Partnering with Pharma: The realities faced by HealthTech startups

Christian Hein builds AI that drives impact in healthcare. At Novartis, he scaled AI from pilots to enterprise platforms, reaching over 400,000 patients and more than 5,000 reps. Today, he advises Pharma, MedTech and HealthTech ventures on AI strategy, governance and value, while partnering with investors and serving on the boards of companies advancing AI in healthcare.  

This is his advice for HealthTech startups who are looking to partner with Pharma…  

Having seen it from both sides, Christian highlights 14 challenges that make collaboration complex. While the process can feel daunting – even discouraging – the message is not to avoid it, but to approach it with realistic expectations, preparation and awareness of obstacles. A strong Pharma partnership, though difficult to achieve, can be extremely valuable if managed well.

1. Slow to digital transformation

Unlike most industries, Pharma has not been significantly transformed by AI or digital innovation and largely operates under the same business model as 20-30 years ago. While there’s some experimentation with AI, the industry moves slowly because its existing business model is already profitable and stable, so there’s no urgent need to fully adopt AI.

2. Very risk averse

Pharma takes enormous financial risks because developing a new drug costs around $2 billion. While this makes the industry highly innovative, failure is extremely costly – sometimes in the hundreds of millions – so Pharma lacks a startup-like culture of rapid experimentation and pivoting. As a result, when an approach fails, the common response is to revert to traditional methods rather than try new ones.

These first two points are important to understand before approaching Pharma or considering the partnership route, as it can help shape expectations, strategy, and the way startups demonstrate value.

3. Lacks AI expertise

Pharma isn’t a hub for digital or AI expertise. Many companies hired digital/AI teams over the past decade but often later “downsized” them due to unclear ROI and lack of strategy. As a result, senior executives are generally not AI-savvy, so pitches need to be extremely simple because complex concepts often go over their heads.

4. One advocate isn’t enough

Even when someone in Pharma supports a new solution, they typically cannot make decisions independently. For anything beyond a small pilot, startups need to convince multiple stakeholders across therapeutic areas, geographies and decision-making boards. That supporter can act as an internal champion, but they need the tools and influence to persuade others.

5. Constant changes in teams

In many Pharma companies, employees typically stay in a role for 2-3 years. This means stakeholders frequently change, and new people often overhaul previous initiatives. Combined with regular corporate restructurings, this creates constant disruption, so it’s crucial to regularly identify and engage with the current decision-makers.

6. Consider finance teams and budgeting cycles

Finance teams are critical, but often overlooked, gatekeepers. Annual budgets (most often set in Q3-Q4) dictate what can be spent, so entering late may mean having to wait a year or more, though leftover funds from cancelled projects can occasionally be leveraged. Multi-year commitments are rare, so startups must plan for yearly cycles and ensure Finance fully backs any promised funding.

7. No partnership structures in place

In traditional biotech, Pharma has a well-established process for acquiring and managing molecules, involving three roles: scouting for new molecules, business development/deal-making, and alliance management to oversee partnerships. HealthTech, by contrast, lacks these structures. Startups often end up dealing with Procurement, which treats them like any other IT vendor – focusing on cost reduction and standardized contracts. Unlike molecular deals, HealthTech business models are still evolving (SaaS, service-plus-cost, royalties, etc.), there’s no standard process, and negotiations are slower and more complex as a result.

Understanding this early on is critical. Startups should be explicit about the type of partnership being proposed and consider carefully what structure will be most appealing and practical for Pharma.

8. Multiple risk-averse functions

When partnering with Pharma, startups encounter several risk-averse functions whose primary goal is to prevent problems and take zero risks, not to drive innovation. Key examples include Compliance, which enforces fair-market rules that can complicate digital tool pricing; Privacy, which ensures data protection; Drug Safety, which enforces strict reporting, often making digital projects costly; and IT Security, which protects company data. None of these functions are incentivized to innovate – they default to inaction. Success requires early engagement, clear communication in their terms, and positioning the solution as low-risk and beneficial.

9. The role of IT

In big Pharma, IT is treated as a cost center focused on maintaining stable, large-scale systems. New tools from startups are often seen as “shadow IT” that adds complexity, so IT teams resist adopting them. Success requires understanding their priorities and the effort needed to gain IT’s support.

10. Demonstrating ROI

The biggest challenge for startups in Pharma is demonstrating ROI. Because of annual budgeting cycles and frequent stakeholder turnover, even strong supporters will eventually need evidence of value. ROI is difficult to measure in Pharma, so startups should establish clear, agreed-upon proxies – like faster patient recruitment, higher diagnostic rates or patient lifetime value – to demonstrate impact. Without measurable results, projects risk being cut within a year or two.

11. Scaling internationally

The best HealthTech innovations succeed when deeply integrated into local healthcare systems, but this makes scaling across countries difficult due to differing incentives, regulations and payment structures. As a result, most HealthTech companies are multi-country, not truly global. Pharma’s global teams, however, are incentivized to back solutions that scale across multiple markets, so startups must carefully tailor their approach depending on whether they’re engaging local, regional or global stakeholders.

12. Consider Pharma sales reps

A common idea is to use Pharma’s large sales rep networks to bring HealthTech solutions to market, but this usually fails because the reps’ incentive structures are not aligned with promoting digital tools. Reps are paid to push high-margin drugs, not lower-margin, education-heavy digital tools, and selling software to doctors is complex. Such partnerships can work, but only with carefully designed incentives, training and detailed execution.

13. The role of Legal

Legal plays a major role in Pharma partnerships, especially around data and IP ownership – Pharma wants control, while startups want to retain rights. To avoid endless negotiations, startups must know upfront what’s non-negotiable and what they can concede. Contracts should be treated like a marriage with a “prenup”: clear governance structures, escalation processes, and well-defined exit clauses to handle changes in roles or priorities. Since Pharma contracts are long (often 100-page documents) and negotiations are slow and long, startups must carefully review every detail to protect themselves for the long term.

14. Regulatory aspects

Regulatory involvement in HealthTech is still limited, but many solutions now qualify as software as a medical device. Startups should understand the regulatory requirements and take conscious decisions they can then explain to both investors and Pharma companies, even if they delegate the regulatory details and in-depth knowledge to someone in-house or an external specialized provider. Given the regulatory framework keeps evolving, startups will likely know more than Pharma counterparts, who are only beginning to build this expertise. With AI regulation evolving rapidly and still unclear in regions like the US and EU, startups need to stay ahead and guide Pharma on compliance.

Pharma needs HealthTech innovators, even if they don’t fully realize it yet. Success requires navigating complex, multi-stakeholder decision-making and finding allies inside Pharma who share a passion for innovation. Startups must also ensure partnerships are win–win by understanding Pharma’s deeper motivations – whether improving patient recruitment, ticking the “AI strategy” box, or helping someone advance their career – beyond just the technical value of the solution. 

Contact Christian Hein.