Transcript
00:03 Eugene: Welcome to the Digital Therapeutics Edition of Digital Health Today, and I’m your host, Eugene Borukhovich.
In the last episode, I have spoken to Pierre Leurent, CEO and founder of Voluntis, and one of the fathers of the Digital Therapeutics Alliance. So today, I continue with the early trailblazers of the DTx industry, Anand Iyer, the Chief Strategy Officer of Welldoc. But before we dive in, I briefly met Anand at a health Excel event in New York City early in 2019, even though Welldoc has been around since 2008, I’m not even sure how we did not run into each other before. But it was great to connect with Anand for this podcast and get to know him and what drives him, not to mention speak about the early days of Welldoc and DTx industry. And now would jump to my conversation with Anand.
So I’m here with Anand Iyer, Chief Strategy Officer at Welldoc, welcome to the show. And before we sort of really dive in, I’d love to get to know you, Anand and I know you’ve been there from the very, very early days of Welldoc, which is one of the leaders in the digital therapeutics space and I would even say digital health altogether. So I would love to get to know you a bit more, and especially our listeners.
01:22 Anand: Absolutely, Eugene, and it’s great to be here with you. Thanks for having me. So yeah, a little bit about me. Interestingly enough, I’m a wireless technology guy and started my career in the telecom industry in the late 80s. And then came down to the States, went to Carnegie Mellon to get all my graduate degrees. And it’s interesting, my doctoral work was in pattern recognition, which is actually germane to what we’re going to be talking about later on.
But when I left there, I joined a management consultancy, PRTM management consulting, right at the dawn of 2G cellular wireless, if you can remember those days back in the early 90s in the US, and…
02:00 Eugene: I still remember dial up modem, so probably aging for some of the really younger crowd here.
02:06 Anand: We were dating both of ourselves. But we helped found a number of wireless operators, we helped start [inaudible 02:13] company, for example, we have upstart Vodafone, Tata. And we focused on building up networks and helping people optimize their radio networks. And then ask the question, if you’ve already built the infrastructure, why not start to think about the services on top of that? And so we started working with the automotive companies, Ford, GM Monster, for example, that was our model that we created to allow automotive telematics to flourish so that now you could make the car if you would, a node on the network and provide value added services to the driver, passengers, etc.
And then we said, geez, why stop it automotive? Why not do retail, supply chain, smart highways, Department of Defense? I mean, all of this crazy stuff, but it had me flying all over the world. And in that journey, Eugene, I developed Type 2 diabetes myself. Very interesting. It’s a wakeup call for me. And…
03:00 Eugene: Habits. Health habits and traveling. Yeah, I know…
03:05 Anand: Sleeping at the wrong time, not eating at the right time. And we started working with the usual suspects, the Hill ROMs, the Siemens, things like radio frequency identification, tagging of hospital beds. Because believe it or not, hospital beds was the number one missing item in a hospital and like, how could you miss a bed? You think it would be a scalpel or something smaller.
But it was in that journey that I met a couple of folks from Becton Dickinson. At the time, they were fifth in the five horse race in the blood glucose meter market behind at the time, J&J, Abbott, Roche and Bayer. And they said, listen, we believe that there’s got to be a better model that doesn’t just rely on a number, but converts the data to information, knowledge, action, and potentially outcomes. And can we leverage the wireless platform? And I’m like, of course, and we’ve done it every other industry, why not here.
And so that was my entree, believe it or not into the space around 2005-2006. And in that journey, I happened to meet the cofounders of Welldoc, and ended up consulting with them. They were my last clients before I left PRTM in 2008 and join, I mean, full time. But yeah, so a little bit of me, which is good, which is wireless in my blood; a little bit of me, which is not so good, which is too much sugar in my blood, but somehow Welldoc’s managed to fuse the two together.
04:22 Eugene: No, listen, exactly, and I think that’s the beauty of you’ve been through a number of industry, the beauty of the health and care spaces that we all have a story of why we joined. And I want to sort of dive into that 2008 and a little bit of your decision of joining Welldoc, I mean, young company. What was that sort of pivotal decision in your head? Yes, Type 2 diabetes, and I think you saw something there, but just dive a little bit deeper in your decision point there.
04:51 Anand: Yeah, it was actually quite simple. My wife is a physician. She’s a dermatologist and she was watching all of the projects that I was doing, and I was fortunate to be nominated his top 35 wireless executive in 2007, globally. And she said you’ve really built up a capability to help take a concept, a technology concept in that to a disruptive technology concept and make something of it, either a product strategy, a market strategy, or an entire industry strategy. And you’ve done that with telematics, you’ve done it with in building wireless, why wouldn’t you do it for healthcare?
And when you step back in the healthcare equation, we all know whether it’s an emergent economy or whether it’s a well-established economy, that chronic disease is a burden. And it’s a disproportionate burden as it relates to not just the number of people who suffer from these chronic conditions: diabetes, asthma, heart failure, etc, but it’s a disproportionate cost, Eugene. Right? And there’s this little thing called life that gets in the way. And it’s not that there’s any blame, patients tried to do the things that they should do, that their doctors tell them, but they forget. Or they’re unaware. Or they’re unable. Or they don’t have access to the right things. And you start to think today about social determinants, maybe they can’t afford what the doctor wants them to do.
At the same time, you have the flip side of the view of the physician that says, you know, I always say if you ask an overworked, underpaid doctor to do one more thing that’s orthogonal to their workflow, they won’t do it. Right? They won’t do it, no matter how shiny and sexy it is. And so you have this conundrum that says, how do you actually support the journey of a patient, their journey, because my journey and your journey may necessarily be different and the journey of their providers, their Sherpa through this journey of their chronic disease? How do you support them with say, technology where they can stand on technology, shoulders and reach higher, right?
And building a products strategy market strategy, in fact, for us, there was no precedent, it was an industry strategy, the consulting background help, because that’s the nature of a consulting. Either you can look at the market, and you can look at all the trends, and you can come up with these strategies, and then you can operationalize them in ways that deliver a value proposition, in this case: better outcomes, lower costs, better patient engagement, easier physician engagement.
And so I think, kind of the reason is, I had the ability to do it, and I had the disease, personally, and I had already been consulting for 16 years and like, why not, now’s a good time as any, to see if we can actually change the trajectory of these diseases and therefore change the lives of people who suffer from these conditions. And so that was it, was really kind of epiphany.
07:39 Eugene: Basically, a no brainer, get cracking, and the Welldoc team was, I’m sure, happy to have you because you were consulting with them prior to that. So, back, I know, it’s crazy, 2008, wow, 12-13 years ago now, and I am sure that the word or the two words combined digital therapeutics, you know, I had Brian on in the earlier episodes and we talked that some of that digital therapeutics was even used 15 years ago in an imaging type of business, but when it comes to what we know as today, that probably didn’t even exist. So what was the hypothesis? What was that market looking like, as you guys were inventing it, for lack of a better term? I think along with Volantis that got started somewhere around the same time.
08:22: There was a couple of companies who were in it, Volantis, Welldoc, Vacsiva, the old text for baby program, MedApps, an old friend of ours, Ken Dix and Qualcomm when you believe it or not, the work that they were doing with Johnson and Johnson at the time, and LifeCalm. And what you had is you had people looking at it from a hardware mentality like Qualcomm. You had people like Becton Dickinson looking at it from a medical device perspective.
And then you had these companies like, Welldoc, who were looking at it, what today we call software as a medical device, but they were looking at it from a software perspective saying, I’ll personalize it, I poke my finger, a couple of times a week, and I get a number. What do I do with a number? Am I supposed to eat or not? Am I supposed to take my insulin or not? If so, how much? What’s the effect on that number if I exercise? And so it literally is the transformation of a data point, in this case, a blood glucose reading measured in milligrams per deciliter into information, knowledge action that then hopefully leads the patient to better place. And in order to do that, it’s got to be with the patient kind of 24/7/365. It has to be easy to use. It has to be intuitive, and it has to be nonintrusive, if you will, and it’s going to be part of their own life flow.
And the mobile platform, think about it, the mobile platform has a couple of very unique properties, which is it knows no socio economic boundaries. The richest of the rich have a cell phone, the poorest of the poor have a cell phone. Right? It knows no literacy boundaries. The smartest guy and the uneducated guy all have cell phones. Right? And so this technology has already broken and become ubiquitous in the true sense of ubiquity, that says, how can you leverage the power of that to actually coach the patient at the point of care such that if they have an entry, or if they want to study and learn, what are the causes of their hypoglycemia, that they can do it right then and there, and then system can take all of that data, run it through evidence based guidelines and provide to their healthcare provider, say a report?
Because no doctor wanted to be bombarded with just tens and thousands of data points. Rather, you would want to give the physician kind of the [inaudible 10:44] that says, hey, this is where the patient was, this is where they are, this is what’s changed, and this is what you should do against evidence based medicine. But you know, you’re the doctor, do what you think is right. And I think it’s that model that says, if you can support the patient at the point of care in real time, and you can take that data and convert it to a view that can help the physician optimize the therapeutic pathway for that patient, you bring the two together, you let technology enabled them. That’s kind of the thinking. Right?
11:14 Eugene: So you know, it’s interesting you mentioned that you had the J&Js and the BDS of the world coming at it from different angles, and then here comes this new breed of companies. So let’s actually talk about the business hypothesis you guys had in, you know, I’m sure those startup type rooms. And how has that pivoted over the last 12-13 years?
11:36 Anand: Yeah, it’s a great question. And I think it’s actually a very simple answer, which is a maniacal focus, that’s the right way to say it, a maniacal focus on health outcomes, and economic outcomes, numerator denominator, right? And if you could actually demonstrate that your software intervention could actually create clinical benefit, and so how do you measure clinical benefit in diabetes? So the easiest way is some kind of sustained drop in hemoglobin A1C, or some sustained drop in mean levels of blood glucose, or with the advent of CGM today improve time in range.
And any one of those metrics qualify as being a valid, or if you want to go beyond the constellation of just diabetes, I’m also going to look at blood pressure, right, I’m going to look at LDL cholesterol, the ABCs of diabetes, right, and I’m going to manage if you would cardiometabolic wellness. At the same time, can I do it in a way that actually reduces the cost burden to the system? Because it was well established that people who are more out of control cost the system more, people who were better in control costs the system less.
So the business hypothesis was if you could actually use the software in a therapeutic form to actually get the patient to a better clinical place measured by clinical parameters, then you could fulfill this numerator-denominator equation that says, look, you’re going to improve the value quotient, you’re going to improve the ratio. But that was the original business hypothesis that and what’s fascinating, Eugene, the active ingredient, if you were to really compare a digital therapeutic to us…
13:15 Eugene: I love that comparison actually, to the molecular cell.
13:18 Anand: If you were to use the active ingredient analogy to a molecular compound, the active ingredient is patient engagement. We say the blockbuster drug of the century is engaged patient. If they do what their healthcare provider has told them to do on all the vectors, whether it’s food or exercise, or sleep, or glucose management, medication management, psychosocial distress, etc. If they do the things they’re supposed to do at the right place at the time, then you get them and you get them to a better place.
13:48 Eugene: Absolutely. And I do want to chat about, you know, again, I hate that term, and I keep repeating this adherence, so we’ll touch on that a little bit later. But I’d love to also to the extent you can, I know you guys have privately held, talk about a little bit of the pricing models, and which way from 2018 till now, where you involved in the channels, right? Because we all, I mean, I’m in a startup now and we’re testing different revenue streams and models and channels. So I’m curious to talk a little bit about the pricing and the channels that evolved.
14:20 Anand: So it’s a complex question, so we’ll break it up into pieces. Which is, at the end of the day, your pricing model has to be one that actually delivers a value proposition, right, has to be otherwise it’s going to be a flawed pricing model, is not going to sustain itself. And so the first thing we asked ourselves is in order for us to actually even price something like this, what’s the value you’re going to get from it? So multi-part question. First, what’s the numerator clinical value you can get? So randomized control studies, you know, real world studies, on average, on average, 2.0 A1C reduction in the first 90 to 120 days. We’ve seen for those people who start with higher A1C, bigger drops. We’ve seen for those people who start with smaller A1C lower values, lower drops, but on average two points.
And we actually had the luxury of working recently with IBM Watson health, then Truven Analytics. And we were able to say, if you were to line up a cohort of patients with known A1C values, and you were to look at their total cost of care as being the sum of three things, Eugene, which is part one, which is the acute costs, ER, Ed, hospitalizations, doctor’s office is it. Second element was supplies, drugs, meters, strips, compression stockings, whatever other there immediate. And then the last one is comorbid conditions, the cost of diabetes, comorbid conditions, which are the usual suspect, hypertension, hyperlipidemia, retinopathy, neuropathy nephropathy, right? If you were to take the total area underneath the curve cost, is there a way to actually correlate delta A1C to cost?
And what we found was fascinating in that, on average, for a person who started above an A1C of 8, right, that drop, a two point drop is about tantamount to about a $3,100 per patient per year cost savings in the US healthcare system. What’s fascinating is we’ve been able to replicate this type of thinking in other economies with other cost models, because as we know, the US healthcare system is a little more expensive, right? Perhaps a lot more expensive… Yeah, just a little bit.
So as soon as you have that basis of established value, now you can say, alright, I want to deliver an ROI of a certain amount, certain level. Right? Your finance colleagues will say any ROI over 3X in the first years is a good starting point, you’re a stick figure of merit. And then you say, well, I could do it on a per user basis, I could do it on a population basis, I can do it at a risk basis. And so I think one of the things we learned about pricing over our journey is that it’s not a one-size-fits-all, and it may vary as you go from market to market.
And unlike a model that relies on a supply chain hardware, or human coaching models, because there’s companies who do the human coaching as well as hardware, and software, the software model itself doesn’t be those fixed costs, right, and so you have flexibility. And so I think the pricing model is always one that should deliver that significant kind of value. And it leads into the discussions that everybody’s having today about risk. How do you actually take risk? Well, you can take risk, but you have an estimate of what you’re going to save them, gain sharing, risk sharing, whatever the vernacular is, there’s a great way.
And I think, in our case, the best way to say is, it’s an evolution of your pricing strategy based on incremental knowledge of the value proposition you’re actually delivering to a healthcare system that allows you to price flexibly. So it’s a good way for the industry to think about it.
17:58 Eugene: Speaking of industry, right, because, again, you guys were sort of the trailblazers, and I guess the closest equivalent was the NDC codes and equivalent of that in the medical device. And I know, I could be wrong, and please correct me, but you guys were the one only that got the equivalent of an NDC. So can you just tell the audience a little bit about that what was right wrong about it and why the one and only?
18:24 Anand: Yeah, so very interesting. When we received our first FDA clearance, it was actually under the stipulation of an RX only, okay. And because of, please, think about the newness, FDA said, this is something that should come from a doctor, okay. And as soon as you have an RX associated with it, which is what caused us to go, was actually an NHRIC code…
18:45 Anand: NHRIC.
18:46 Anand: NHRIC code. Yeah. And so, at that point in time, you have a code, fantastic. But as you know, there’s a lot that needs to happen in order for that code to be “activated and deliver its intended” revenue stream to you. Which is, you first have to get it listed in the databases, these compendia, you have to then get these listed with the formularies, PBMS, etc, you have to have a pair listed and cover it for their enterprise. So the analogy I use is, it’s like having a door with three or four keys, you have to simultaneously open all keys, right? So first, you have to hope that you have all the keys, and then you have to kind of turn them all at the same time. That’s the only way the door opens. Right?
And for us, I remember when we first this is around the time when our CEO Kevin Crates came on board, and he came from human genome sciences, right, when GSK had picked them up, said you know what, we should actually launch a pilot program if you would in primary care, but we should do a sample program and we should implement the sample program and then have them prescribe 30 day, give us samples and prescribe subsequent to that and then take the data, present it to the payers, etc.
And it’s in the middle of that journey that we went back to the FDA, and with our safety data and said, look, you know, this is interesting, but it’s a clunky model, because all of a sudden, you became a Merck or Pfizer, and it’s like you’re a drug company. And you just killed the scalable nature of software. Right? Now you’re doing it one RX at a time. Do we really need the RX scalable OTC model as well? And in they said, yeah, well show us the data. And the RX feature and functionality is there for certain features like insulin titration, which is the standard in the industry. But for other features, it’s an OTC model.
And so what we learned very quickly, is that you could actually have multiple models, and it didn’t have to be just an RX it could be and that opens up the opportunity to do things that others have done as well, right, which is you can go and have an enterprise licensing model or an enterprise software model. And so this way, you kind of get to have your cake and eat it too, you get the benefits of the clinically validated FDA cleared, etc software, but you also get the inherent scalability of software that allows you very effective market modeling. And so there were goods associated with it, we learned everything we had to learn and more about what it meant to truly clinically integrate into a clinical workflow. Because you’re forced to, at the same time, you learned how to then adapt that such that you got scalability as well.
21:22 Eugene: Yeah. And you know, it’s interesting. I mean, on the scalability side, because I think any product and especially software based products is only as good as people using them. Right? And I always want to demystify in this podcast, because to the listeners that are not familiar with what a digital therapeutic is, what is it they experience with your Welldoc product? Maybe just in a minute or two, walk us through, what does a typical Type 2 diabetic get when signs up for Welldoc?
21:51 Anand: Yeah, so it’s fairly straightforward. So I’ll use BlueStar, our flagship platform as an example. So BlueStar is architecturally, it’s the sum of three pieces, and the three pieces face off to the three different actors in this equation. So actor one is the patient, the patient get app that they download. There’s also a web version of it, believe it or not, so it’s the only one of its kind that has both mobile and web. And when they download that, it’s a mechanism that allows them to put in parameters, whether it’s manually entered or through today, over 300 connected devices, systems, pharmacies, labs, EMRs. Okay? And when they put those parameters in, they get real time coaching on what to do and they also get longitudinal coaching on not just individual vectors, but they get longitudinal coaching on correlative insights across vectors.
So it’s good to tell you, this is what to do with the high glucose or low glucose, it’s better to tell you, here’s how your glucose trend was this week, but it’s best to tell you, Eugene, let me show you why your glucose was high here. It’s because of this violating meal, or because of this, you know, skip med regimen, right? That’s when you start to hit the diabetes IQ of a patient, you start to increase that diabetes IQ. Okay. So that’s the piece that faces off to them. Right? And that invitation to download that can come in many ways. It can come through a prescription. It can come through an email from an employer. It can come through a payer driven program. There’s many ways to get them on board. Right?
The second piece experience is that which faces the second actor, which is a doctor, healthcare provider. It could be doctor, nurse, certified diabetes educator, and we affectionately call that the smart visit report. And this is a report that the system generates, that automatically comes via fax, email, via embedded object in their own EMR. So it’s integral into their workflow, which effectively says, here’s where you are, here’s where you are, here’s what’s changed, here’s what evidence suggests you should do. And what’s fascinating, especially in light of the recent telemedicine, reimbursement codes that are available in certain markets, doctors can actually bill for reimbursement for the review of these reports, just fascinating. All of a sudden, you have a mechanism that is an incentive for them to use it too, patients getting to a better place, doctors allowing to build their like, sign me up, right. It’s a good thing.
And then the last piece is that which faces the enterprise. Where do you want to do population reports? Where do you want to do surveys? Where do you want to do, you know what, show me all my patients who got an A1C above nine, who haven’t come in the last six months for an eye exam, and whose LDL cholesterol is above 100? Blast out a message to them or provide the educational support. So the experience is customized to the patient, method one, it’s customized to the provider, it’s also customized the enterprise. But that’s the holistic experience, if you would, across that triumvirate of actors.
24:46 Eugene: So, you know, I think part of that, I mean, you mentioned it can come via prescription, but also around managing and helping patients change their behaviors. And this is where my head is constantly flowing around, I wouldn’t say conundrum, but there’s a prescription digital therapeutics and there is, I would call it a new breed of disease management companies, right, Disease Management 2.0. Neither one is right, wrong, or indifferent. The question becomes, is there a differentiation? Are they merging together? I don’t care about what the names are. But just what are your thoughts around that?
25:21 Anand: Yeah, it’s actually pretty straightforward. It’s something that we as you know, Welldoc was one of the five companies to help cofound the Digital Therapeutics Alliance, it is something that we took seriously alongside, Propeller, Akili, Volantis, ourselves and Pear and said, hey, prescription digital therapeutic versus, as you said, DMV 2.0. In a very simplistic sense, what DMV 2.0 is, it’s the scotch taping of technology on top of an existing human process. Well, you’re using technology to offer some adjunct increased capability that then allows a human coach to then conduct per disease management, typical human coaching programs. And you see this in the case of blood glucose meters with the cell chipset that send the data to the cloud, cloud sends the data to a coach, coach calls the patient, tells them what to do.
And in that case, yes, you’ve added technology and you’ve created some new data stream, but you ask what is the incremental value versus the incremental cost? Because now you’re paying for the technology. And we all know cell chipsets are not cheap, and data plans. And you start to think about adding these cost elements. Are you really creating an offset or have you just taken like you said 2.0 and just put technology on top of human process versus a digital therapeutic, properly defined as software as a medical device where the software itself is the intervention? So if you go to the…
26:56 Eugene: That description sounds familiar.
26:58 Anand: Yeah. Yeah. If you go to the DTA website, dtxalliance.org, if you go to the website, you’ll actually see that the intervention is there to treat, manage, diagnose, but it has to be the principal mechanism is software. Okay? Not humans, not hardware, it’s a software. And it has to fulfill certain requirements. Like it’s been through clinical validation, randomized control. It’s been cleared by the regulatory authorities. It’s cleared by the cybersecurity certifications. It’s integral into clinical workflow, etc, etc. There’s 10 principles that the DTx Alliance has listed. And that’s the difference.
One is scotch taping technology onto an existing human process. One is allowing technology to be software as a medical device to be the intervention that actually moves the… A great example I always use outside of diabetes is our friend who you know as well at Akili Interactive, right, Edie Martucci, I mean, who would have thought that the FDA would approve a video game as an intervention.
28:05 Eugene: No. No. I remember seeing it years back, the first version, I was just astounded even back then. Yeah, absolutely.
28:12 Anand: But, but, but they follow the same rigorous pathway of ensuring that they went through clinical trials, they got FDA clearance, etc. But there’s therapeutic value. There’s an improvement in cognition, right? There’s actually an endpoint. There’s a clinical endpoint. And so that’s the difference, is the software itself is the therapy versus a technology that then enables a human to do maybe more.
28:36 Eugene: Yeah. So it’s interesting, I agree with you on the point of maybe technology lets humans do more. But the other aspect and you brought up Akili, but I think Welldoc, and any other software as a medical device, there’s the concept in a molecular world of adherence, right, which again, I keep saying that I can’t stand that term. But the piece of software, the device, there’s a concept of adherence and behavior change around that, too. So where do you see still doc’s nurses, but even more importantly, I think health coaches, which you mentioned earlier in this picture, even with Welldoc, Akili, and other more pure digital therapeutics.
29:21 Anand: Yeah, I think they’re critical and then part and parcel to the success of a digital therapeutic rollout. So by no means are these things intended to substitute or remove a physician out of the care loop. Right? That’s contrary to all of our strategic visions. It’s quite the opposite. We want to actually enable the physician or the clinician team and the patient to come closer together and technology is what allows them to do that. And so they’re there.
If you think of the lifecycle, Eugene, they can be there at the beginning to introduce them to it, onboard them, train them, etc. They can be there to support them periodically. And if they’re in the green zone, maybe they don’t need to be bothered, stay green, you’re doing great. Automated messages. But if they start to deviate and there’s a pattern of deviation that needs clinical intervention, that may need some reinforcement from a behavioral standpoint, or it actually may need something more like, I need to alter your meds or hydrate your meds or things like add another med. So there’s a loop there. And then obviously, they’re there to help guide the journey. They’re the ones who are there to guide the patient through the journey. Because, unfortunately, these are progressive diseases. I know that, knock on wood, my diabetes is still well controlled after having it for 20 years. Exactly. Kudos, exactly. But you know, at some point in time, my pancreas is not going to be as good as it is right now.
So these are evolutionary. And so there has to be the role of the provider to continue to support. And so I see them, the role of the clinician throughout the lifecycle of the use of the digital therapeutic onboarding support. And think of it as a closed loop, because if they make a medication change, or titrated medication, then they can come back and see the effect. And it keeps on getting to a point of equilibrium with the patient, new equilibrium points. But I see that as integral in how they work with them throughout the lifecycle of the DTx.
31:18 Eugene: Thank you. Well, that sound means it’s time for a question from my journalistic partner on this podcast, Brian Dolan, who is the founder of Exits & Outcomes, and as I like to call him the “Digital Health Detective”. Let’s see what question Brian has for our guests today.
31:38 Brian: Okay, here’s my question. Welldoc has been at this a long time, longer than just about any other digital health company. What do you imagine or foresee as an exit for Welldoc? Is it an IPO? Is it getting acquired by a bigger company? What is your dream outcome for the business in, say, the next 5 to 10 years or pick your own timeframe if you think it’s sooner or later than that?
32:04 Anand: So yeah, thanks, Brian. Great question. And by the way, Brian, you’ve been around just as long as well. I still remember the early days of these conferences, where you and MobiHealthNews, and it was a great service where you start to bring all of us together with a common perspective. But the easiest answer to that question is I’m going to actually put on my old management consulting hat, and say, what I told our clients. Which is, if you actually have a sustainable value proposition, and you grow that sustainable value proposition, then the exit strategy will take care of itself. And so you don’t engineer or architect for an exit strategy, you engineer architect to continue to deliver value.
Now, that value in the case of a DTx can actually be obtained in maybe two principal ways. One, the DTx can be the solution. So for example, in our case, Blue Star, and diabetes, and we work with both direct to the market channel, as well as through strategic partnerships, to get our product into the market with payers, employers, hospital systems, clinics, IDs, etc. But the second one, which is also becoming very important is the world has evolved. And payers have evolved. And they all have their own digital strategies, Brian, of some sorts. They have, whether it’s an app, whether it’s a portal, whether it’s an AI dashboard, or whatever it is, they have. And they’re oftentimes looking for capabilities to augment, maybe accelerate what they’re doing. So they’re not looking for standalone.
Because you can imagine that’s a worst case, right? No payer wants to offer 10 different user experiences for a patient who has these 10 conditions. They want to integrate, and they want to be the quote unquote, digital storefront, if you would, and have a common experience. And that requires an architecture for the DTx that can be consumed and integrated into somebody else’s. So method one, be the end solution; method two, be the enablement of somebody else’s in solution. And if you deliver value in both of them, now, your exit strategy says, well, my God, the exit strategy can be multiple, right? The exit strategy could be to a pharmaceutical company, for example. The exit strategy could be to a large payer. The exit strategy could be to one of the nontraditional.
I mean, think about today, I can promise you that Aetna, Cigna united, they’re not looking at each other as their sources of competition. They’re looking at Walmart and Amazon and BestBuy, and Walgreens. They’re looking at these new market entrants, who are going to disrupt in many ways healthcare, as we know, some people call it consumer-directed healthcare, but they’re going to look at that. So the exit strategy could be to that pathway. The exit strategy could also be that you’ve delivered value that you’re now going to go and go the IPO pathway as we’ve seen in the digital health industry. So I think the key though, is to not lose sight of the value. People often ask, how many subscribers do you have? And what’s your engagement rate? And we answer all those. But what’s more important is, what value are you creating? And if you’re creating value for these companies, the exits tend to work themselves out.
35:16 Eugene: So spoken like a great management consultant, there’s multiple options, Anand, you know. Also, as an entrepreneur myself, you don’t design from day one for an exit, right? You’re trying to find a market fit. But to me, and I’m going to infer it doesn’t sound like there’s huge plans on acquisitions or IPOs, etc. That’s my summary of it. But you did mention Pharma as a potential exit point, not necessarily for you guys, but just as a DTx.
And my background, I spent a couple of years in Pharma, and I’m actually curious on where’s your thinking? Because I actually did a post on DTx, right? Will a DTx company that understands the end consumer/patient swallow the pill inside? Or will we see Pharma companies swallowing digital therapeutic companies that are now generating digital revenues, right, for lack of a better term? So where do you stand on this?
36:25 Anand: Well, it’s a great question. Actually, there’s a couple of questions there. So let’s try to dissect and address each one. So what is the role of Pharma in the digital therapeutics lifecycle? Where do they actually intersect? And where do they play? And if you look at some of the earlier models, and you start to look at, for example, Pear and Novartis, okay, when they had an established business relationship, when you look at Click and Sanofi, for example, or Click and Otsuka, etc, okay. And initially, these pharmaceutical companies came in at a point in, what I would call the definitional stage of the digital therapeutic, what is it? How do you conduct a randomized control study? How do you get FDA clearance? It kind of a foundational formational pieces, if that makes sense.
37:13 Eugene: Talk about active ingredients as we mentioned earlier, right? What is an active ingredient or DTx?
37:19 Anand: Exactly. And who knows that better than the pharmaceutical company? At the same time, we have excellent relationship with Astellas. And Astellas came on later because we already had the established ingredient, we already had the established outcomes, FDA, etc. Now it’s more of a commercial relationship that says, hey, can we help you commercialize that is specifically outside of the US. And so in this case, you have two different roles for the pharmaceutical companies and one, they can be there in the foundational formative pieces. One, they can be there on the commercial end, right.
So on the commercial end, because you asked the question about, you know, are they going to create a separate revenue stream for digital therapeutics? When you actually look today across everybody, forget valuations, because that’s a different topic altogether. But if you actually just look at revenue streams, the revenue stream associated with the digital therapeutic is a fraction, a tiny fraction of the revenue stream of a drug. It’s different orders of magnitude, right? And so is it plausible or reasonable that digital therapeutics will generate similar revenue streams where they can be “a revenue stream of interest to a pharmaceutical company”? No. Maybe time will tell on that, but certainly not the case today. But can the digital therapeutic be part of a bundle, say, where the bundle may include drug, it could be a pharmacologic or biologic agent as software as a medical device, and maybe even some hardware and maybe even some human services, right? A bundle or a true bundle. And in that case, they’re not going to look at the…
38:58 Eugene: And we’re back to disease management/reversal 2.0.
39:02 Anand: Perhaps. Perhaps. But in this case, there’s an integral part of that DMV 2.0 that’s actually technology enabled, that not only provides incremental and unique value proposition, but it’s also a stickiness factor, because it may drive continued use persistence, compliance of that pharmaceutical agent, the drug, right. And so it may be a value multiplier. Maybe that’s the best way to say it. It may be a value multiplier to their existing revenue streams, because it’ll keep somebody on a drug longer.
And we all know in the pharmaceutical industry, Pharma has all of this data on the persistence and compliance and kind of drops off and you’re at 18 to 23% at some point reasonably quickly. And maybe there’s an opportunity to lift that curve and people will continue to fill the scripts that they need to fill and then there’s an opportunity to monetize that. And so in that case, the revenue stream from the uplift, it dwarfs the revenue stream from the digital therapeutic itself, right? And so I think the answer is, they can play in multiple places. And they can play in multiple models. And to be quite truthful, we’re at a stage where it’s all at its infancy. It’s not a one-size-fits-all, where people are figuring out different ways in different economies, how these things work. So it’s going to be fun to see how we go forward.
40:24 Eugene: Yeah, it’s going to be in spectrum for sure. So we started with you and I’d like to actually end with you. You know, what is your why, what gets you up in the morning on, Anand?
40:35 Anand: Wow! I think it goes back, Eugene, to where we started this discussion. Which is, yeah, I was on a recent panel at ATA last year, everybody was doing these Zoom panels, right. And the moderator asked us all at the end of the talk, you know, usually, they’ll ask you kind of your parting comments, or whatever. But this moderator was clever and said, I want you to use one word, one word to share with the audience. And so one of my fellow panelists said, opportunity. That’s a good one. Another one said, innovation. That’s a good one. I said, duty.
And the reason I said duty was I’ve been so fortunate to have the lens of a patient myself, to have the lens of a technology entrepreneur, to have the lens of a management consultant, to have the lens of a product strategy, architect, whatever you want to call it, okay. And somehow these things have all fused. And what keeps me going, Eugene, is literally, one life at a time, if we can change these lives, you know, I still remember in when my daughter was in grade school, she did presentation, and she asked me if I could come in and share with her classmates what it is that I was doing. And so it’s fun to talk to these kids. And she introduced me and she said, my dad is saving lives. I’m like oh, how cool is that? That’s an introduction. I can’t repeat that. I can’t talk that.
And I think we, as an industry, we have this discussion with the DTA all the time, we have an obligation, Eugene, we have an obligation to help solve this thing that hasn’t been solved for decades. And it’s not because people aren’t trying, the capabilities to do that, the technologies didn’t exist three decades ago, now they exist. And so if we have something that we can provide, that can help solve these, not just here, but think about the emerging economies around the world and think about health disparities, and think about the accessibility and affordability of health care to different minority communities, we have an opportunity to build those bridges to bridge these digital divides. And so there’s a duty I think, that’s what keeps me going and saying I can do it. And I’ve been given the pieces to do it. So shame on me if I don’t kind of thing, right? So yeah, that’s what keeps me going.
43:16 Eugene: Amazing. And with those words, I want to thank you. We’ve learned a lot, and we will talk soon.
43:25 Anand: Thank you, Eugene. Take care. All the best.
43:28 Eugene: Thanks so much for tuning into Digital Therapeutics Edition of Digital Health Today, production of Mission Based Media. Be sure to hit that subscribe button to this podcast on your favorite podcast player so you’re then automatically notified when we post our upcoming episodes where I speak with dozens of leaders and trailblazers who are forging the path for digital therapeutics.
If you’d like to learn more about Your Coach Health or Brian Dolan’s Exit & Outcomes, you can always find the links to this and more in the show notes for this episode. You can connect with me personally on twitter at HealthEugene, or follow my journey of writing my first book “Hard Pill to Swallow” at hardpilltoswallow.substack.com. I’m Eugene Borukhovich and catch you next time.
