The Digital Health Revolution in Germany: Promise, Potential, and Pitfalls
Navigating the Complex Landscape of DiGA, Healthtech Startups, and the German Healthcare System
Germany's digital health sector has been in the spotlight with the introduction of the DiGA law in 2019, which allows doctors to prescribe 12-week courses of app and web-based therapy to any of the 73 million people using public health insurance in the country. This revolutionary law was seen as a catalyst for the digital transformation of Germany's healthcare system, offering a promising platform for healthtech startups to get their apps in front of millions without having to negotiate with each of the 110 public health insurers separately.
However, the reality has been far from the initial promise. The uptake of DiGA treatments has been slower than expected, with only 203,000 prescribed by September 2022, a figure that pales in comparison to the 440 million regular prescriptions doled out each year in Germany. This slow adoption, coupled with protracted price negotiations with health insurers, has led to financial difficulties for some startups, with some even being forced into insolvency.
The pricing issue is a significant one. After a startup has been listed on the DiGA directory for 12 months, price negotiations begin with the insurers' representative body. The startup can choose its initial price, but at the end of the negotiation process, it must pay back the difference between the initial and negotiated prices for all the prescriptions sold after the first year. This has led to financial strain for many startups, with most negotiations resulting in a price cut of 50-60%.
In addition to pricing challenges, getting doctors to prescribe DiGAs and patients to request them has proven to be a significant hurdle. As of November 2022, only a third of doctors had prescribed a DiGA, and roughly the same amount stated they wouldn't prescribe a digital therapy. Furthermore, even when DiGAs are prescribed, about half don't get used, leading to further financial losses for the startups.
The process of accessing a digital therapy app is also cumbersome. Patients must take a photo of their paper prescription and upload it to their health insurance app. The health insurer then issues a 16-digit code that unlocks app access. This code is usually sent by post and can take weeks to arrive, causing delays and reducing the likelihood of the app being used.
Despite these challenges, there are signs of progress. A new draft law has been proposed that could digitise prescriptions, making DiGAs more accessible. Furthermore, the DiGA framework is attracting attention in other markets, such as France, Austria, and Belgium, potentially offering opportunities for German digital health startups to expand.
However, the road ahead is still fraught with challenges. The low level of adoption across the German healthcare system, the regulatory risks, and the lack of commercial success stories have made venture capitalists cautious about investing in DiGA startups. The future may see a period of market consolidation, where smaller, single-product DiGAs are rolled up into platforms of multiple digital therapies, reducing customer acquisition costs and making marketing more efficient.
Source: Sifted