Pear Therapeutics and how we price apps

Have we played ourselves by expecting healthcare to cost a lot?

A few weeks ago, my boyfriend and I started bickering for some reason. I can’t remember the cause, I just remember saying, “I do read the news, I know that Pear Therapeutics, which…has an app…announced a SPAC.”

I bring that up because it seems emblematic of where digital therapeutics are right now, even for people like me (and presumably you) who closely follow developments in healthcare. Digital therapeutics companies have some name recognition, and they’re starting to go public (via SPACs so far) but my guess is that most people don’t know what these companies do.

For the uninitiated, digital therapeutics are apps or other software meant to treat a medical condition. The field is mature enough to have a trade association, the Digital Therapeutics Alliance, which defines digital therapeutics (or DTx) as follows:

Digital therapeutics (DTx) deliver medical interventions directly to patients using evidence-based, clinically evaluated software to treat, manage, and prevent a broad spectrum of diseases and disorders.

High price, low adoption (for now)

Pear Therapeutics offers a portfolio of digital therapeutics meant to treat Substance Use Disorder, Opioid Use Disorder, and insomnia. The company clearly has expansion plans; the company’s tag line is “prescription digital therapeutics for the treatment of serious disease.”

As Health Tech Nerds points out, the company’s $1.6 billion valuation seems almost entirely based on the novelty and growth potential of digital therapeutics themselves, rather than Pear’s revenue and customer base. In fact, some back-of-the-envelope math (as done by HTN) suggests that they only have 4,500 downloads (and no word on engagement).

The company also seems to be basing its value on long-term plans to offer a platform for other digital therapeutics, presumably an infrastructure that allows smaller companies with novel software to navigate the FDA- and insurer-approval process. In an interview with MedCityNews, Pear CEO Corey McCann said, “We also see an opportunity to be a horizontal platform for our assets and other companies. We really see this space playing out in many ways a lot like the EMR where clinicians are working with only one platform.”

However, if Pear really does only have about 4,000 users, that would put it on the smaller side of digital therapeutics companies. Kaia Health, founded in 2016, offers software to treat musculoskeletal conditions. The company’s homepage boasts that they have more than 450,000 users internationally.

How tall is the fence around digital therapeutics?

The question remains: Besides being gatekept by insurer reimbursement, how are digital therapeutics different than any other app?

Pear’s investor presentation offers insight into how the company is thinking about that difference:

But why can’t health and wellness apps also conduct randomized controlled trials on their software? And why does Pear Therapeutics’s app have to cost $900?

I’m far from the only person with this question. HTN linked a piece from the blog Astral Codex Ten going deeper. The whole post is good, but I found this part particularly insightful (emphasis mine):

Right now, in the heady youth of the industry, I feel angry about prescription-gated apps that cost $899.


On the other hand, CBT-i [cognitive behavioral therapy for insomnia, which the Pear app offers] is really good. Apparently nobody was incentivized to offer it electronically without this system. And this system ensures the electronic version will be high-quality and evidence-based. Insurance will pay the costs in some hard-to-follow way that will never make any individual person feel like they’re spending the extra money. I can already feel myself beginning to endure and pity and embrace this.

Then, in the comments section, a bunch of coders stepped in offering to code a competitor app. It struck me that, unlike DIY prescription medications (which I think are really interesting and at the same time would never take myself), you can verifiably recreate the content of a digital therapeutic, assuming you have the appropriate medical advisors, etc.

Does this mean that coders can do this for any digital therapeutic app? If so, is this a new phase of the battle between gatekept and democratized, provoked by the internet? Is this a new version of Metallica suing Napster over its stealing of their intellectual property for mass distribution?

An interesting point is made by Trilug here in the Astral Codex Ten comments:

The mostly-free App Store route was taken by a different category of health app: period and fertility trackers. But, to Trilug’s point, are period trackers free because a bunch of them are low quality? Or are they low quality because a bunch of them are free? (It goes without saying that the free ones are selling your data.)

There is an FDA-approved period tracking and contraception app called Natural Cycles. The app is $10 a month, and it’s FSA/HSA eligible, but not reimbursable by insurance. Although it’s been FDA-approved for several years, and although Natural Cycles claims the app has about the same rate of success in preventing pregnancy as the Pill, it’s far from a common birth control method in the U.S.

It’s almost like consumers need the insurer reimbursement to think of the app as a legitimate treatment. In other words, we’re so conditioned to treatments and medications being expensive that we trust something to work more if it’s $800 than if it’s $10.

Because Natural Cycles thinks of itself as an app, rather than a digital therapeutic, the company almost apologizes on its website for charging anything. The irony is that it would likely see more adoption if it started charging far more.


I’m perhaps the most fascinated in digital therapeutics not for their healing power but because they’re opening a new front in the healthcare treatment market. The healthcare system excels at gatekeeping, and, as the Astral Codex Ten blog points out, the routing of digital therapeutic payments through insurers is a good way to keep a technology closely held and very expensive. At the same time, digital therapeutics are built using code at a time where programming is a widely distributed skill (especially compared to, say, pharmaceutical chemistry). 

There’s a world—and maybe this is more likely—where everyone “endures and pities and embraces” exorbitant costs for software. After all, as Astral Codex Ten points out, there was apparently no one else willing or able to create this app until Pear Therapeutics came along. Likewise for Kaia and MSK treatment. Maybe we should treat these as more or less new, pricey pharmaceutical options.

But because digital therapeutics are so new, and because so many people can code, I think the healthcare system will at least have to acknowledge that this software can’t be gatekept in the same way as prescription medications—and maybe that will democratize access in some way.

This information shouldn’t be taken as investment advice (obviously), and the opinions expressed are entirely my own, not representative of my employer or anyone else.