2. 2 | Digital disruption in the life sciences sector
Digital innovation, sector convergence,
3D printing, blockchain, robotics: all
terms that — until recently — were not
part of the life sciences lexicon. Yet the
traditional way in which this market sector
has been defined is being rewritten, as
businesses from other sectors enter
this space. The expectations of key
stakeholders, including patients, health
care professionals and regulators, are
changing as digitalization plays an
increasingly important role.
What does this mean for a relatively
traditional sector that has experienced
high levels of regulation and enforcement
activity? Will the bribery and corruption
risks stay as it is going through this major
transformation? What does the “Industrial
Revolution 4.0”1
mean for compliance
risks?
Digitalization is widely seen as a
positive. It can significantly increase
transparency of a company’s operations
and impact its efficiency over the
product cycle. In life sciences, it is a
by-product of stakeholders’ changing
expectations — and their focus on
outcome. The incorporation of technology
and increased use of data directly impacts
the product life cycle — from research
and development through to sales and
marketing.
Throughout this transformation, the
high level of sector regulation remains
unchanged. While methods of improper
practice may change, the risks of bribery
and corruption prevail, supplemented by
new types of compliance risks.
Digital disruption in the life sciences sector: will
corruption risks also be disrupted?
Background — regulatory environment
Changing risk landscape in a disrupted sector
It is common knowledge that the life
sciences sector continues to be a focus for
regulatory enforcement activity. The life
sciences sector is unique for a variety of
reasons, including the scale of companies’
interactions with health care professionals
(HCPs), who, in many countries work for
The digital transformation will almost
certainly lead to new compliance risks and
the evolution of existing risks, including
the following.
Alliances with partners from
other sectors
Are your new partner’s compliance
standards on a par with yours? What
about its corporate culture?
In the past two years in particular, non-
life sciences companies have entered
the sector through partnerships with
traditional players. Large companies
from the technology, consumer products
and automotive sectors, among others,
have established their own health
care divisions. While this convergence
of sectors can be seen as a positive
development for the future of health care,
these companies will rarely be familiar
or are affiliated with the government,
and therefore can be considered public
officials under relevant bribery laws.
Recent enforcement activity by regulators
in the US and UK, as well as other major
markets including Germany and China,
with the detailed regulatory specifics
of the sector, such as those involving
interactions with health care professionals
or level of reliance on third parties. As
a result, those partnerships that are
unmonitored — or that skip the necessary
comprehensive pre- and post-deal
compliance due diligence process — may
be more exposed to compliance risks.
Partnerships/alliances with
start-ups
How well does your new partner protect
its own IP? How will it protect yours?
The focus of a start-up is to achieve
successful growth through the discovery
and launch of a unique product. The
establishment of an effective compliance
framework in these companies may be
impacted by the level of budget and
resource availability. It is therefore
important for companies that acquire
or partner with start-ups to conduct
thorough pre-acquisition compliance due
diligence. This should not only include
corruption risks, but new and evolving
risks, such as data privacy and cyber.
Use of wearables
Who decides if a specific use of data is
ethical?
Use of data obtained from a variety of
digital or mobile sources is a positive
trend, and one that will ultimately help
with the advancement of health care.
Using sensors and blockchain technology
to track patient data and real world
analytics may well become the norm — but
how will this data be used? Who owns
it? Companies need to consider their
protection and ethical use of digital data.
1
Industrial Revolution 4.0 is described as ‘a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.
Source: World Economic Forum
confirms a continued focus on this
sector — hence the need for companies to
enhance their compliance activity.
3. Digital disruption in the life sciences sector | 3
Use of new technology in
research and development
When there is limited human involvement,
how do you identify risk points on the
integrity of your clinical trials?
Robots and virtual reality tools are
increasingly used in the R&D phase of a
drug’s life cycle. While this reduces risk
of human error, other risks become more
prevalent, including data integrity and
cyber threats. This increases the need for
companies to adopt regular focused risk
assessments.
Interaction with HCPs
What if your only Key Opinion Leader in
the local market is a late adoptor of new
technology?
The future is likely to see robots
undertaking certain aspects of the
medical professional’s role. In the
meantime however, HCPs will continue
to prescribe or administer products,
retaining their status as key stakeholders
for life sciences companies.
What may increase the challenge in
interactions with the HCPs, however, will
be obtaining the ‘buy-in’ from them on the
latest products or advanced technologies.
This is compounded if the HCP shows a
preference for more traditional solutions,
leading to the possibility that companies
may resort to incentivizing HCPs through
improper or unethical means to use or
prescribe new offerings. As a result,
monitoring of interactions with — and
transfers of value to — HCPs are areas
that need constant focus — especially for
businesses with products at the cutting
edge of technology.
New ways to raise funds
You just received substantial funding — but
do you really know who your investor is?
As methods of R&D funding change,
so do the associated compliance risks.
While sourcing funds from a variety
of individuals can be fruitful, it is
essential to establish the true identity
of these individuals or entities. To
confirm that funds received are from
reputable as opposed to illegitimate
sources, companies should conduct
comprehensive business intelligence
checks on these investors.
Rise of the robots
How confident are you that your company
is protected from insider threats?
It is anticipated that advancement in
robotics and artificial intelligence will
put a portion of the world’s population
out of their jobs in the next 20 to 30
years. It is important to understand the
impact that departing employees may
have on companies. Such situations
may lead to disgruntled employees
calling their whistle-blower hotline
to report wrongdoing or attempt to
steal information from the company.
As a result, companies should be
conducting internal threat assessments
as well as reviewing the effectiveness of
their hotlines.
Continued reliance on third
parties
How do you determine that your latest
technology will not be appropriated by
unauthorized users?
A greater focus by governments, and in
particular the G20 major economies, to
promote greater transparency on the
ultimate beneficial ownership structure
of an entity is a development in the right
direction. This does not mean, however,
that risks associated with third parties
will disappear. Third parties, such as
distributors, continue to interact with
HCPs and government officials on behalf
of life sciences companies and represent
them in the market. Corruption risks
therefore remain — as does the need to
monitor them closely.
With the increased use of blockchain2
technology, which enhances supply chain
processes as well as the overall life cycle
of a product, companies and third parties
can track their products more efficiently.
With fewer “lost” items, the likelihood of
products being improperly acquired and
used is therefore reduced.
Another potential risk associated with
advanced technology relates to third —
party sanctions and export controls. With
the invention of digital and biologically
advanced products, the risk of these
products ending up in the wrong hands
for unintended purposes (e.g. terrorism)
increases. It is therefore crucial that
companies assess their export and
sanction controls.
Interactions with regulators
regarding non-traditional
products
Is there a difference in how you interact
with regulators for approval of traditional
versus disruptive products?
Non-traditional products include those
incorporating artificial intelligence or
3D printers. As the nature of products
undergoing regulatory approval changes,
so do the requirements and length of
time taken to obtain such approval.
There is still uncertainty around
how certain new products should be
regulated, such as products that can be
tailored for a patient’s genetic profile
(genomic medicine). While regulators are
formulating their approval process for
these innovative technologies, monitoring
of interactions with — and payments to —
government officials regarding obtaining
product approvals and registration in local
markets will continue to be a key focus.
Power of patients
Who decides the perceived outcome of a
product?
Patients are now more informed. They
believe they know what they need — and
they want to pay for a treatment based
on its outcome. An unclear definition
of what this outcome is, how it should
be measured and its correlation to
pricing are all likely to increase disputes
with regulators, purchasers or other
stakeholders. This potentially increases
the risk of corrupt activity. Compliance
programs should therefore include
controls to mitigate risks arising from
increased litigation.
Creation of demand for a product by
a company (or its competitors) paying
outsiders to write positive (or negative)
commentary about outcomes is also a key
risk. Conducting periodic media analytics
will help identify such occurrences.
2
Whilst the internet is a world-changing medium for information exchange, blockchain is “the first native digital medium for peer-to-peer value
exchange. Its protocol establishes the rules — in the form of globally distributed computations and heavy duty encryption — that ensure the integrity
of the data traded among billions of devices without going through a trusted third party.” — Source: http://www.ey.com/gl/en/industries/technology/
ey-blockchain-reaction-tech-plans-for-critical-mass
