Digital Health: Mental Health AI Chatbots

In this article we cover Market size, competitive landscape, regulatory hurdles and risk faced by AI mental health chatbots

I. Market Size of Mental Health Chatbots: ~$24B target spend for AI chatbots expected to grow at ~6% CAGR over the next 5 years

II. Landscape of Mental Health services: Opportunity for AI chatbots to fill in gaps in Telehealth offerings and provide personalized treatment at affordable cost

• Brick and mortar Facilities (eg. Life Stance):

  • Offered by licensed therapists, psychologists or psychiatrists

  • Therapy is patient or physician initiated

  • $100-250 per session covered by commercial payers

  • Applicable for sub-clinical to clinical diagnoses E.g., stress, depression, schizophrenia, PTSD, ADHD and addiction

• Telehealth Facilities :

  • Life Coaching (eg. Headspace, Calm) :

    • Offered by unlicensed life coaches

    • Patient initiated

    • $50-100 per year entirely OOP

    • Applicable for sub-clinical conditions eg. stress

  • Teletherapy (eg. Talkspace):

    • Offered by licensed therapist or psychologists

    • Patient initiated

    • $2.5-5K per year ($50-100 per week), largely OOP

    • Applicable for sub-clinical to clinical diagnosis

  • Telepsychiatry (eg. 1 Doc Way)

    • Offered by psychiatrists

    • Physician initiated

    • $5K+ per year ($85-135 per session), covered by commercial payers

    • Applicable for clinical mental health diagnoses

      
      

III. Landscape of Mental Health AI Chatbots: Successful companies have developed rules based AI chatbots and received FDA breakthrough status

IV. Regulatory process for Mental Health AI Chatbots:

• Required for 'medical grade' chatbots only, but can unlock ~100x ticket size per patient ($50-100 per year to $2.5-5K per year)

• Process:

  • Classified as 'Software as Medical Device' (SaMD)

    • Classified as Class II ('moderate risk') in US and Class II A ('low-medium risk') in EU

  • US FDA / EC came out with initial AI action plans in 2021, final regulation expected in 2024-25 

  • Expect 2-4 years to complete process post FDA approval (see detailed process and levers to accelerate process below

Source: ISPE

V. Mental Health AI Chatbots