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Express Scripts throws a lifeline to digital health start-ups

Tim Wentworth, President of Express Scripts and Cigna Services, speaking at the CNBC Healthy Returns conference in New York on May 21, 2019.Astrid Stawiarz | CNBCDigital health companies are getting funded in droves, but many are struggling to get traction.So Cigna’s Express Scripts, one of the biggest pharmacy benefits managers, is throwing them a much-needed…

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Published on December 12, 2019

Tim Wentworth, President of Express Scripts and Cigna Services, speaking at the CNBC Healthy Returns conference in New York on May 21, 2019.

Astrid Stawiarz | CNBC

Digital health companies are getting funded in droves, but many are struggling to get traction.

So Cigna‘s Express Scripts, one of the biggest pharmacy benefits managers, is throwing them a much-needed lifeline. It is vetting companies offering cutting-edge treatments for certain conditions, such as diabetes management or respiratory health, then putting them into a “formulary” of recommendations for health insurance plans and doctors.

Right now, Express Scripts and other PBMs like CVS Caremark essentially decide which medications should be covered by health plans. They weigh factors like efficacy and cost, and place medications into tiers that are differentiated by the amount of cost-sharing or copayments required from patients. Doctors typically use this information to help figure out which medication to prescribe and will often try to start with lower-tier therapies.

By categorizing digital therapies into medication-like tiers, PBMs can make the case that payers are protected from higher costs while providing better access to the new treatments.

The move will also help the struggling digital health sector. In 2018 alone, venture investors poured $8.1 billion into digital health companies that aim to bring novel technology to the $3.5 trillion medical sector. However, start-ups in the space have seen relatively few exit events like IPOs or acquisitions. That has prompted some entrepreneurs to make the case that digital health has been one of the most disappointing bets of the past few decades.

Express Scripts' chief experience officer Mark Bini thinks his company can make a material impact by offering “confidence” and “peace of mind” to health planning customers on the fence about digital health. “This could be the pathway that sets the stage for broad adoption,” he said.

CVS is also planning a similar program, although it hasn't unveiled many details beyond its first “available vendor,” a sleep tech company called Sleepio.

Who's on the formulary?

Many digital health companies provide a combination of medical devices and software apps to people with chronic ailments. Their goal is to help people make behavioral changes so they can better manage their condition, and not just to prescribe a pill or device.

To prove that these treatments work, some companies have invested in clinical studies and other evidence. But that's not necessarily resulting in deals, and sales cycles for digital health companies remain notoriously slow.

The Express Scripts program kicks off in January with a formulary that will include 15 companies that treat conditions including depression, anxiety, asthma and diabetes. It plans to unveil further categories in the coming year, as other digital health companies tackle a range of diseases and conditions, including musculoskeletal pain, fertility and tobacco cessation.

This group selected Livongo, a digital health company that recently went public, to have a “preferred” status, in part because it is working across a variety of health conditions. Bini also took account whether the companies had clinical evidence, as well as their user experience, affordability and commitment to privacy.

“We see this as a signal to the market,” said Glen Tullman, co-founder of Livongo, noting that his company could see an uptick of customers. “It's a strong indication of Express Scripts' level of confidence in us.”

Other companies on the formulary include Omada Health, which focuses on diabetes and hypertension; Propeller Health, which is owned by ResMed and works with patients with respiratory ailments; and Welldoc, which is also in the diabetes space. All of these companies offer things like connected devices and software apps to patients and get paid through their relationships with health plans.

Bini said Express Scripts will make money by charging fees for the administrative work, but he didn't rule out rolling out rebates with digital health companies, as it gets from drug companies.

Other digital health executives note that the formulary could prove to be a benefit in the long run because their offerings are so new and widely misunderstood.

“If you look at biotech, for instance, investors put tremendous amounts of funding in because they know that if they can make a product that's effective and approved by regulators, there's a path to reimbursement. Magic happens and it just works,” said Chris Hogg, chief commercial officer at Propeller Health.

“In digital health, many of us started out 10 years ago and we did a bunch of clinical trials and a ton of pilots, and we made progress, and now we're wondering why a lot of it hasn't scaled,” he said. As Hogg puts it, the “rails” just haven't been built yet between the start-ups and the traditional health industry, and he thinks the formulary is a start.

“I think we underestimated the impact of those traditional rails,” he said.