As we noted in our in-depth last week, the digital health space is still holding its breath for big pharma and big payers to dive in with serious M&A. At the opening session for Digital Medicine Connect in Boston, a part of EBD Group’s BioPharm America conference, speakers from around the digital health world weighed in on how that landscape is changing.

“When I think about M&A in the space, pharma merger-acquisition of digital seems like such a logical extension of their business model,” Corey McCann, the CEO of Pear Therapeutics and a former investor. “They’re cash-rich margin-rich companies which are not built to do what these different companies are doing. They’re also very deal-forward companies, they’re used to going out and licensing portfolio companies. So I think you’re going to see trends where pharma is out doing more and more. Contrast that with payers, I can’t give you a straight answer there. I think payers are much less used to M&A, frankly, more used to risk-sharing and partnership.”

Christine Lemke, chief product officer at Evidation Health, thinks pharma won’t start doing big deals in digital health until they’re scared.

“There are two reasons I think pharma will get more interested and it depends on if you think digital medicine companies are toys or threats to your business,” she said. “If you think something’s a threat, just like GM thought self-driving cars were a threat and spent a billion dollars on a tiny company in the space, some biopharma companies are going to say, it’s a threat, we don’t have that DNA in our company, and we need it. You’ll see insane acquisitions at extreme prices for those that think it’s a threat. For those that believe it’s a toy, they’ll dabble in small things. They’ll think ‘We can do things the old way’ and they won’t transform themselves. It will be interesting to see who’s wrong or right.”

McCann says pharma is getting more and more serious about the space, but they’re still in the early stages in terms of how they think about the space.

“Pharma is sophisticated in thinking about digital as a means of cost avoidance,” he said. “They see big cash outlays for Phase 3 studies and they’ve been talking about streamlining for some time. Almost invariably, that’s the first conversation. There is a mindset shift [that needs to happen] around having them understand digital health offerings as products. We’ll see more of that, but right now, the conversation is almost invariably around tools.”

For pharma companies (and payers) that aren’t ready to buy their way into digital health, there’s still the partnership option. 

“You see a lot of development work done both in acquisitions and in partnerships,” Yarmela Pavlovic, a partner at Hogan Lovells who helps startups clear regulatory hurdles as part of her work, said. “So the Proteus pill [being developed with Otsuka] was a key partnership. I think it makes a lot of sense because large biotech and pharma companies, some may have the infrastructure to support those products, and some may not. So do you build all those resources in house, or do you work with a partner who has that?”

Lemke pointed out that the Sanofi-Verily partnership is another example of a pharma company trying to get digital health innovation into its DNA without actually making an acquisition. She positioned it as a low-risk move.

“That could be a new model where you partner with established, innovative players,” she said. “Nobody ever got fired for partnering with Google.”