Transforming life sciences legal departments: Four key areas of focus

Increasingly, life sciences legal departments are charged with doing more with less, even as they attempt to transform to meet complex digital, regulatory and geopolitical changes. In this EY HS&W Law blog series, my colleagues and I shine the spotlight on the four key areas of focus for Legal Counsels and offer advice on how they can get the job done. Let’s get started.

Despite an anticipated 25% rise in corporate law department workloads and only a 3% rise in headcount (EY Reimagining the Legal Function Survey Data, 2021), Legal Counsels and their teams must deliver higher quality services at lower cost and with better results. And increasingly, they have to be as accountable for their departments as other business units, developing strategies, budgets and teams that contribute to the bottom line.

That’s because legal budgets are not what they used to be. Life sciences (LS) companies are focused on innovation and revenue growth amid rising drug development costs, and drug pricing, formulary, and reimbursement hurdles. The COVID-19 pandemic added another layer of financial stress, with these companies suffering economic losses from supply chain shortages and malfunctions.

In the meantime, evolving regulatory, ESG (Environmental, Social and Governance) and operational risks are adding to fiscal pressures. As a result, legal workloads are growing exponentially, and legal budgets are facing increased scrutiny. In addition, more than 90% of legal department time is spent on routine tasks, thus diverting precious resources from more challenging work (such as complex risks) and impacting employee retention.

I know how difficult this can be. I have spent the better part of my career working at the intersection of business, finance, and law, most recently as a Head of Global Legal Operations for a leading pharmaceutical company. If legal departments are to operate more efficiently, they should consider transforming their operations, balancing technology, analytical insights, and internal and external workload allocation. But how?

In this blog, I outline what I believe are the top four legal issues currently facing LS companies today, and challenges and opportunities they present for legal departments: contract lifecycle management (CLM), risk management, regulatory, and ESG. In subsequent blogs, my colleagues will delve deeper into each one.

Streamlining contract lifecycle management

Today, the average company loses 9% of annual revenue due to poor CLM practices (Forbes.com). With rapid globalization and changing business models, LS contracts are becoming more complex from a commercial, compliance and performance perspective. Innovative, data-driven contract management technology is playing an increasingly important role in the creation, approval, negotiation, execution and management of life sciences legal agreements. The benefits range from the practical to the strategic – from streamlined contracting and contract management (including better tracking of obligations, risks, terms, rebates, and renewals), to enhanced R&D evaluation, vendor optimization, partnership building, and IP protection.

Investing in the right technology is critical, but many legal departments lack the technical confidence and sometimes even the necessary financial support to take that first step. Then there is the issue of change management. Legal Counsels need a strategic roadmap to ensure that the right choice is not only obvious but adopted by all.

An enterprise approach to risk management

There are so many complex risks facing the life sciences industry that it’s difficult to stay on top – let alone ahead of them all: product liability, securities fraud, cybercrime, and disruptions to global supply chains, to name a few. And how many companies have risk preparedness programs in place to manage supplier risks as they relate to Russia and China, for that matter?

LS organizations’ legal departments need to employ an enterprise approach to risk management, taking the lead but ensuring that key internal stakeholders are involved at every step. They require the technology and oversight to obtain the insights and mechanisms needed to identify, evaluate, monitor, and improve processes within their environment. Only then can they react or ideally, prevent or reduce the impact of potential risks.

Staying ahead of the changing regulatory landscape

EY projects that by 2025, regulatory compliance will be more complex, posing risks and opportunities for LS companies. There will be multiple new sets of regulations around broader aspects of health care solutions that go beyond therapeutics to include technology, data handling and security. Regulations will be more harmonized across the globe as regulatory bodies collaborate more, leading to faster approvals, along with stronger safety monitoring and payer pushback.[1]

Establishing internal policies and effective systems to ensure full compliance across a widening span of regulations will be crucial. Here too, an enterprise approach is needed, one that embeds risk considerations into the rhythm of the business – identifying and assessing risks, providing solutions to prevent, limit or balance them, and resulting in risk-informed initiatives and programs.

A growing role in ESG

ESG practices can deliver better access to finance, reduce costs of capital, and open doors to new markets, products, geographies, and suppliers. However, LS ESG strategies are complicated, involving many diverse and broad risk factors, such as carbon footprint reduction, health equity, patient safety, data security, DEI (diversity, equity and inclusion), and anti-bribery, anti-corruption and anti-competitive practices. New laws, regulations and changes in the way board members, investors, regulators, customers, advocates, employees and the public view ESG also have broad implications for these organizations.

General Counsels are likely to play a bigger role in ESG, given their focus on SEC reporting, compliance and risk management and their involvement in a range of other issues connected with sustainability. It will be important to ensure that their operating model provides the capacity, talent and technological resources to meet evolving expectations.

From challenges to opportunities

Increasingly, we hear from General Counsels that they want to operate more efficiently and transparently, with insights from data, analytics and intelligence associated with their legal responsibilities and operations. They also want to relieve their in-house teams from performing high volumes of repeatable, mundane activities and transform them into a more integrated, strategic partner.

With their responsibilities growing in complexity along with the life sciences ecosystem, it is nearly impossible to do all this alone. A better plan is to engage experts who straddle both legal and technical worlds. An Enterprise Legal Service Provider (ELSP) can not only alleviate growing pains, but help legal departments transform in real time to keep up with growing demands.

In the next blog, learn more about optimizing CLM.

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

[1] (2017). Life sciences 2025 — managing disruptions to gain competitive advantage. ey.com. https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/life-sciences/life-sciences-pdfs/ey-life-sciences-2025-managing-disruptions-to-gain-competitive-advantage.pdf