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The challenge of compliance in life sciences: Moving from cost to value

The UK Centre for Health Solutions launched its report The challenge of compliance in life sciences: moving from cost to value at the Financial Times Global Pharmaceutical and Biotechnology Conference in association with Deloitte. The report, which is based on interviews conducted with senior compliance leaders in 11 major life sciences companies and Deloitte’s experience working with the industry, focuses on the compliance challenges life sciences companies face in ensuring a strategic balance between compliance risk and value. As regulators and regulations continue to increase in number and complexity, life sciences companies will need to demonstrate that they have active and comprehensive compliance programs across all of their business and clinical operations. This week’s blog discusses the seven key insights derived from the initial phase of our research that we believe these programs would need to address.

Life sciences companies are having to address an increasing number of regulatory requirements which span multiple geographies, business activities and functions. Globalization, alliances and partnerships, heightened transparency expectations, and the ever-evolving needs of existing and new customers, are driving companies to re-examine their whole approach to compliance. Compliance failures can be costly, both in terms of fines, remediation costs and reputational damage.

Moreover, as knowledge of science converges with exponential improvements in technology, life science companies seek to push the boundaries of innovation, developing and launching new products which address unmet patient needs. However, these innovations are happening at pace and as a result, companies often find themselves moving into territories where there is little or no regulatory guidance.

Compliance failures can be costly, both in terms of fines, remediation costs and reputational damage. Therefore, identifying, analyzing and mitigating compliance risks are essential in developing an effective compliance program and ensuring the future sustainability of the industry.

Seeing the challenges that life science companies face in responding to an increasingly complex regulatory environment, our research initiative set out to identify:

  • How well the industry understands the totality of its compliance risks
  • How compliance is managed and implemented within companies
  • What the future of compliance might look like.

We grouped our findings under seven key insights and viewpoints.

  • Life sciences companies often lack an enterprise-wide view of compliance risk: governments and agencies around the world have created a hugely complex regulatory environment.  Obtaining an enterprise-wide view of compliance risk or a single view of overall ‘compliance health’ is often a challenge. We believe there should be a single ‘owner’ of compliance risk which could be vested in an individual or a compliance committee.
  • Big Data’s role in compliance is often overlooked: life sciences companies tend to analyze and report based on historical data. Applying advanced data analytics techniques could enable companies to identify and quantify, proactively, new and/or emerging risks. Indeed, compliance functions should adopt a more scientific approach to data analytics – more akin to the rigorous scientific approaches used elsewhere within life sciences companies – and develop prospective Key Risks Indicators to help them to look around the corner and identify and quantify new or emerging risks.
  • The competitive advantages of ethics-driven cultures are being recognized: companies with mature compliance functions emphasize ethical behaviors and acting with integrity as the norm, as opposed to simply focusing on rules. ‘Tone in the middle’ needs to gain as much emphasis as ‘tone at the top’, if not more. Culture change programs will be a critical success factor.  One way of achieving this to link rewards more directly to compliance, with clear objectives embedded into performance measures at all levels within the organization.
  • Companies with the most mature compliance organizations will win the talent war: the compliance skill set is changing and mature compliance organizations have developed initiatives to develop talent. Successful companies will be those that are able to sustain their compliance talent pipeline to meet the increasing demand and changing nature of compliance skills. As compliance complexity within life sciences grows, the demand for high quality compliance resources will increase, successful companies will be those that are able to sustain and develop their compliance talent pipeline.
  • A lack of dedicated, local compliance resources presents a significant risk for global companies: increasing levels of regulations in smaller, local, markets requires appropriate compliance resources to ensure compliance standards are not compromised. However, compliance resources at the local level have not kept pace with incremental increases in local regulatory burdens. Companies with mature compliance functions have created compliance excellence clusters among larger affiliates, that smaller affiliates with limited compliance skills can consult and are also introducing new global e-learning programs.
  • Major opportunities exist to optimize compliance effectiveness and efficiency: compliance inspections and audits represent a significant cost to companies.  Continuous readiness models are inherently more efficient than the ‘mobilize-prepare-host-remediate-disband’ operating models used by most companies; and would drastically lower overall compliance costs. Combining this model with effective compliance risk assessments and management would further improve the effectiveness compliance functions.
  • Leading companies build regulatory engagement into their innovation models: the industry needs to take the initiative to negotiate a balanced position with regulators. While most companies are embracing new technologies to deliver enhanced patient outcomes, the ambiguity of regulations relating to converging and emerging technologies results in a myriad of compliance challenges. Life sciences companies and regulators should work in a much more collaborative fashion, including with patients, to ensure the future regulatory landscape is centered on addressing patient needs and promoting early access to life sciences technology innovation.

Life sciences companies currently face the dilemma of trying to achieve their business goals while striving to remain in full regulatory compliance. We believe that by addressing the above insights, life sciences companies could transform their compliance activity from a cost, to something that delivers value and sustainable competitive advantage to themselves, and importantly, to the patients that they serve.

This post originally appeared on the Deloitte UK Centre for Health Solutions blog, Thoughts from the Centre. 

 

Author bio

Karen is the Research Director of the Deloitte UK Centre for Health Solutions. She supports the Life Sciences and Health Care practice by driving independent and objective business research and analysis into key industry challenges and associated solutions; generating evidence based insights and points of view on issues from pharmaceuticals and technology innovation to healthcare management and reform. Karen also produces a weekly blog on topical issues facing the health care and life science industries.