Global pharmaceutical firms have long been a bastion of medical innovation, but the nature of this innovation today is evolving rapidly—from patient care centered only on drugs and devices to patient care that also includes predictive, intuitive, artificial intelligence (AI)-based digital health medicine and platforms. To maintain its foothold, pharma companies are actively seeking to partner with digital health firms to accelerate the design, development and deployment of digital medicine.
These enterprise-level partnerships offer pharma the chance to build capabilities and accelerate time to market; meanwhile, they offer healthtech firms marketable validation of their value, a source of funding and a commercialization partner. If not carefully managed, however, these partnerships can easily fall prey to cost and operational inefficiencies, commercialization delays and a breakdown of the working model.
Pharma-digital health partnerships offer value—and risk
We see three primary value drivers for pharma in building enterprise-level partnerships with healthtech companies. They are:
- Managing complexity. The growing use cases for digital health platforms mean that pharma companies face increasingly complex technology and regulatory compliance issues as well as additional privacy and security risks. Technology partners can help.
- Optimizing cost through technological efficiency. Pharma companies can avoid the cost of building digital health solutions from scratch and maintaining the technology stack. This means less time spent building (and rebuilding) core technical infrastructure and more time perfecting the product based on continuous user feedback.
- Ensuring focus. Freed from the need to solve technological issues, pharma can focus instead on what it does best—things such as gathering patient insights, developing novel solutions and bringing these solutions to market.
While current partnerships are largely centered on developing point solutions such as standalone software as a medical device (SaMD) use cases, digital therapeutics and clinical decision support tools, it remains to be seen if these partnerships can deliver value when they require combining multiple solutions from across platform partners, working directly with a health system’s IT and data infrastructure, building new or custom infrastructure for trusted use of third-party data or establishing multisided data exchange to boost network effects.
The potential value of these partnerships is balanced by a healthy dose of risk, namely:
- The scalability challenge. Navigating multinational regulatory environments, a prerequisite to achieving commercial scale, requires active market shaping. In the context of digital health, this capability remains nascent for both healthtech and pharma, considering the paucity of digital solutions that have successfully attained scale.
- Thirsty investors. Innovation in digital medicine doesn’t always translate into upfront cash flow, which may put pressure on healthtech (and its ROI-driven investors) to trade long-term value creation for short-term revenue.
- Backing the wrong horse. Investing in a suboptimal partner can force pharma to choose between propping up a struggling company or dissolving a partnership and starting over.
- Multilateralism is hard. Capabilities and contracts are likely not designed for use cases involving three or more parties, setting up inefficiency (at best) or dead ends (at worst) when pharma needs its partner to operate more openly or collaborate with a wider range of potential partners.
Guiding principles for managing risk in pharma-healthtech partnerships
Given the cost and complexity of internal product development or acquisition, we recommend pharma pursue partnerships with digital health firms—but only if they actively work to mitigate their intrinsic risks. We see four guiding principles for doing so.
1. Decide who does what
Pharma must consider which capabilities it should own and which it can outsource. We suggest using the following rubric to identify which capabilities should remain in house. We believe pharma should maintain responsibility for capabilities that meet the following criteria:
- Legacy pharma capabilities that can be readily repurposed to support the company’s digital health ambitions. These include insights and analytics, customer engagement, government affairs, value and access, and evidence generation and outcomes research.
- Capabilities that can be transferred to work with other partners. Building these capabilities, such as product strategy, offers pharma long-term advantage should a partnership fail to deliver against a use case or unravel altogether.
- Capabilities that enable pharma to undergo broader digital transformation. These capabilities, such as pathways and service redesign, are essential to keep in house for those companies wishing to adopt digital-first business models beyond medication.
Pharma may consider fully relinquishing responsibility for platform life cycle management and building infrastructure and platform capabilities. For all other capabilities that don’t meet the above criteria for keeping in house, outsourcing can be considered—with caution and ideally in a partial or hybrid manner.
Figure: Ownership mapping
2. Prioritize a patient-centered approach to innovation
We often see partnerships deliver on standalone use cases, such as SaMD solutions, evidence generation or remote monitoring. These solutions usually serve a specific purpose at a single point in the patient journey and deliver on a pharma-centric value proposition. However, by focusing exclusively on point solutions, pharma may needlessly limit its own potential to create transformative innovation. Ironically, it may be those companies with the deepest, most exclusive relationships with a single healthtech company that fall victim to this trap.
Pharma companies that succeed with digital health will be those that excel at thinking beyond individual point solutions to the entire universe of innovations that could transform the patient care pathway in a specific therapy area. To succeed here, we recommend that companies:
- Get your teams right. Ensure teams are structured and incentivized to encourage patient journey transformation.
- Be “promiscuous.” Don’t get tied down with a single partner, because this may blind teams to possibilities outside a given digital health company’s domain of expertise.
- Don’t chase “the need for speed.” Resist the temptation to trade the allure of an easy scale-up for the long-term potential of a more holistic solution. Prioritizing speed to market over pathways optimization puts another limit on pharma’s potential for transformative innovation.
3. Establish strong partner relationship management capabilities
Pharma and digital health partnerships represent a new go-to-market strategy for pharma and, as such, require careful program and product management. Pharma’s alliance management groups must be ready to manage four critical elements of the relationship between their companies and their digital health partners.
- Manage differences in agility and ways of working. Pharma companies work in long development cycles and, since patient lives are at stake, have a natural antipathy to the fast-paced, iterative engineering mindset of the technology sphere. Even though pharma’s digital health teams may themselves adopt agile ways of working, they will still be connected to their organization’s more deliberate business planning processes and culture. These differences can create tension if left unmanaged.
- Ensure continuous, two-way feedback and issue resolution. Digital health teams on the pharma side will be lean by design and may be responsible for multiple projects with different partners. There must be mechanisms in place to ensure the ongoing, transparent exchange of feedback to identify issues and address them quickly. Robust program management allows delivery teams to focus on delivery while leaving the relationship’s softer elements to others.
- Plan for new IP generated by the partnership. When pharma and healthtech work together, significant co-development is often still taking place. If a pharma company wants to one day either internalize IP generated through the partnership or migrate it to another one, companies must plan for this from the outset.
- Put a data strategy in place. A big part of the digital health value proposition for pharma depends on data. If there’s no strategy in place to extract value from it, partnerships will fall short of expectations. Before launching any partnership, ask and answer these three questions: Do we understand what data will be generated? Who owns this data? Do we have the technical infrastructure to ingest this data in a compliant way?
4. Maintain responsibility for go-to-market and commercial scaling
While the most mature digital health companies will have some existing in-field relationships with hospitals and other large customers, they can’t match pharma’s pedigree in engaging physicians and activating patients. This is why we recommend that pharma take ownership of the lion’s share of go-to-market and commercial scaling.
There are a limited number of areas where pharma may look to outsource aspects of commercialization to its healthtech partners. These include using partners to:
- Accelerate last-mile deployment for those markets and digital medicine solutions for which the partner already has existing presence and experience
- Process commissioned data to enable a service to take place, assuming no need for novel infrastructure
- Support channel for in-flight solutions responsible for service optimization
Other than this narrow set of activities, pharma should retain overall go-to-market responsibility for digital solutions. Doing otherwise takes pharma down the path of remaining “just” a drug company—rather than a life sciences company that happens to make drugs. But while pharma companies should leverage aspects of their existing playbook and organizational model, they must evolve to meet new reimbursement and access challenges inherent to digital connected health.
How pharma can begin building its partnership muscles now
The challenges to ensuring successful pharma-healthtech partnerships are many, but they shouldn’t be overwhelming. For those working within pharma’s digital centers of excellence (COEs), here are five steps they can take immediately to ensure current and future digital health partnerships are fruitful.
- Hone the vision for the pathways optimization function within the company’s digital health team and define its role within the broader digital health group
- Create a thoughtful team design that defines clear roles and responsibilities for pharma and its partners and establishes appropriate ways-of-working between pharma digital teams and their healthtech counterparts
- Consolidate use cases across therapy areas and then formulate a point of view on which of these should be delivered via platform partners
- Develop a plan for marrying pathways optimization initiatives with existing or planned standalone SaMD use cases
- Create a playbook to provide a unified model for scaling digital health initiatives across multiple platform partners
With research showing that traditional healthcare delivery only affects health outcomes by between 10% and 20%, pharma must cut itself a path that moves beyond medicine. Digital connected health offers the way forward. While partnerships are needed for pharma to deliver on the promise of digital connected health, pharma digital health leaders must take a broad, careful and forward-looking approach to establishing partnerships and managing their risks. Otherwise, they will not deliver on their objectives and will fail to support pharma in its broader business model transformation.
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