Your Company Needs Compliance Expertise — But When And From Whom?

By Adam Pajakowski, partner, consulting, Crowe Advisory LLC

Biotechnology and life sciences companies operate in one of the most heavily regulated and risk-sensitive industries in the world. From clinical trials and patient data management to intellectual property protection and commercialization, organizations face increasing scrutiny from regulators, investors, third parties, and customers. A common question among founders, boards, and investors is: At what stage should a life sciences company establish a dedicated compliance department?

And the questions keep coming: How many employees do I need to work in the department? Can I outsource compliance? Which risk areas do I focus on?

The answers depend not only on company size or revenue, but also on the organization’s risk profile, operational complexity, regulatory exposure, funding stage, strategic objectives, and compliance maturity. Many startups initially assign compliance responsibilities to legal counsel, finance personnel, or operations leaders. As those risks and responsibilities grow, however, a formal compliance function becomes essential to protect enterprise value, meet regulatory obligations, and support sustainable growth.

Life sciences organizations should establish compliance capabilities and assignments across corporate compliance, internal audit, privacy, cybersecurity, quality, and risk management.

Understanding Compliance In The Life Sciences Industry

Compliance in life sciences extends far beyond regulatory filings. A modern compliance framework could include the following areas and departments:

• corporate compliance and ethics
• internal controls and internal audit
• privacy and data protection
• cybersecurity governance
• quality and regulatory compliance
• clinical trial compliance
• third-party risk management
• anti-bribery and anti-corruption controls
• environment, health, and safety
• research integrity

Compliance requirements become substantially more complex as organizations move from research into clinical development and commercialization. The breadth of regulations and specialized skills required across these areas can also make it difficult to recruit, develop, and retain the right expertise.

Here we examine different life sciences company stages, their usual top risk areas, and potential compliance needs and alignment.

Stage 1: Early Research Startup

Characteristics of this stage

• seed or angel funding
• preclinical research activities
• limited patient data
• minimal commercial operations
• a small management team

Compliance triggers/needs

At this stage, a separate compliance department is usually unnecessary. However, foundational controls should be formalized. Focus areas could include, but are not limited to:

• corporate governance policies
• code of conduct
• intellectual property protection
• basic cybersecurity and privacy frameworks and initial monitoring
• vendor due diligence (focused on those with patient data)
• research integrity standards
• financial controls (initial Sarbanes-Oxley framework or something similar)

Recommended structure

Responsibilities are often shared among:

• CEO
• CFO
• general counsel (internal or external)
• research leadership
• outsourced consulting firm professional(s)

The goal is to establish a culture of compliance before significant regulatory exposure emerges.

Stage 2: Venture-Backed Growth Company

Characteristics of this stage

• series A/B funding
• expansion of clinical research
• multiple clinical trials or expansion
• growing use of patient and health data
• increased outsourcing
• multiple strategic partnerships

Compliance triggers/needs

This is typically the stage where formal compliance planning should begin. Key indicators include:

• human clinical trials
• HIPAA-regulated activities
• regulatory compliance and monitoring
• expanded vendor population and relationships
• investor-driven compliance needs

Recommended structure

Organizations should designate:

• compliance officer (full-time or part-time)
• privacy officer (could be employed or sourced from a consulting firm)
• information security lead (could be employed or sourced from a consulting firm)

Core programs could include:

• compliance risk assessment
• third-party risk management and audits of key suppliers
• data privacy program
• incident response planning
• regulatory training
• whistleblower reporting process

Stage 3: Clinical-Stage Organization

Characteristics of this stage

• multiple clinical trials
• Food and Drug Administration, Medicines and Healthcare products Regulatory Agency, or other regulatory engagements
• patient data collection
• growing board oversight
• increasing or maturing research budgets

Compliance triggers/needs

At this stage, a dedicated compliance function is recommended focused on key areas of risk and regulation. Regulators increasingly expect evidence of systematic oversight and accountability.

Recommended structure

Chief compliance officer (CCO) with responsibilities including but not limited to:

• enterprise compliance oversight
• regulatory compliance monitoring
• investigation management
• ethics program administration
• board reporting

Privacy function with responsibilities including:

• HIPAA compliance
• General Data Protection Regulation compliance
• data governance
• consent management
• data subject rights management

Cybersecurity function with responsibilities including:

• security governance
• risk assessments
• incident response
• third-party security reviews
• security awareness training

Quality and regulatory affairs with responsibilities including:

• GCP, GMP, and GLP compliance
• clinical quality systems
• regulatory submissions
• corrective and preventive action management

Internal audit function (could be employed or sourced from a consulting firm) with responsibilities including:

• performing an annual risk assessment, developing an audit plan, and executing it
• conforming to Sarbanes-Oxley framework, if applicable

At this stage, compliance should become a recognized operational function rather than an informal responsibility. Most organizations of this size dedicate employees to some, but not all, of these departments. They use consulting firms to assist with the other risk areas, specifically to execute audits and perform monitoring.

Stage 4: Commercial Organizations

Characteristics of this stage

• product approvals pending or achieved
• revenue generation
• global operations
• sales and marketing activities
• expanded regulatory obligations

Compliance triggers/needs

Organizations now face heightened exposure to:

• False Claims Act risks
• anti-kickback regulations
• Sunshine Act reporting
• anti-corruption laws
• global privacy regulations
• public company reporting requirements

Recommended structure

A mature compliance organization often includes:

• CCO
• compliance operations team
• privacy office
• cybersecurity team
• internal audit department
• enterprise risk management function
• regulatory affairs function
• quality assurance function

Board-level compliance oversight should be established through one of the following:

• audit committee
• compliance committee
• risk committee

In addition to the formal compliance areas, most commercial organizations typically use technology to help in executing compliance programs. Some select one technology to execute all compliance; other organizations use multiple technologies focused on specific risk areas.

About The Author:

Adam Pajakowski, a partner in consulting at Crowe Advisory LLC, specializes in Sarbanes-Oxley programs, operational audits, third-party risk, and compliance audits. Adam is focused on life sciences and healthcare organizations, both public and privately owned. He has more than 20 years of experience and has been at Crowe since 2015. He is a certified internal auditor and a certified information privacy manager.