As pandemic anxiety and depression continue to harm people’s mental health, digital therapeutics (DTx) is more important than ever before. This, combined with the $18.5 billion Teladoc-Livongo merger, has heated up competition in the virtual care space and catapulted the global DTx market to reach $56 billion over the next five years.

What is digital therapeutics?

DTx delivers evidence-based therapies via software, like mobile health apps, that replace or complement the existing treatment of a disease. They diverge from the broader digital health market in that they must be approved by regulatory bodies—and displaying proof-of-concept is at the core of their model.

Insider Intelligence expects DTx to be a $56 billion global opportunity by 2025.

Digital therapeutics market

DTx vendors leverage their tech to treat chronic conditions, which gobble up the lion’s share of the US’ healthcare spending. The surging prevalence of chronic conditions combined with long term effects of the pandemic is fueling growth in the global DTx market.

The DTx market will swell amid ongoing digital health funding. - Insider Intelligence
The DTx market will swell amid ongoing digital health funding. Insider Intelligence

Last year, Insider Intelligence expected the DTx space to hit nearly $9 billion by 2025, but its new forecasts expect DTx to be a $56 billion global opportunity by 2025.

Over the next five years, there will likely be an uptick in merger and acquisition (M&A) activity and closures among DTx companies. Pharmaceutical companies will likely also become active acquirers of DTx providers, and large M&As are a key sign of market maturity and future growth. 

Those that choose not to get on the DTx bandwagon might miss out on a massive opportunity—and drug companies and medical device makers that don’t jump at the chance of linking up with DTx providers  risk losing market share to emerging competitors. 

Digital therapeutic regulations

There has been an increase in regulatory acceptance and venture capital (VC) funding for the DTx market, as investors place their bets on consumers’ heightened interest in DTx platforms.

The FDA has been paving the way for swift DTx development—empowering DTx vendors to launch their platforms quicker than ever before. In April, the FDA loosened regulations surrounding approval of digital mental health tools to hasten their time to market.

Digital therapeutics trends

The Teladoc-Livongo megamerger put a spotlight on the power of digital therapies and the virtual care market. As a result, other telehealth players are eyeing DTx platforms to enhance the value of their services.

More telehealth vendors may purchase DTx startups as the market continues to grow.  - Insider Intelligence
More telehealth vendors may purchase DTx startups as the market continues to grow. Insider Intelligence

Pharma companies have been strategically pouring cash into DTx firms to capture a slice of the growing DTx market. And with the FDA greenlighting multiple DTx treatments, pharma companies can invest in DTx solutions with more confidence that they’ll see a return on investment (ROI).

Telehealth vendors have been charting unprecedented growth amid the pandemic, and are now more financially stable and able to expand their portfolios. As the DTx market swells alongside the digital health boom, more cash-rich telehealth vendors may purchase DTx startups, or develop their own DTx solutions in-house.

Top digital therapeutics companies

In the Digital Therapeutics Report, Insider Intelligence details the top DTx providers making waves in the digital health space, diving into what each company offers, recent funding, investors, FDA clearance, and significant partnerships. The companies mentioned in the report include: 

A patient uses Pear's reSET-O app to treat opioid use disorder.  - Pear Therapeutics
A patient uses Pear’s reSET-O app to treat opioid use disorder. Pear Therapeutics

  • Omada
  • Virta Health
  • Biofourmis
  • Akili Interactive
  • Pear Therapeutics
  • One Drop
  • Lark Health
  • Propeller health
  • Cognoa
  • Kaia Health
  • Happify Health

Future of DTx and digital health

The emergence of digital medicine threatens to reshape the entire healthcare value chain—and because drugs interact with nearly every healthcare stakeholder, DTx solutions are leading a variety of players to carve out room for digital solutions.

The US mental health crisis is only getting worse amid the pandemic, so DTx players that want to remain most attractive to their payer and employer partners should branch out into behavioral healthcare. 

And while we expect to see heightened activity in the space over the next several years, a few hurdles to growth remain:

  • Government-based insurers like Medicare have been slower to cover DTx, likely due to outdated regulatory framework.
  • DTx vendors need to ensure their platforms are integrated within the electronic health record (EHR) or software that physicians’ already work in.