Market Intel: Why Telehealth, Digital Therapies Will Provide Mental Health Support Beyond COVID-19 Crisis

BY MARION WEBB

Executive Summary

In this second part of a two-part series focusing on mental health tech, Medtech Insight highlights behavioral digital health companies that have attracted investors’ attention. Part one focused on transcranial magnetic stimulation.

Mental health has taken center-stage during the ongoing COVID-19 pandemic crisis with millions of people flocking to digital technologies such as teletherapy and therapy apps to help them cope with mental stressors.

Many experts believe that the digitization of health care and behavioral health, which has seen lightning-fast adoption among consumers and providers during the pandemic, enabled in large part by the removal of regulatory barriers, will drive innovation and investment opportunities.

According to venture capital firm Rock Health’s midyear report, in the first half of 2020, digital behavioral health companies received $588m in funding, up from $539m in 2019 (compared with 2017, were $273m was distributed), putting 2020 on track for the largest funding year ever. (Also see “Rock Health Reports Record Digital Health Funding Of

$5.4Bn In H1 2020, Sees Potential For Record-Year Funding” - Medtech Insight, 15 Jul, 2020.)

“We are bullish on the opportunity for telemedicine to play an important role in the treatment of behavioral health concerns,” Rock Health’s venture associate Chipper Stotz told Medtech Insight. “There is a really unique opportunity for digital health companies to really plug into this problem we have today to support patients with telemedicine from the comfort of their own home to offer evidence-based care that can be standardized and modularized in a way that allows not only providers and patients to track outcomes [but also] refer that back to health plans.” (Also see “Telemedicine Is Riding High, Hopes For More Provisions In ‘Phase Three’ COVID-19 Stimulus Package” - Medtech Insight, 25 Mar, 2020.)

Ralph Judah, managing director of health global markets at Deloitte Consulting LLP, agrees.

“I’m very bullish about the ability to intervene at a critical time, and not for somebody to have to wait until they get a physical appointment with a psychologist or a psychiatrist in order to have their problems and concerns addressed,” Judah told Medtech Insight.

Stotz said the pandemic has worsened a mental health crisis that has already existed. He cited a recent study by Mental Health America that said that nearly 100,000 Americans have reported anxiety or depression as a result of the pandemic. Demand for virtual health skyrocketed especially during the months of March and April when many doctor’s offices shut down to prevent the spread of infection of SARS-CoV-2 and started telehealth consulting or alternative options for in-patient visits. “The uptick in funding is, in part, driven by the renewed interest from doctors who are recognizing the problem that has really always existed, but has been exacerbated by the COVID crisis,” Stotz noted.

The Rock Health report showed that much of the funding distributed in the first six months of 2020 went to digital behavioral health companies that either offered virtual platforms to facilitate remote monitoring for acute and chronic conditions or digital therapeutics that provide users with clinical interventions.

Mental Health Funding

The largest rounds so far in 2020 were raised by three companies – Headspace, Inc., Mindstrong Health and Lyra Health – which raised 54% of the entire behavioral health funding round.

Santa Monica, CA-based mediation app maker Headspace raised $47.7m in equity and debt in February and raised another $93m in a series C round in June. The company said earlier this year it wants to grow its direct-to-consumer business, but also expand into the business-to-business segment.

The company’s app is used in several clinical trials, including one at the University of California San Francisco to measure the meditation’s app impact on work stress. Headspace’s chief science and strategy officer Megan Jones Bell told CBS News in June that Headspace is also working on a “separate program that’s developed in collaboration with patients, physicians, patient advocacy groups” that will be clinically validated for US Food and Drug Administration clearance.

Jones Bell didn’t say for which indication, but regulatory clearance would give the start-up the credibility and validation to set itself apart in the smartphone mental health space.

In July, Headspace also announced it joined forces with Snapchat to bring mediations to the app itself via Snap’s new Mini applications. “Headspace Mini,” rolled out on 20 July, allows Snapchat users to join into meditations.

San Francisco-based Mindstrong raised $100m in a series C round in early May, which it plans to use to scale its business.

The company partners with national and public payer organizations to offer its digital platform to its members. Its focus is on patients with severe mental illness such as schizophrenia, major depressive disorder and obsessive-compulsive disorder. Mindstrong’s in-house clinical team of therapists, psychiatrists and care coordinators connect with users via messaging, video or phone conversations to deliver virtual care. The company also offers video chats via their in-house psychiatrists to help members with medication management, according to their website.

The smartphone app also allows members to monitor their own mental health symptoms through AI-powered digital biomarkers that can track changes in mental health symptoms, such as stress and mood. It does so by tracking a patient’s smartphone behavior, such as how a patient scrolls and types. The company conducted a study with the Kadima Neuropsychiatry Institute to determine which smartphone feature would be the best predicators for a user’s mood, anxiety and cognitive assessments in patients with major depressive disorder and bipolar depression. When the markers indicate a problem, it triggers an alert to the member’s clinical team.

“People living with a serious mental illness will tell you that managing their symptoms isn’t one of those things that fit neatly into business hours or can be deferred because of COVID-19,” Mindstrong’s CEO Daniel Graf said in a statement. “The combination of our technology and our inhouse clinical team puts us in a position to unlock a unique solution that increases access to care and improves health outcomes.”

Burlingame, CA-based Lyra Health, which partners with companies to offer their employees personalized mental health treatments through its network of providers, closed a $75m series C round in March. The funding will be used to expand its platform technology and network of evidence-based mental health providers, the company said.

Mental Health Issue Survey Among US Employees

Lyra Health has a network of more than 3,000 mental health providers that it matches with employees and spouses and children based on their individual needs. Employees and covered dependents start off by accessing Lyra’s digital platform and entering symptoms, which are used to build recommendations for treatment. The patient can then schedule an appointment with a matched provider online.

Joe Grasso, clinical director of partnerships at Lyra Health, said the company has seen an 84% increase in weekly care registrations from midMarch to May and added more than 620,000 new members to the population eligible for Lyra benefits.

“We expect the need for mental health care to continue growing due to COVID-19 and the racial justice movement,” Grasso said.

He pointed to a recent study Lyra Health conducted with National Alliance of Healthcare Purchaser Coalitions that surveyed more than 12,000 US-based employees who receive health insurance through their employer that found 83% of Americans experience mental health issues.

Meanwhile, 40% of survey participants said they don’t believe their employer cares about their mental health, beyond being productive at work.

“The findings of the study are eye-opening – including the fact that many of these employees have struggled to access mental health treatment with only 14% stating that they have spoken to a mental health professional during this time of turmoil,” Grasso said.

While Lyra Health has partnered with more than 40 companies, it signed nine new customers since the COVID-19 shutdowns began including big employers such as Starbucks, Morgan Stanley and Asurion. He said six new customers are slated to be added for the third quarter.

Among other notable companies in this space is San Francisco-based Big Health.

Big Health developed two major digital health apps, Sleepio and Daylight, to help users manage poor sleep and anxiety, respectively. Big Health raised $39m in a series B round in June, which was backed by Glide Health and Morningside Ventures with participation from Samsung NEXT and prior backers Kaiser Permanente and Octopus Ventures. The company plans to use this funding to grow its distribution channels and marketing efforts.

Big Health’s Daylight app

Both digital health apps use cognitive behavioral therapy (CBT) techniques and solicit feedback from users to deliver personalized therapy. The Daylight app aims to reduce mental health issues such as worry and anxiety.

On 28 July, Big Health published positive results from a six-week long randomized controlled trial comparing the digital CBT Daylight app in 256 participants with moderate-to-severe symptoms of generalized anxiety disorder (GAD) to a control group of individuals with anxiety that may have received other treatment (including possible pharmacological intervention)for their anxiety during this time period, but were not using the Daylight app.

Four weeks after the intervention period, 71% of Daylight users in the study achieved remission of GAD compared to 33% in the control group. The improvements achieved with using the Daylight app lasted six months following the intervention, which coincided with the beginning of the pandemic when many people had heightened anxiety. The study results were published in July in the medical journal Depression and Anxiety.

Peter Hames, CEO and co-founder of Big Health, told Medtech Insight that this is the latest study of a total of 13 published randomized controlled studies.

The company’s apps have seen a huge upswing in demand since April when it – along with other companies such as Headspace and digital health company Omada – offered their platforms for free to help individuals cope with mental stressors during the pandemic.

“We have signed up 6.5 million lives to access our solutions globally,” Hames said. That included large employers such as Nike, McDonalds, Target, Home Depot and Comcast, the UK’s National Health Service, as well as payers such as the Boston Medical Center. CVS Health is also now offering both products to its employees.

But Hames said that the platform is no longer being offered for free to the community as it was intended for use in the “first few weeks of the pandemic to help those with the most need.”

However, he said, a side effect of the pandemic is more employers are recognizing the need to provide mental health offerings for their

workforce, and he believes that Big Health can be a part of the solution.

“As employers try to get back to some [resemblance] of new normality, then we’re having a lot more conversations with employers about how we can provide help to their population base,” he said.

He also agreed with Stotz and Deloitte’s Judah that the pandemic has uncovered a problem that has been around for a long time. Hames noted that 70% of people get no help at all with chronic mental health issues and of the remaining 30% who get care, most rely on pharmacotherapies such as antidepressants that can have sideeffects.

“There has been a great acknowledgment as a result of people being isolated of the value of digital health solutions that can be accessed from wherever you are … the biggest thing for me it’s made mental health a topic that’s unavoidable, which I think is a positive thing,” Hames said.

Another start-up, Hims & Hers, also gained traction for its mental health app during the crisis.

The company started out by building its business around the de-stigmatization of disorders such as erectile dysfunction and sexual health, then moved into the mental health space with anonymized group therapy and guided meditation sessions. In late July, it also introduced a new service that connects people with providers who can prescribe and manage common medications for depression and anxiety.

Reuters recently reported that the company is exploring a public debut which could raise its valuation to more than $1bn.

The Rise Of Teladoc

Since the pandemic, mental health providers in hospitals and private practices have also started using telehealth offerings or significantly expanded their telehealth capabilities, including mental health offerings, as a way to continue to serve their patients and recoup lost revenues.

Among the leading vendors in that space are publicly held Teladoc Health, Amwell and Doctor on Demand, which all reported unprecedented growth since the pandemic hit.

Teladoc connects patients with health care providers associated with hospitals, health systems, physician practices and health plans, through a highly flexible technology platform used to complete millions of telehealth visits. It derives most of its revenue from subscription access fees.

On 29, July, the company reported it ran 2.8 million virtual visits in the second quarter of this year, a more than three-fold rise from the same period last year. During the second quarter, Teladoc’s total revenue rose 85% to $241m and global revenue subscriptions access fees revenues rose 64% year-over-year, the company reported. On 1 July, Teladoc completed the buy-out of virtual care provider InTouch Health for $600m and with that expanded its offerings to InTouch Health’s 450 hospital clients.

The company covers more than 450 medical subspecialties, but behavioral health has been a strong growth driver due to the rising use and upselling of mental health services to existing customers.

Taladoc’s CEO Jason Gorevic told investors during the second-quarter earnings call on 29 July, “while general medical visits continue to

exhibit significant growth, demand for specialist care, including dermatology and mental health, continue to grow even faster.”

“We’re seeing tremendous demand for mental health visits in particular as visit volumes have grown sequentially in every months of the year based on the business-to-business and directto-consumers sides of the business,” he said. “BetterHelp, our direct-to-consumer mental health offering, is exhibiting accelerating traction and continues to significantly outperform our expectations.”

Gorevic also told investors that the “pandemic has accelerated the widespread adoption of virtual care, and added, “I’m confident there’s no going back.”

The telehealth sector has been largely driven by eased government restrictions on telehealth use such as waived licensing requirements which allowed telehealth companies such as Talkspace and BetterHelp to provide teletherapy across state line, removed previous barriers of location to receive telehealth services for Medicare beneficiaries, and provided reimbursement parity for providers.

The Trump administration on 3 August took a big step to expand virtual visits including mental health under Medicare with an executive order to direct the departments of Agriculture and Health and Human Services, and the Federal Communications Commission, to join forces for building the infrastructure to support telehealth in rural communities beyond the pandemic. (Also see “Telehealth: Trump EO Would Extend Payments, While CMS Proposes Permanent Rule” - Medtech Insight, 5 Aug, 2020.)

But there are still many unanswered questions that could block widespread adoption in the future with reimbursement and privacy of data ranking high on that list. (Also see “Telehealth Act Introduced In US House Would Eliminate Geographic Originating Site Restrictions” - Medtech Insight, 17 Jul, 2020.)

But Gorevic remains optimistic for growth. For 2021, he forecasted a 30%-40% revenue growth for Teladoc, noting that in the first half of 2020, the company onboarded 15 million new paid members in the US alone, including 8.5 million in the second quarter.

Teladoc and diabetes coaching company Livongo Health, Inc. announced on 5 August they have agreed to merge in an $18.5bn cash and stock deal, which is expected to drive revenue of 30%- 40% for the combined company over the next two to three years, Teledoc CFO Mala Murthy told investors in an earnings call on 5 August.

“I recently shared the virtual stage with US HHS Secretary Alex Azar,” Gorevic said during the earnings call, “and when asked about virtual care Secretary Azar said, “I think we’d have a revolution if anyone tried to go backwards on telemedicine. This is now an embedded part of our health care system.”

Boston-based Amwell raised $194m in a series C funding round in May, led by Allianz X and Takeda and reportedly confidentially filed for an initial public offering. The company told CNBC in May that it has seen a 1,000% increase in visits amid the pandemic, and even higher in some places.

San Francisco-based Doctor on Demand secured $75m in a series D financing round in July. The financing round was led by equity firm General Atlantic with participation from existing investors. The company said it will use the funds to expand access to virtual care. Doctor on Demand said on 8 July it more than doubled its covered lives in the last six months, covering more than 3 million virtual visits.

Untapped Opportunities

Stotz foresees untapped funding opportunities in areas that remain underserved in the digital behavioral health sector.

“Things like eating disorders, obsessive compulsive disorder, post-traumatic stress disorder that are not only incredibly pervasive to people’s lives, but also costly for health plans to cover their members who have these conditions,” he noted.

More recently, Rock Health has also been interested in the pediatrics space, noting that many behavioral health concerns emerge during childhood adolescents.

Teladoc is also exploring this opportunity. In April, the telehealth giant began working with Cincinnati Children’s Hospital Medical Center in a pilot program to develop the first telehealth platform for pediatrics.

Teletherapy Pros And Cons

While digital technologies offer many advantages for patients, such as real time help from the convenience of their home, it also poses unique challenges.

Patty Oneal Mas, a licensed couples and family therapist, in private practice in San Diego, CA, said she first started using teletherapy in her practice during the lockdown in March via the telemedicine platform Doxy.me.

She was pleasantly surprised by the positive response by patients. For some of her clients, such as people with social anxieties and looking for flexibility in scheduling appointments, teletherapy offered a good alternative.

But there are also cons in telehealth. Among them are technical glitches, such as with Wi-Fi access, which interrupted the flow of sessions or couldn’t get it started. Some clients had trouble finding privacy at home and were “hiding in the closet” or calling her from the car.

Telehealth is also no substitute for the one-on-one human connection.

“I think there is something about being in the same space and having that connection,” Oneal Mas said. “It [teletherapy] takes that physical connection out of it … I really appreciate that and I think that clients do to … they told me they can’t wait to see me in person.” Also, she finds that for some patients with serious mental illness, teletherapy is simply not the right solution.

With coronavirus cases spiking again in many parts of the US, including in San Diego, Oneal Mas is still not offering face-to-face meetings in her practice. But she does offer patients, who feel comfortable with the idea, outdoor private sessions with protective masks and social distancing rules enforced.

Oneal Mas expects that in the future, most patients will return to see her face-to-face. But she plans to still offer teletherapy for a small number of clients who prefer it.

“I think the ratio is going to be 90% in-house and 10% telehealth,” she said. “Probably for some of my clients, telehealth is a nice option. I had someone move to Northern California and I now I can still see her through telehealth.”

Deloitte’s Judah believes that the pandemic will accelerate the emphasis on early detection and prevention of mental health issues forward by ten years to 2030 and transform the health care industry as we know it. (Also see “The Rise Of Digital – Deloitte Offers COVID-19 Recovery Strategies For Medtechs” - Medtech Insight, 22 Apr, 2020.)

“We’re seeing two things happen in behavioral health that are supporting this change,” Judah said.

There is already a major cultural change driven by the younger generation, particularly by the Generation Z, to publicly discuss mental health issues, breaking down long-held social stigmas.

He also feels that younger people are more willing to engage in teletherapy and digital therapeutics.

Though companies such as Lyra Health’s Grasso would disagree.

“We see a lot of member interest in virtual mental health care options – especially now as a result of COVID-19 – but it’s person, not age-specific,” Grasso said.

Judah, however, has observed that Deloitte’s clients’ sensitivity to behavioral issues has been heightened by the pandemic, “simply because it’s more pronounced and more urgent.”

“This situation has stressed employees … working from home, trying to care for children at home or sick loved ones is putting a lot of pressure on employees that is going to get the attention from human resource departments,” he said. The de-stigmatization of mental health issues combined with scientific breakthroughs could drive low-cost access to mental health services. He also anticipates that mental health will be more integrated with primary care to address issues early and will be covered by insurance.

There is tremendous potential for digital technology to transform mental health. With more than 10,000 apps now crowding this market, it can be difficult for both providers and patients to decipher which ones are truly backed by science and effective. And in many cases, the research to support that these tools are effective is lacking. The FDA announced in April it would relax certain premarket requirements for computer programs and mobile apps that support the treatment of conditions such as depression, anxiety and insomnia to address mental health needs during the COVID-19 crisis. But it has no regulatory requirements for low risk general wellness apps.

“It’s incredibly hard for patients to discern with just the plethora of options available on the App Store who is and who isn’t providing evidencebased care, the more outcomes and clinical vigorous validation that companies can provide can really help patients navigate to the right ones to care for them and help health providers and health plans to find who to work with,” Stotz said.