The ripple effects of a digital health company’s implosion

If you read any medtech publication (like ours), you’ve probably heard about this.

In April, behavioral health care company Pear Therapeutics filed for bankruptcy in news that rocked the digital health world. 

In its wake, Pear left an industry—and state health programs—cautious about buying into similar solutions in the future. The Oklahoma Medicaid program, for example, appears hesitant to buy into a similar digital therapeutic in the future after being “stung” by Pear’s tumble from grace.

So what does this mean for patients? And Pear’s digital health startup peers? Let’s dive in.

What happened with Pear Therapeutics?

Just two years ago, Pear laid out projections for its future commercial scale in regulatory filings. 

They forecasted that their behavioral health prescription app business would grow to $125 million by 2023. As we can see from the bankruptcy filing, they didn’t come close.

“There were definitely some indicators that would have said, ‘listen, this is going to move very quickly and we certainly are optimistic in terms of where those numbers are going to go,’” Pear’s former chief commercial and strategy officer Alex Waldron said in an interview with STAT. He conceded that “in retrospect, you could certainly say they were too aggressive. But some of those aggressive statements were made before a lot of the things that caused macro issues — exogenous things you couldn’t control for — fell out, which is a shame for everybody.”

Some of those “exogenous things” Waldron alluded to likely included the movements of the market. When Pear was making those projections in 2021—we all remember—digital health was experiencing an unexpected boom due to the pandemic-induced mass-uptake of telehealth and loosened insurance restrictions.

But when Pear turned its attention to convincing private and public insurers to cover its digital therapeutics, they hit many walls. One of their successes was the value-based agreement they made with Oklahoma, which became one of the first U.S. states to offer digital therapeutics to Medicaid patients. Now, to many, that gamble appears to not have paid off.

“I don’t want to say we’re not receptive,” Terry Cothran, the senior pharmacy director at Oklahoma Health Care Authority said at the Digital Therapeutics Alliance’s summit. “We’re just very, very cautious. It would be hard for me to convince my leadership to take that leap again so soon.”

Our perspective: When health tech companies implode, patients can suffer. 

But there’s a caveat.

As Oklahoma Health officials’ remarks at the DTA Summit made clear, our industry takes a reputation hit when bigger players like Pear appear to fall out of nowhere. Peer companies on more solid financial footing begin to sweat. Projections get less optimistic.

More importantly, patients can seriously suffer when health tech companies disappear. This is especially clear in the medical device space. Think of Second Sight vision implant recipients—with the company that designed their devices going away, patients were left having to pray that their devices didn’t malfunction or require upgrades.

At the same time, we must remember that our industry is resilient. 

Let’s take a look at another recent high-profile corporate collapse: Silicon Valley Bank. There were predictions that startup banking and the fintech industry would have a hard time bouncing back from the trust lost in the wake of the bank’s collapse. However, users and investors have recognized the benefits of working with agile, innovative companies in that space. 

When it comes to digital health, we think overall attitudes will remain the same. Though we may be leaving the pandemic-induced boom in our industry, health tech is not going away.