing insomnia, Selfapy on depression, Invirtro and Velibra focusing on helping patients with anxiety disorders. The five remaining DiGAs address tinnitus, obesity, multiple sclerosis, migraines, and joint pain. The most recent additions are M-sense, Elevida, and Selfapy, all announced within the span of 7 days. We can expect new ones to be published soon, as 20 applications are being reviewed. Once adopted into the DiGA directory, a few challenges arise that must be settled within a year to solidify the DiGAs position in the directory. If you are looking for more insight on existing DiGAs and the application process, the BfArM DiGA website can provide further clarification.

Pricing

Reimbursement pricing with DiGAs is a tricky subject which is why we reached out to our legal expert. Here is some clarification on DiGA reimbursement pricing and negotiation in case you need it.

For the first year after being listed, DiGA developers can decide their reimbursement price relatively free, to an extent. A few exemptions will apply, for example manufacturers will have to take into account certain discounts they have granted in the past when setting prices for the first year.

If the GKV-Spitzenverband and the 13 associations of manufacturers agree on maximum price limits (Höchstbeträge) in the future, these maximum price limits additionally limit the freedom of pricing in the first year. The health insurance funds then only have to reimburse the DiGA up to the maximum price limit.

For the period after the first year, the manufacturers must negotiate the reimbursement prices for DiGA with the GKV.

Currently, a rift exists between developers and insurance funds on how reimbursement pricing should be handled. The obesity app, Zanadio, received an reimbursement amount of 500€ for 90 days, to which the Techniker Krankenkasse insurance fund responded by questioning its value. Some key players in the field responded that the current approach to pricing was limiting. A suggested favorable method would be to include more value-based aspects in comparison to the current approach of 3 months all or nothing. How these decisions will be made depend heavily on how DiGAs collect evidence for the effectiveness and accessibility to patients.

Validation

Once published on the DiGA directory, developers have one year to collect data and provide evidence that their app does in fact offer either a medical or structural added value and therefore deserves to be reimbursed. This information will not only provide them with the data to prove themselves to health insurance funds but can be vital to winning over physicians and, thus, pave the way to more prescriptions. Several of the DiGAs are in the process of establishing case studies to demonstrate their efficacy. As of now, there has not been many details released in regards to prescription rates or user experience.

Physician Acceptance.

After being listed in the directory, physicians can prescribe apps to patients. However, this creates a whole new set of challenges including physician acceptance. A recent Bitkom survey was conducted among physicians in Germany, illuminating their position on the subject. Overall, one in four physicians said they would like to prescribe DiGAs, but so far only two percent have done so. What’s particularly exciting is that around 68% of physicians surveyed viewed DiGAs as a useful addition to the standard medical offer. Still, many physicians remain hesitant, around 28% do not want to prescribe DiGAs, mainly due to concerns regarding data protection, lack of information and trust on DiGAs.

This challenge will be further complicated as more apps make it on the directory, leading to intensified competition. This might happen soon, as another migraine app is waiting for approval. This begs the question, how will doctors choose between apps and who will they look to for information and recommendations?

Part 2: Entering the Market

The DVG is a significant breakthrough, ushering in a new era with the digitalisation of healthcare. Yet this policy does little to support the DiGAs in some of the more challenging aspects of adoption: entering the complex and competitive healthtech market. This policy is just one step in the long path of transforming DiGAs into sustainable and profitable businesses. Here at Heal Capital, we have put together some strategies we have seen on how to enter the market and make the most of distribution channels. Five channels have been illuminated and we heed DiGA startups to reflect on these carefully for their market strategy.

Distribution Channel 1: Physicians

Physicians will have a crucial role in the rollouts of DiGAs, which comes as no surprise. Yet, approaching this channel is more tricky than it may appear. Reflecting back on Heal Capitals experience, we have a few tips to share on this subject.

From our experience the number one driver for adoption by physicians will, at least in the early days, be “to make the job of the physician easier.” This can be achieved by addressing the recurring patients the doctor cannot (really) help, for example patients who suffer from migraines that the doctor cannot directly treat. This disorder is not only painful but can be very isolating, and unfortunately doctors don’t have the time to continuously support the patient. Having a DiGA that provides them with the support not only meets the patients needs but allows the doctor to focus on other cases.

Additionally, taking over doctors responsibility for therapy adherence, like medication or lifestyle change, would also be seen as beneficial. An industry leader touched on this in our Online Masterclass, saying if patients are asking their doctors for help to use the app, then the developers have failed in delivering a useful app. However, if the developers manage to create an app that keeps user-engagement high along with meeting the needs of the patient and physician, and that is further combined with an increase in revenue for the physician, then you hold the goose that lays golden eggs.

While all physicians no doubt struggle with similar day-to-day challenges, developers must also know the individual physician. With this in mind, if you are planning on taking the GP route, there are around 59K GPs to consider in Germany, but should you choose to go after specialty doctors in smaller markets, you have a better chance at targeting them.

Entering this channel can be done via the traditional or modern way. One can visit the doctor’s office be it in the city, suburb or village (post-COVID, of course). Or a more tech savvy approach has been developed by the Munich-based telemedicine provider, Teleclinic. The company has just added DiGAs to their range of services. Promoting DiGAs to telemedicine platforms may connect developers with more doctors who have already experienced the benefits of digitalisation.

Despite physicians being the most obvious route, there are numerous challenges that hinder this channel, in particular physicians’ awareness of DiGAs and their hesitancy around them. In the Bitkom survey, 58% of doctors want a central platform where they can learn about the DIGAs. Should this be created, developers should reflect how they can stand out on this platform.

Distribution Channel 2: Insurance

Developers may also consider approaching insurance companies directly, if one decides to go along this route, here are a few tips.

The first is to make sure that you have chosen the right department, either Leistungsmanagement or Versorgungsmanagement for their DiGA and to address them in German with a German pitch deck. Afterall, this is the German market.

Two of the most important aspects of your pitch should be to focus on how the DiGA is reducing healthcare costs while maintaining high user engagement. Insurance companies are always in search of the best cost-effective strategy that will genuinely help their customers. DiGA developers must demonstrate to insurance companies easily quantifiable near-term ROI advantages that are directly resultant from their intervention (ie. reduced emergency admissions on a quarterly basis). Second and third order impacts across longer time periods (reduced heart attack risk in 10 years) is much harder to get traction for.

The third aspect is that insurance companies are also businesses, they are equally concerned about their image and brand. If developers can demonstrate that this app will keep the insurance company at the forefront of innovation and healthcare tech, they may be able to create a steady stream of patients directly to their app. Keep in mind it is still the responsibility of the DiGA developers to provide a marketing strategy and assets, like brochures, videos, etc. of your product. Overall, if you can grasp the individual needs of the insurer, you will likely find the right path to incentivise them into distributing your DiGA to the right patient populations.

Last thing to consider on this front with respect to the public insurances (GKV) is a DiGA impact on the (new) Morbi-RSA, there might be incentives that drive specific DiGA for one insurance that does not apply for another. With respect to private insurances, we are more than happy to discuss how a DiGA fits into their thinking.

Distribution Channel 3: Direct marketing

Another optional distribution channel would be to directly target the potential users and create a pull effect from patients to doctors and insurances. Many patients have already begun to incorporate digital therapeutics into their daily lives to help them manage their disease. A 2020 Bitkom survey of 1,200 people over the age of 16 saw that 59% of respondents could imagine using DiGA, and over a third plans to do it irregardless. To make the most of such a channel digital education should be ramped up.

An important question to ask oneself is where and how could DiGA developers reach such a population. Social media marketing is a possible route however there are strict regulations in Germany for marketing of medical devices. Here are just a few to give you an idea: medical devices must not be advertised to consumers using statements made by third parties, in particular letters of thanks, appreciation or recommendation, or references to such statements if they are made in an abusive, repulsive or misleading manner (Art. 11 para 1 nb. 11 Heilmittelwerbegesetz). BfArM is a key regulator in this aspect and the details fall in the Heilmittelwerbegesetz (HWG).

Patient organisations and support groups are another interesting target, if you identify them and target their constituents you have a high likelihood of success. Attracting patients who value a solution seems to be the strongest indicator of success on which to build long-term distribution success and adoption. For further reflection on this point, look at our article on Digital Therapeutics Part 1.

Distribution Channel 4: Pharmaceutical

Within the pharma channel there are two viable approaches to go. The first approach would be for the developers to enlist the pharmaceutical sales force to advertise the DiGA along with their own products. Pharmaceutical companies that market generic products usually have a massive sales force could be the right fit for this approach. Or perhaps take a page from their playbook and develop your own sales force, equipped with free merchandise (who isn’t convinced after a free pen and sample) and sheer determination to sell sell sell.

The second option would consist of a strategic partnership. This would require an alignment between the pharmaceutical company and the DiGA developer’s target group, company values, and health focus. A potential approach would be a ‘bundle package’ where the DiGA is offered along with the treatment developed by the pharmaceutical company. Through such a partnership, DiGA startups will be able to gain access to pharma’s experience in conducting clinical trials, thus aiding the startups in building medical evidence around their DiGA. A final added benefit is that pharmaceutical groups have established ties with the medical community especially key opinion leaders (KOL) and can perhaps share their channel to physicians and patient organisations.

Despite the possible advantages, we currently remain hesitant on both approaches and advise to not rely too much on either. Sales driven by people that previously were focused on non-digital products has not been the key to adoption in other industries and should therefore be monitored very closely on sales but also account management KPI. Strategic partnerships need to be well thought through in order to circumvent long-term negative effects for your independent development as a health-tech company.

Distribution Channel 5: VIMPRO

In a previous article written by our own Dr. Christian Weiss, Heal Capital proposed that a Vertically-Integrated Microprovider approach may be an efficient and profitable solution to the challenges digital therapeutics face. What this would entail is the verticalization of a DiGA, integrating the provider into your offer, and thus allowing the developers to reap the downstream benefits their DiGA provides in patient outcomes. Other high-level players involved in DiGAs have agreed that the VIMPRO approach would be a promising solution. Make sure to read the article to gain a deeper understanding of the concept.

Conclusion

Germany has turned itself around in the span of one year. At the end of 2019, the country was seen as largely lagging behind in the field of digitalisation, afterall, most Berlin Spätis’ and village bakeries still won’t accept cards! While the DVG has given DiGAs a much more promising environment to grow in, developers should be wary. They will be facing a competitive market and having a good product alone unfortunately won’t cut it. The worst thing a DiGA can do is assume that their product will be enough, this will lead to a failure in adoption. Developers must develop a robust market strategy so that their company can grow into a resilient and sustainable business. This is a lesson that has been repeated in the past in many different fields, and will be no different with DiGAs.

We are curious as to what ideas you have towards DiGA adoption beyond what we shared. We are happy to hear what you think, so please reach out to dealflow@healcapital.com