Digital health has the potential to transform the pharmaceutical industry and the patient experience. Both digital health startups and pharma are eager to engage each other. Pharma continues to have significant need to leverage innovative “beyond the pill solutions.”
Digital health startups offer a wealth of potential solutions, and investors have noticed. Such startups attracted over $6.7 billion in Q1 2021 alone.
Given the potential synergy, why aren’t we hearing more pharma-startup success stories? Simply put, there is a “pharma-startup gap,” a disconnect due to the divergent ways pharma and startups operate. Differences in size, speed, processes and culture make it challenging for pharma and startups to partner.
Pharma firms are powerful and stable, with the resources and personnel needed to develop and test their products. But their ability to change course is limited and takes time. Pharma companies are complex organizations which operate via a myriad of internal processes.
They have built sophisticated channels for connecting with healthcare providers, navigating government regulation and handling payments. Safety and quality are nonnegotiable. They must be demonstrated initially and then monitored continuously.
As a result, pharma often moves slowly and cautiously. The average time from discovery to drug approval is over 10 years. To bring that single product to market typically costs over $2 billion.
Digital health startups are the exact opposite. They are small and nimble, and can focus on developing innovative solutions without regulatory constraints or complex infrastructure. Because funding can run out, speed is of the essence. A minimal viable product (MVP) can be developed in months – not years – and for a fraction of the cost of a drug.
Moreover, their product can be changed and updated rapidly in response to user feedback. If an idea fails, a startup can quickly pivot and change course. However, startups typically lack the infrastructure needed to scale and commercialize solutions. They may also not have a firm grasp of the regulatory requirements around certain digital health solutions.
Despite their differences, pharma and digital health startups each bring a set of unique and complementary strengths. Both contribute to improving patient outcomes and healthcare experiences. Startups can develop new ideas quickly, explore iterations and test them rapidly.
Pharma has access to well-developed sales and marketing channels, as well as strong connections with providers and payers. Tremendous synergies can be achieved when pharma and startups partner. But finding each other and working together is not always easy, due to these fundamental differences.
To effectively partner and bridge the pharma-startup gap, both startups and pharma need to learn to speak the same language. For startups to successfully partner with pharma, they need to understand what drives pharma – what keeps them up at night. Meanwhile, to successfully adopt the digital health innovations of startups, pharma must understand the timing and funding pressures that many startups face.
Through partnerships, pharma companies and digital health startups can leverage their complementary strengths and accomplish what neither can do alone. But until they learn to understand each other, they will continue to be stuck on their respective sides of the pharma-startup gap.
About the authors
Naomi Fried, PhD, is a founder and Managing Partner of Ambit Health Ventures, a venture fund focused on early-stage digital health and medtech investments. Previously, Naomi was the CEO of the boutique consulting firm Health Innovation Strategies, VP of innovation and external partnerships at Biogen, the first chief innovation officer at Boston Children’s Hospital, and the first VP of innovation and advanced technology at Kaiser Permanente. She advises and is on the boards of digital health startups.
Laura Gunn, PhD, is the managing director of a stealth startup. She is a pharmaceutical executive with over 15 years of experience across the pharmaceutical and diagnostic industries. Most recently, Laura was at Biogen, where she held several leadership positions, including head of scientific partnership and chief learning officer. With expertise in multiple functions across pharma, she is passionate about finding novel solutions for complicated problems.