Digital Therapeutics (DTx), as a new digital treatment method, is expected to continue to penetrate deeply into various aspects of mental health in the future, including prevention, diagnosis, treatment, and rehabilitation. In addition to existing drug treatments, non-drug treatments (surgery, radiation, and physical therapy), and psycho-behavioral therapies, DTx provides a new approach to evidence-based treatment and disease management.
On one hand, psychometric digital therapy, as a supplement to traditional treatments, can make up for deficiencies in treatment settings, timing, and user compliance. On the other hand, with policy support, psychometric digital therapy will further expand its indications, refine research and development targeting different stages of symptoms, and emerging technologies such as artificial intelligence and virtual reality will further promote innovation in psychometric digital therapy products.
In addition to companies focusing on digital therapeutics, software enterprises, smart hardware enterprises, internet companies, pharmaceutical companies, and others are all getting involved in the digital therapeutics industry. With high attention and support from policies and capital, it is only a matter of time before the market is fully stimulated, and the development of psychological digital therapies in China is expected to accelerate significantly.
On the occasion of World Sleep Day, Frost & Sullivan (Frost & Sullivan, abbreviated as 'Frost & Sullivan') has joined hands with Xinjing Technology, a leader in the Chinese psychological digital therapy industry, to jointly release the '2023 China Psychological Digital Therapy White Paper' based on research and analysis conducted through Frost & Sullivan's primary interviews and secondary desk research.
This report starts from the psychological digital therapy industry, specifically analyzing the current application status, challenges, and pain points of digital therapies in the psychological field. It elaborates on the market scale and driving factors of the Chinese psychological digital therapy industry, and looks ahead to the future development trends of the industry.
1Overview of China's Mental Health Service Industry
01Concept and Definition of Mental Health Services
Mental health is intrinsic and important to everyone's life. It influences our thoughts, feelings, and actions, supports our ability to make decisions, build relationships, and shape the world we live in. Mental health is also a basic human right that is crucial for individual, community, and socio-economic development. Mental health has both intrinsic and instrumental values, helping people connect, function, cope with, and develop.
Source: Analysis by Frost & Sullivan
Narrowly defined, mental health services refer to activities that maintain and promote people's mental health, guided primarily by psychological theories and methods. Broadly defined, mental health services involve the use of certain principles, means, and methods to solve people's psychological and behavioral problems.According to the professional competence requirements for service providers, mental health services can be categorized into three types: psychotherapy, psychological counseling, and general mental health services.
Psychotherapy services:Psychotherapy services are a professional diagnostic and treatment method for patients suffering from severe mental or psychological disorders, with a high level of expertise. Service providers are mainly mental health professionals at all levels (including specialized psychiatric hospitals and psychiatry departments in general hospitals). Currently, with the development of digital therapies for mental health, some digital platforms can also provide corresponding services.
Psychological counseling services:Psychological counseling services are generally provided for individuals with mild psychological disorders such as anxiety, depression, and pain, requiring a certain level of professional expertise. Service providers mainly include mental health professionals at all levels (including specialized psychiatric hospitals and psychiatry departments in general hospitals), as well as qualified social mental health service organizations.
pan-mental health services:General mental health services typically provide light-touch mental health services such as alternative psychotherapy, physical and mental wellness services, emotional counseling, career advice, child and adolescent psychological education, emotion management, meditation for sleep aid, emotional sharing, and positive mental social support for general users, with relatively low professional knowledge requirements. Service providers mainly include qualified social mental health service organizations and various digital mental health service platforms (internet-based psychotherapy and general mental health service platforms).
02mental health service industry industrial chain
Currently, the upstream of the mental health service industry mainly includes pharmaceutical R&D and production enterprises, medical device R&D and production enterprises, and digital technology development companies; the midstream mainly consists of mental health professional institutions at all levels, qualified social mental health service organizations, government-established social psychological service institutions, psychological aid departments set up by schools and enterprises, as well as digital mental health service platforms; the downstream covers consumers or patients who require general mental health services.
Source: Analysis by Frost & Sullivan
03Current Situation of Mental Health Service Industry
Although China's mental health services are currently in a period of rapid development, the problem of supply not matching demand still exists for a long time. Professional psychological treatment resources are still facing serious shortages, with a significant gap compared to developed countries such as the United States and Japan; psychological counseling and general mental health services have gradually gained social recognition in recent years and have become one of the important supplementary means to professional psychological diagnosis and treatment. In the context of widespread social pressure, the market for psychological counseling and general mental health services will continue to develop rapidly in the future.
According to data from the National Health and Family Planning Commission, as of 2020, there were 653,000 psychiatric beds in Chinese hospitals, with the number of beds increasing at a compound annual growth rate of 14.9%. The number of psychiatric beds per 100,000 people in China was 46.2. The resource of psychological therapists in China is in a serious shortage. According to the National Health and Family Planning Commission data, in 2020, there were only 40,490 practicing psychiatrists and 45,432 practicing assistant psychiatrists in Chinese psychiatric hospitals, with only 6.1 psychiatrists per 100,000 people, which is a significant gap compared to the United States' 12.7 and Japan's 11.9.
Relevant research in Nature suggests that 60 psychiatric beds per 100,000 people are considered the optimal situation, with 30 beds being the minimum level. Between 25 and 30 beds indicate a mild shortage, 15 to 25 beds are considered a moderate shortage, and less than 15 beds are considered a severe shortage.
Source: National Health and Family Planning Commission, Frost & Sullivan analysis
Affected by the COVID-19 pandemic, issues such as economic downturn and health concerns have brought immense mental pressure to people around the world. The incidence of various mental and psychological disorders has risen rapidly. At the same time, depression and anxiety disorders, which are already prevalent, have seen a surge due to the pandemic. Among them, in the first year of the pandemic, the global growth rate of cases of depression and anxiety disorders reached 25%, corresponding to an additional 530 million and 760 million severe cases, respectively.
Source: Analysis by Frost & Sullivan
In addition to the impact of the COVID-19 pandemic, according to World Health Organization data, one in every eight people globally suffers from mental health problems. Among them, 71% of patients with mental disorders have not received any mental health services, and global mental health service expenditures only account for 2% of total health expenditures. Currently, mental health problems are widespread globally, but the penetration rate of mental health services is still low, and the supply-demand relationship is still mismatched.
2Overview of the Chinese Psychological Digital Therapy Industry
01Definition and Classification of Digital Therapies
Digital therapeutics (DTx) are a type of therapy based on software programs that provide evidence-based treatment interventions for patients to prevent, manage, or treat diseases. In July 2017, the US FDA issued the first approval for a digital therapeutic regimen for substance use disorders (SUD). Since then, digital therapeutics have entered the public eye as a new form of treatment. Digital therapeutics offer a new approach to evidence-based treatment and disease management, in addition to existing drug therapies, non-drug therapies (surgery, radiation, and physical therapy), and psychological and behavioral treatments.
Source: Digital Therapeutics Alliance (DTA), Frost & Sullivan analysis
According to the DTA classification criteria, digital therapies can be divided into four categories: recording physical condition, managing or preventing diseases, optimizing drug therapy, and disease treatment. Unlike the broader concept of digital health, digital therapies have the following important characteristics:
✔ Disease management, interventions, and treatment methods based on evidence-based medicine and software programs, designed for specific patient populations and narrow clinical indications;
✔ The core is software driven by evidence-based medical algorithms, featuring high planning and precision;
✔ Internationally, medical digital therapy products are regulated by the US FDA, EU CE, and other authorities. In China, according to the 'Classification Catalogue of Medical Devices', digital therapy products are classified into treatment planning software, imaging processing software, data processing software, decision support software, in vitro diagnostic software, and others (rehabilitation training software), etc. The risk level can be comprehensively judged based on product description and intended use, and then the second/third category of medical device management applies. If it does not belong to medical devices, the regulatory requirements are relatively simple, and products do not need to follow relevant medical device regulations for research and development, clinical trials, and registration production. Sufficient clinical trial data to verify product effectiveness is the most important factor in the development and regulation of digital therapy products.
Source: Analysis by Frost & Sullivan
The research and development of digital therapies are based on digital biomarkers formed from a large amount of healthcare data. A digital biomarker is composed of one or more digitized phenotypes, which have been validated through evidence-based medicine and are associated with diseases. The application of digital therapies makes it possible to provide personalized treatment plans according to individual differences among users.
According to the treatment method, digital therapies can be divided into three main types: those that produce therapeutic effects solely through software, such as using VR to assist with falling asleep; those that produce medical effects through a combination of software and medication, which may reduce or enhance drug use; and those that produce medical effects through collaboration between software and doctors, enhancing the doctor's intervention and guidance.
Specific use cases, high evidence-based medical attributes, and strong regulatory oversight are the main characteristics of mental health digital therapeutics. Mental health digital therapy (DTx) products carry clinical risks as medical products and must undergo clinical trials to prove their effectiveness and safety before they can be approved as a clinical treatment plan. The development of digital therapeutics needs to be tailored for specific psychological user groups, indications, and clinical symptoms.
Source: Analysis by Frost & Sullivan
02Current Status of the Psychological Numerical Therapy Industry
Currently, there are mainly five business models for psychological digital therapy companies. Depending on the user, channel, and payment method, they can be generally divided into 2C model, 2B model, 2G model, 2H model, and 2I model. Each model differs in usage methods, payment forms, product features, and other aspects.
2C Mode:This model is directly targeted at individual patients or individuals, selling products to individuals through one-time purchases or service subscriptions. The 2C model is currently the mainstream business model and is also the preferred choice for most digital therapy companies. Under this model, DTx companies can achieve profitability more quickly.
2B mode:This model is targeted at corporate groups (employers), selling DTx products to these groups, which then provide the products as employee benefits or other forms to their employees. Given that Chinese enterprises generally do not place as much emphasis on employee psychological care as in Europe and America, there is great potential for exploration in this area in the future.
2G Mode:In the form of government procurement, DTx products can be included in basic medical insurance or public health services, allowing residents to obtain them for free or with a certain proportion of expenses reimbursed. In particular, with the country's increasing emphasis on the mental health of students, there may be a stable demand in the future.
2H Mode:Hospitals are a necessary pathway for medical-grade digital therapy products. DTx products, as medical devices, are prescribed by doctors to patients in the form of prescriptions.
2I Mode:The 2I model is the most promising business model to explore. Compared with mature markets in Europe and America, China has long-standing deficiencies in the commercial medical insurance payment model. On one hand, insurers intervene in diseases through digital therapies to achieve cost control; on the other hand, they use DTx products to achieve differentiated marketing and increase customer acquisition.
2) Forms of psychometric digital therapy products
Digital Therapeutics (DTx), as a new medical approach, has given rise to more diverse forms of products and treatment modalities. Currently, psychological digital therapy products are mainly categorized into VR/AR, wearable devices, applications, game interactions, etc., with a trend towards diversification. VR technology is the most widely applied in digital therapeutics, and some products have obtained NMPA approval.
Source: Analysis by Frost & Sullivan
Currently, clinical research on digital therapeutics is mainly driven by academia. According to data from clinicaltrials.gov, clinical trials conducted by scientific research institutions such as universities and hospitals account for about 70%, while those led by companies account for about 30%.
From the perspective of disease domain distribution, digital therapeutics have been tried and explored in most disease areas. Some popular research directions have emerged, such as mental disorders, behavioral and cognitive disorders, oncology diseases, etc., and some industry-leading digital therapy companies and products have been developed.
Source: clinicaltrials.gov, analysis by Frost & Sullivan
4) Application Scenarios of Psychological Numerical Therapy
Currently, psychological digital therapy has shown good therapeutic effects in multiple indications such as sleep intervention, children's attention training, substance use disorders, and cognitive disorders. Professor Huang Xiao from the Department of Psychiatry at Zhongshan Hospital Affiliated to Fudan University stated that there is more potential for exploration in psychological digital therapy in the future, with enormous application potential.
The effectiveness and safety of digital therapies have been recognized within the industry. Ideal therapeutic outcomes must follow evidence-based medical principles and be carried out under the guidance of doctors or professionals. Digital therapies can overcome limitations such as insufficient healthcare resources, treatment venues, and time.
Source: Analysis by Frost & Sullivan
03Market scale of psychological digital therapy in China
Digital Therapy (DTx), as a digitalized proactive intervention method, is expected to continue to penetrate deeply into various aspects of mental health care in the future, including prevention, diagnosis, treatment, and rehabilitation. It aims to fully mobilize patients' enthusiasm for participating in the holistic health management of their mental health throughout their life cycle, assisting them in improving their behavior and lifestyle habits. Mental health services can be categorized based on professional level into psychotherapy, psychological counseling, and general mental health services.
In 2022, the market scale of mental health services in China reached 133.68 billion yuan, among which digital therapy accounted for about 0.6%. With the continuous maturity of digital therapy technology and driven by multiple national policies promoting the development of the digital therapy market, the proportion of digital therapy in the mental health service market will reach 1.1% by 2025.
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Psychotherapy
Source: Analysis by Frost & Sullivan
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Psychological counseling
As a primary adjunctive treatment for mental illnesses, over 97% psychiatrists recommend psychological counseling to patients as an adjunctive therapy. With the increasing awareness of mental health, users' willingness to pay for psychological services has strengthened, driving growth in the psychological counseling industry and digital therapy market. Compared to medical-grade digital therapies for psychotherapy, the barriers to entry into the psychological counseling digital therapy industry are slightly lower, and more companies will enter this market in the future.
Source: Analysis by Frost & Sullivan
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pan-mental health service
The pan-mental health service industry entered a period of rapid development after 2019. Driven by the COVID-19 pandemic, user demand surged. The emergence of a large number of pan-mental health service platforms has improved the demand matching in the market. The pan-mental health service market in China will continue to maintain high-speed growth in the future, which has also brought growth momentum to digital therapies.
Source: Analysis by Frost & Sullivan
04Drivers of the Chinese psychological digital therapy market
The current market for psychological digital therapy in China is still in its initial development stage. Frost & Sullivan believes that with the strong support from the Chinese government for the mental health service industry and digital therapy-related medical approvals, the increasing public awareness of digital therapy, the economic development in China that is driving consumers' willingness to pay for treatment, and the innovative advancements in emerging technologies such as artificial intelligence and XR, the market for psychological digital therapy in China will continue to develop rapidly in the future.
Mental health is an important part of the public health system and one of the key directions of the Healthy China strategy. The Chinese government has gradually placed emphasis on promoting the specialization, standardization, and systematization of mental health services in order to improve the low coverage rate of the current psychological service system in China. At the same time, psychological digital therapy combines the characteristics of life sciences and information technology, which can improve the accessibility, continuity of mental services, and reduce the cost burden. Therefore, some local governments have also introduced various active measures targeting psychological digital therapy to promote the development of the market for this therapy.
The base population in China with mental health service needs is large, and there is a significant gap in the industry supply side. Compared to developed countries, China's mental health industry is still developing slowly, with a shortage of professionals in related fields, and the lack of detailed regulations and supervision for psychological counseling. In the future, as the industry gradually becomes more standardized, the development of psychological digital therapy can fill the gap in professionals to some extent and promote the development of telemedicine. In addition, with the growth of China's per capita income, people's willingness to consume mental health services is also increasing, and the commercial prospects for digital therapy are quite promising.
Digital therapy is a new model that generates effects through AI-powered software programs based on highly evidence-based medical evidence. With the continuous development of artificial intelligence technology, digital therapy will further develop rapidly. In addition, some companies have already used XR technology to enhance the immersive experience of digital therapy, using devices such as VR glasses to help solve psychological problems such as attention deficit hyperactivity disorder (ADHD) in children and drug addiction in adults. The outbreak of these emerging technologies will further promote the innovation and development of digital therapy.
05Development Trend of China's Psychological Digital Therapy Market
Frost & Sullivan believes that the future indications for the Chinese psychological digital therapy market will further expand, research and development targeting different stages of indications will become more refined, relevant regulatory regulations will be further improved, industry standards will be established, and emerging technologies such as AI, XR, and IoT will further promote innovation in psychological digital therapy products.
Currently, the scope of indications for psychological digital therapy in China is relatively narrow, mainly focusing on childhood autism, sleep disorders, and other mental and psychological diseases. With the growing market awareness of digital therapy, digital therapy companies will become more specialized in their indications, developing more refined products according to different characteristics and stages of the indications. It is expected that the scope of indications for psychological digital therapy will further expand in the future.
The digital therapy market in China started relatively late compared to developed markets such as the United States and Europe. Currently, it is mainly classified under traditional medical devices, with no specific management documents or approval channels for digital therapies. Supervision and approval are conducted according to medical device regulations. Drawing on the experience of advanced markets like the United States and Europe, future regulatory laws and regulations related to digital therapy in China will be further improved. As domestic psychological digital therapy products enter a mature commercial stage, more unified industry standards will be established, thereby further standardizing the Chinese psychological digital therapy market.
The advancement of emerging technologies such as AI, XR, and IoT devices will further drive the innovation of digital therapies. Currently, some companies have applied VR devices combined with digital therapies to treat psychological disorders such as ADHD in children and drug addiction in adults. In the future, with the development of other emerging technologies, such as IoT devices that monitor physiological indicators like brainwaves and heartbeats in real time, identify patients' immediate physical responses, and provide appropriate stimulation in conjunction with scientific treatment methods, AI can offer personalized psychological counseling and companionship services through intelligent voice recognition and semantic analysis. Psychological digital therapy products will continue to innovate.
3Best Practices in Chinese Psychological Digital Therapy: Xinjing Technology
In recent years, 'digital therapeutics' have been sought after by global capital markets due to their approval by the US FDA for use in psychotherapy. The essence of digital therapeutics (DTx) is the combination of computer technology and medical technology, which uses intelligent software-driven approaches to prevent, treat, and manage specific diseases. Digital therapeutics have proven their safety and effectiveness through evidence-based clinical pathways, and can improve healthcare efficiency, service efficiency, and reduce service costs.
Frost & Sullivan believes that digital therapies may reshape the development of the mental health service industry in our country.Currently, digital therapies have been widely applied and practiced in psychotherapy. The commercialization of these therapies varies based on indications, target populations, market positioning, etc., into two categories: medical-grade digital therapies and consumer-grade digital therapies. Among them, medical-grade digital therapy products have been included in the national medical device management.Overall, whether it is To B or To C, security is the foundation of a product's standing, while differentiation is the manifestation of its product strength.
Xinjing Technology focuses on mental and psychological VR digital therapeutics (DTx) medical solutions. It is one of the first high-tech enterprises in China to apply virtual reality technology to the fields of neurology and mental health, providing comprehensive medical and health solutions. As a pioneer in digital therapeutics, Xinjing Technology combines cutting-edge technologies such as VR virtual reality, artificial intelligence, neuroscience, and biofeedback with clinical treatment and rehabilitation methods for mental health. Using digital development technology, it has formed five major product systems including mental health training, children's attention training, elderly cognitive training, limb movement rehabilitation, and substance dependence assessment and rehabilitation. It has carried out application cooperation with hundreds of hospitals and research institutions in China, including the National Mental Health and Mental Wellness Prevention and Treatment Center, Shanghai Mental Health Center, etc. Xinjing Technology received tens of millions of yuan in Series A financing in October 2021, led by Power Health Fund, and completed over 100 million yuan in Series A financing in total in 2022.
The VR virtual reality therapy independently developed by Xinjing Technology is unique in its immersive, interactive, and imaginative features. By combining these with the principles and methods of traditional clinical psychology treatment, it creates a quiet and comfortable sleep environment for patients based on evidence-based medicine principles, ensuring effectiveness and safety. It provides psychological guidance and care through auditory and visual means, ultimately enhancing the therapeutic effect on users.
The mental health DTx training system of Xinjing Technology is suitable for psychological intervention and treatment. It can monitor vital parameters such as EEG in real time, achieve multi-dimensional recording of users' clinical information, and help doctors provide precise medical care. It features customizable training with multiple modules and plans, allowing for plan matching based on the actual situation of patients. Currently, two core products, namely sleep disorders and children's attention problems, are in the stage of large-scale clinical application and have proven their safety and effectiveness.
