Authored by RSM US LLP

For growing life sciences companies, having a robust compliance strategy is essential for navigating the complex regulatory landscape, ensuring product safety and quality, protecting the company’s reputation, and mitigating legal and financial risks. The following guide outlines how biopharma and medtech companies can maximize their organizational value through smart compliance planning.

Why compliance matters

Biopharma and medtech businesses create value every day, whether or not they have a U.S. Food and Drug Administration-approved product in the market. That value is partially realized when clinical-stage companies go public, or when multiple rounds of investor funding are successfully completed before FDA approval. For those companies that go public, a very basic governance infrastructure is statutorily required that includes standard policies, many of which can be pulled from the public domain. There is no preliminary measure to determine whether those initial basic policies have been appropriately socialized throughout the organization or if they are followed.

If that’s true (and it is), then what is the purpose of policies, procedures or compliance?

Policies and procedures work together to create a company standard for doing business. They inform employees of regulatory requirements and provide standardized processes that, if followed, should produce a predictable result. Compliance in the biopharma and medtech sectors is the function responsible for ensuring that company policies and procedures reflect regulatory requirements and guidance issued by enforcement agencies.

Compliance in the life sciences industry

Within the life sciences industry, biopharma and medtech companies may vary greatly in appearance and objectives. However, they all share one crucial concern: the importance of preserving value. To this end, compliance serves as a vital protective mechanism. Here are a few examples of compliance goals and advantages:

Private clinical-stage biopharmaceutical company with multiple candidates in various phases of the clinical process

Goal: Wants to be purchased by a larger manufacturer.

Compliance advantage: A solid infrastructure of implemented policies and procedures communicates to potential buyers a heightened business acumen for an asset that likely has few, if any, unforeseen issues that might destroy the value buyers are looking to capture.

Publicly traded medical device manufacturer marketing several products with others in development

Goal: Looking to grow organically over time as it brings new products to market.

Compliance advantage: Establishing a sound culture of compliance will be demanded by the board of directors who are charged with protecting shareholder value; a solid compliance function can address the board’s concerns.

Private pharmaceutical company with products on the precipice of FDA approval

Goal: Commercialize candidates as they are approved, thereby transforming the company from a clinical organization into a commercial entity.

Compliance advantage: Establishing compliance expectations simultaneous to building the commercial function can effectively engrain compliance discipline into the commercial process.

Initiating your compliance journey

Although a comprehensive risk assessment is ideal, simply answering a few key questions can often determine the necessity to start integrating compliance principles immediately.

  • Is there a standardized process by which the company establishes relationships, particularly with health care providers and other researchers?
  • Do internal medical personnel communicate externally with the scientific, medical or patient community?
  • Has the management team been challenged by the board to provide a compliance plan that addresses the risks of the commercial plan?
  • Does the company have a field salesforce actively promoting one or more FDA-approved prescription products?
  • Is the company conducting or planning to conduct speaker programs, advisory boards or any other external engagements that involve meals, honoraria and/or travel?

Getting started

Establishing a compliance program does not require a uniform approach and it does not need to be completed all at once. Each company can gradually develop a compliance program that is appropriately scaled to its needs. However, intentional planning is crucial. This often begins with a preliminary gap analysis to inform the planning process, ensuring that the program evolves in a structured and effective manner.

The following four-step process has been shown to be effective in the establishment and maintenance of an effective compliance program.

Step 1: Initial assessment

In most instances, companies will have some governance structure in place that can possibly continue to be leveraged. It is important, however, to have an initial assessment to objectively determine how current policies and procedures stack up against industry standards. An initial assessment by external industry experts is a recommended start.

Step 2: Gap analysis

By leveraging the output from Step 1, a comparison should be performed between all applicable regulatory and enforcement agency guidance based on current and planned commercial activities and the current state of the company’s guidance documentation.

Step 3: Action plan development

An action plan can be developed detailing the road that bridges the “current state” to the “desired state” of the company’s policies and procedures, driven by company goals, by the tactics outlined in the candidate/product plan and by the timing of execution.

Step 4: Action plan execution

Executing the action plan typically involves developing and implementing new policies and procedures, which includes the development and delivery of employee training. The timing of each element of the action plan should mirror the company’s evolution and can be stretched over multiple years.

A culture of compliance

Many biopharma and medtech companies use slogans and marketing taglines to foster trust with their target patient population. Trust is paramount—without it, patients would hesitate to use medications or accept implants. At the core of this trust lies a robust compliance program. A thoughtful, well-executed compliance program that addresses risks inherent in commercial and medical activities can be the key to establishing a culture of compliance.

Trust = value

Failure to recognize the connection between trust and value can be a fatal oversight for a biopharma or medtech company. There are numerous examples of companies whose actions eroded the public trust and the result was a direct impact on their market value. An effective compliance environment can be instrumental in managing that risk.

Company culture matters

Trust stems directly from company culture. Companies that consciously foster a culture of compliance by rigorously enforcing rules establish a strong ethical and integrity framework. In such environments, doing the right thing becomes the norm, encouraged and rewarded by the organization. This commitment not only builds trust but also simplifies adherence to ethical standards.

Compliance is enabling

Well-informed professionals move with speed and certainty when they are clear on the guidelines. Ambiguity typically causes hesitation, which in a fast-paced business, can be the difference between winning and losing. An effective compliance environment can enable this by keeping employees informed and engaged in clarifying discussions that illuminate otherwise unclear dilemmas.

Staying one step ahead

Biopharma and medtech companies invest significant resources in identifying, developing, testing and ultimately launching prescription products. Throughout this journey, sound compliance efforts can significantly enhance both a company’s value and the value of the products they develop. This increase in value is evident even before FDA approval, as reflected by movements in share price and subsequent rounds of venture capital investment.

Management teams should protect the value they are creating in their companies by establishing and maintaining a culture of compliance. Accomplishing this task requires a plan of intentional steps that help the organization to mature into an environment of internal control and predictable outcomes. This is not an overnight goal and it can progress at a pace that is comfortable for each company.

Source: RSM US LLP.
Reprinted with permission from RSM US LLP.
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