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New Report Targets Payer Pain Points for Digital Therapeutics Integration

Analysis  |  By Laura Beerman  
   March 27, 2024

The Digital Therapeutics Alliance is helping outline integrated digital product workflows that identify gaps for payers, clinicians, and patients.

Digital therapeutics (DTx) have a long way to go to become standardized treatment. Even after a DTx manufacturer demonstrates product cost-benefit, there are the larger pain points: how to pay for and integrate therapies delivered via hardware and software innovation into the U.S. healthcare delivery system.

But progress is happening — from defining more specifically what the pain points are to how they differ based on the payer. A new DTx Integration & Workflow Report this month from the Digital Therapeutics Alliance (DTA) provides more answers as one company — RelieVRx — makes strides in coverage classifications, pathways, and reimbursement.

A new category of medicine

As DTA notes about digital therapeutics: “As a new category of medicine, one of the first barriers is the challenge of integration into the traditional healthcare system so patients can receive access in a way that is convenient and consistent for them.” The organization’s March 2024 report adds that reimbursement “has significant influence on the workflows of the full ecosystem.”

Reimbursement varies based on whether a payer classifies a digital therapy as a pharmacy benefit, medical benefit, or wellness category — a classification that often varies over time and by payer.

Pharmacy and Medical Benefit Workflows both begin with negotiations between the DTx manufacturer and the payer and PBM, who make decisions about:

  • overall coverage based on the therapy’s cost versus its benefit to the health plan;
  • formulary placement, including tier and Preferred Drug List (PDL) status;
  • utilization management, such as prior authorization or step therapy requirements;
  • product pricing; and
  • contract details.

The workflow that gets a DTx from coverage determination to patient treatment is much simpler if the payer covers the treatment as a Medical versus a Pharmacy benefit.

Following formulary integration, health plan member communication, and vendor integration, a provider can prescribe the DTx — if required — and either a pharmacy or the manufacturer fulfills the prescription. Continued coverage and formulary decisions are based on ongoing cost-benefit analysis.

Three reasons why DTx pathways are important

These pathways — Medical versus Pharmacy, prescription versus non-prescription — are important for multiple reasons.

First, the U.S. healthcare system must be able to pivot for innovation. The right care in the right place at the right time is shifting — from remote facilities to the home and from traditional treatments and prescription drugs to software and wearables.

Second, every DTx company faces the same challenge: the best way to take their product to market, direct-to-consumer (DTC) or direct to payer. Big Health was one of the first companies to realize that the customer is the payer. It has partnered with national PBMs covering 150 million+ lives to expand access and scale faster. Because it has taken other companies longer to learn these lessons, the DTA has also published a playbook.

Third, things are looking up for reimbursement. One year ago this month, another company — AppliedVR — was the first to:

  1. have an immersive virtual reality (VR) product approved under an existing Medicare benefit category; and
  2. be approved with an entirely new reimbursement code.

The result? AppliedVR is the first company to create an immersive therapeutic now covered by Medicare.

CMS clears the way for virtual reality DTx reimbursement

In 2022, CMS approved RelieVRx, a treatment for chronic lower back pain, as a Durable Medical Equipment (DME) and under new HCPCS Level II code: E1905 - “Virtual reality cognitive behavioral therapy device (CBT), including pre-programmed therapy software.”

HCPCS stands for Healthcare Common procedure Coding System, “a collection of standardized codes that represent medical procedures, supplies, products and services” that allow Medicare and other insurers reimburse health insurance claims (NLM). A Level II code applies to products, supplies, and services including those that involve DME.

CMS approved RelieVRx as a DME with its own code because:

  • The product met all five CMS DME requirements related to use, effectiveness, and purpose.
  • It had already been FDA authorized as “Software in a Medical Device” versus “Software as a Medical Device” (emphasis added).
  • CMS noted that — with RelieVRx— “the medical software and the device on which it is housed are so integral to each other that we consider them to be one whole device, not software and a separate device.”

RelieVRx had received “FDA breakthrough status for the first de novo FDA-authorized immersive virtual reality (VR) medical device for home-based treatment” of chronic low back pain.

FDA breakthrough devices and de novo pathways allow innovative medical devices that are more effective than existing options to receive expedited review and approval for faster patient access.

The FDA and CMS approvals pave the way for Medicare reimbursement and make it more likely that other payers (commercial, Medicaid) will follow suit.

DTx pain points and open questions

While AppliedVR awaits specific Medicare payment and MAC fee schedule decisions, it has expanded its RelieVRx contract with the Veterans Health Administration, part of the Department of Veterans Affairs (VA).

The VA partnership is helping AppliedVR work through multiple coverage, reimbursement, and clinical workflow pain points. For RelieVRx, these include the pain points associated with DTx as a Medical Benefit that requires a prescription:

  1. Coverage is lacking and/or inconsistent. This remains true for DTx across all payers. Medicare now covers AppliedVR’s RelieVRx, but the product will need commercial, Medicaid, and employer reimbursement to grow and scale.
  2. Provider scope of practice is unclear. This includes who can prescribe, fulfill, and monitor the treatment. AppliedVR’s government contract allows VA physicians to prescribe AppliedVR.
  3. Delivery is not standardized. How DTx is delivered and by whom (pharmacy, specialty pharmacy, manufacturer). RelieVRx can be administered in VA facilities or in veterans’ homes.

In past interviews, AppliedVR founder and CEO Matthew Stoudt has noted that the VA partnership will help establish national guidelines for home-based prescription because RelieVRx is now on the VA formulary (the VA Federal Supply Schedule, or FSS).

These pain points must now be answered for other payers.

The Digital Therapeutics alliance plans to advance this work through future research, Task Groups, and DTx Integration & Workflow Reports “to make healthcare more accessible and of higher quality for patients and their families . . . [and to address issues] that prevent a positive experience for patients, payors, and providers.”

Laura Beerman is a contributing writer for HealthLeaders.


The Digital Therapeutics Alliance has published its third Integration & Workflow Report.

Its primary focus? Reimbursement as a primary pain point for integrating digital therapeutics into standard U.S. practice of care workflows.

DTA notes that reimbursement’s influence on the rest of the delivery system can unlock other pain point solutions — from coverage and formulary decisions to product prescription, distribution, and access.

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