Key Tips and Considerations for Digital Health Transactions

July 12, 2023

The digital health space is seeing strong growth, with deal activity booming and new players eager to get involved. However, since these transactions may involve typically fast-moving tech companies joining forces with life sciences or healthcare companies accustomed to a slower-paced, highly regulated environment, there is some potential for a culture clash.

By assessing the situation to better understand the specific context of the transaction and considering the stakeholders involved, what each party brings to the table, and what each party hopes to achieve from the deal, the parties can help establish the transaction parameters and the responsibilities of each stakeholder and ensure that all involved are in alignment. Below, we summarize some considerations when embarking on a digital health transaction.

Transaction Structures

Digital health transaction structures run the gamut from sponsored research and grant agreements to joint ventures to license agreements. The specialties of each party involved in the transaction, such as one with valuable intellectual property and another with important industry connections, could help inform the deal’s structure.

Keep in mind that the structures will require different considerations among stakeholders. For example, a joint venture likely will require discussion about governance and policies, something that might look different from the perspective of a tech company and a healthcare company.

Consider the various phases of a project when setting a deal structure and terms. Those involving foundational research at the early stages of a technology could bring questions about the type of rights of each party to improvements and future uses.

Defining Roles and Responsibilities

Another important consideration is determining who is responsible for different regulatory matters. The answer may come down to which party has domain expertise. As with any sort of digital project, there are updates, maintenance, and security risks to consider, and as such it is just as key to establish responsibility for those needs.

FDA and Privacy Regulation

Companies involved in digital health transactions may have different expectations of and familiarity with regulation. For example, a tech company is likely accustomed to updating and modifying products at will and a low level of regulatory detail, whereas a life sciences company more likely deals with a high level of regulatory detail and expects potential limits on updating or modifying products. Meanwhile, healthcare providers routinely deal with Health Insurance Portability and Accountability Act (HIPAA) compliance and data issues.

Therefore, it is important to ask

  • What is needed to comply with the law?
  • Who is responsible for compliance?
  • How should regulatory communication be handled?
  • Will ongoing support or access be needed for regulatory purposes?

Further, keep in mind the broad definition of “device,” which could subject software or other technology that is part of a transaction to regulation by the US Food and Drug Administration (FDA). Investigate whether a technology would be a regulated device and allocate responsibilities for that process accordingly.

Other federal agencies—such as the Federal Trade Commission and Department of Health and Human Services Office for Civil Rights (OCR)—have jurisdiction over digital health privacy. The OCR in particular enforces HIPAA and regulates HIPAA-covered entities such as healthcare providers that engage in standard electronic transactions; health plans; and healthcare clearinghouses.

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