A Better Way to Manage Legal and Compliance in Biotechnology
During more than 30 years in the pharmaceutical and biotechnology industry, I have watched Legal and Compliance become increasingly influential in how companies operate.
Much of that evolution was necessary.
Our industry develops and promotes medicines for patients. The regulatory environment is complex, the consequences of misconduct can be substantial, and companies need strong Legal and Compliance functions.
But I have also watched something else happen.
“How can we accomplish this appropriately?” can gradually become “Why take the risk?”
Those are very different questions.
The first manages risk. The second can eventually prevent an organization from operating effectively.
For emerging biotechnology companies in particular, getting this balance right is a leadership responsibility.
Compliance Cannot Fix a Leadership Problem
Major pharmaceutical enforcement cases provide an important lesson.
Serious misconduct is frequently more than an isolated employee making a poor decision. It can reflect incentives, management expectations and a culture that encourages people to cross boundaries to produce results.
That is fundamentally a leadership problem.
A company can increase training, monitoring and approval processes. But if its culture rewards the wrong behavior, additional controls do not address the underlying problem.
Leadership must.
Legal and Compliance should identify risk, establish appropriate boundaries and challenge questionable practices. Senior management must create the culture and hold leaders accountable when those boundaries are crossed.
The distinction matters because adding controls throughout an organization is not a substitute for addressing the leadership behavior that created the risk.
Every Restriction Has a Business Consequence
Legal and Compliance should have an important voice in company decisions.
But the question should not end with:
Can we do this?
The better question is:
How can we accomplish the business objective appropriately?
And when Legal or Compliance recommends a significant restriction, executive leadership should ask:
What is the total business consequence of this decision?
What regulatory or legal risk are we reducing? How significant is it? What evidence supports that assessment? Is there another compliant approach?
Then consider the other side.
Will the decision affect revenue? Physician education? Patient access? Competitive position? Execution speed? Employee productivity?
That does not mean business considerations override legal requirements.
It means important decisions require consideration of the entire enterprise.
Legal evaluates legal risk. Compliance evaluates compliance risk. Finance evaluates financial risk. Clinical Development evaluates clinical risk. Commercial evaluates market risk.
Senior leadership has to evaluate all of them.
When a Legal or Compliance recommendation materially affects the company's strategy or ability to operate, the ultimate decision belongs at the appropriate executive level.
Companies Measure the Risk of Yes—But Rarely the Risk of No
Organizations are very good at documenting the potential consequences of taking an action.
They are considerably less sophisticated at measuring the consequences of preventing one.
How much longer will execution take?
What opportunities could be lost?
Will physicians or patients become harder to reach?
Will competitors gain an advantage?
Will talented employees stop proposing ideas because navigating the organization has become too difficult?
Even internal investigations illustrate the point. Legitimate concerns must be investigated, but the process itself carries organizational consequences. A poorly managed investigation can damage trust, productivity and retention even when no wrongdoing is ultimately found.
Risk exists on both sides of a decision.
The cost of saying no may be difficult to place on a dashboard, but that does not make it insignificant.
A successful company must manage the risk of doing something wrong without creating an organization increasingly reluctant to act.
Emerging Biotech Has Even Less Room for Imbalance
This balance is particularly important for emerging biotechnology companies.
Smaller companies need strong Legal and Compliance expertise. But they also depend upon speed, judgment, innovation and the ability to make intelligent decisions with incomplete information.
Importing layers of controls and approval processes before they are necessary can create unintended consequences.
The objective should not be to eliminate risk. No biotechnology company can do that.
The objective is to understand risk, quantify it where possible, determine whether it is acceptable and decide who is accountable for the decision.
That is executive leadership.
A Better Model
The most effective relationship between management, Legal and Compliance begins with four questions:
- What are we trying to accomplish?
- What is the actual risk?
- What evidence supports that assessment?
- How can we accomplish the objective appropriately?
Sometimes the answer still has to be no.
But sometimes it should be:
“Not that way. Here's a way we can do it.”
After more than three decades in this industry, I believe one of the most consequential changes inside an organization occurs when risk management quietly becomes risk avoidance.
One protects the enterprise.
The other can gradually limit what the enterprise is capable of accomplishing.
The answer isn't less Legal or Compliance.
It is better integration of Legal and Compliance into the business, combined with executive leadership willing to make decisions and accept accountability for both the risks a company takes and the opportunities it chooses not to pursue.
Joseph McCoy is Founder and Principal of PharmaKonsult.com, advising emerging biotechnology companies on rare disease, specialty neurology, commercialization, clinical-development strategy and organizational leadership. For additional perspectives or to discuss an emerging biotech program, contact PharmaKonsult.com.
About Joseph McCoy
Joseph McCoy is Founder and Principal Consultant of PharmaKonsult and an executive commercial strategy advisor with more than three decades of pharmaceutical and biotechnology commercial leadership experience across neuroscience, rare disease, endocrinology, institutional healthcare and specialty pharmaceuticals.
