Case: Pear Therapeutics’ Failure: Paying the Trailblazer Tax (Case: SM-369; date: 08/22/23; length: 19 pages)
Authors: James Tai, Ethan Goh, Margaret Wenzlau, Shikha Avancha, and Professor Kevin Schulman, MD, MBA, Stanford Graduate School of Business
Background
Digital therapeutics (DTX) offers the promise of using digital technology to benefit patients. The concept is to build from existing science and clinical strategies to create algorithms to support improve patient outcomes. In contrast with consumer applications, DTX algorithms are meant to carry a clinical label, and be subject to FDA review as medical devices (potentially including clinical trials to support the labeled indications).
One of the most interesting companies developing the DTx concept was Pear Therapeutics. At one time Pear was a digital health unicorn valued at over $1 billion. It pushed for the first mover advantage in the DTx space by aggressively expanding its R&D portfolio. Unfortunately, the reimbursement for the DTx market was slow to develop, and Pear’s aggressive investment in research and marketing outmatched market acceptance of their products, leading to Pear’s bankruptcy in 2023. This case asks the question of whether this is the end of the DTx concept, or just the “Trailblazer’s Tax” leaving interest in the space for new entrants.
The case reviews the development of the DTx Concept, and the regulatory and reimbursement challenges for this class of technologies.
Download the case. For inquiries, contact Kevin Schulman kevin.schulman@stanford.edu