In many ways, the life science industry can be viewed as one of the original outsourcers: long before the popularity of outsourcing and the recognition of it as a viable and important cost saving exercise had spread across almost every industry sector, life science companies were busy outsourcing to third party providers everything from clinical trials and manufacturing to safety monitoring. However, despite the industry's historical relationship and familiarity with outsourcing, it is important to remember the disciplines and lessons learned when outsourcing its business and IT processes.

There are several factors which distinguish the life science industry from other industries. First, it is a highly regulated industry and this impacts on the types of operations which life science companies can outsource, the controls they must have in place in their outsourcing agreements and the issues that are likely to arise in their outsourcing arrangements. What cannot be outsourced is the company's legal responsibility for regulatory compliance. Second, due to fierce competition and the need for constant innovation, the life science industry is in a constant state of flux - in order to be successful, life science companies must be able to adapt quickly and often in relation to sensitive business processes.

There are many ways in which life science companies can look to secure flexibility in their outsourcing agreements, but one of the most important elements is undoubtedly governance. Establishing a strong governance structure is essential to ensure that the necessary controls are in place so that specific regulatory requirements can be met and to address any industry specific issues. In addition, particularly in multi-party, multi-jurisdiction arrangements, governance will be a key means of ensuring quick and effective decision making necessary to respond and adapt as required to the changing landscape of the industry.

The need for a strong governance structure is especially true for life science companies which are looking to outsource industry specific functions such as data management, analysis and other clinical research and development related activities. Such activities will often be subject to the strict legal requirements and standards which govern the industry and cover everything from clinical trials and the authorisation of medicinal products and devices, to post-marketing obligations including advertising, surveillance and adverse event reporting. Informing and ensuring the continuing compliance by a service provider of any relevant legal requirements will form a critical part of any outsourcing negotiations - for example, it would highly problematic for a pharmaceutical company preparing to have a medicinal product authorised in the EU if the service provider responsible for its clinical data management and analysis did not organise or evaluate the data in accordance with accepted EU guidelines.

As such, particular care must be taken when outsourcing functions which may have a bearing on a company's regulatory compliance, especially if using an offshore service provider which is unlikely to be familiar with the legal requirements applicable to the life science industry in the European Union. The following steps will assist life science companies to establish the correct governance structure:

• Start the governance process early

As difficult as it may be at this time to focus on hypothetical events and management of a relationship that has not yet even begun, it is crucial that customers begin thinking early about the governance structure they need to implement to ensure the success of the arrangement. Considering what would be the appropriate governance structure should begin before the tender process with potential service providers by examining the current operating structure of the functions to be outsourced. This will enable the customer to gain an in-depth understanding of how these processes are currently operated, and what will be required to maintain at the very least the same consistency and quality of work and levels of productivity. In addition, at this stage any particular regulatory requirements should be identified and ranked to establish what needs to be done to ensure compliance. This will provide the customer with its own road map for the outsourced functions, and will ensure that it arrives at the negotiating table with a clear picture of how it would like the outsourcing managed, and will allow it to assess at an early stage whether the chosen service provider will be capable of meeting its requirements.


• Give governance the priority it deserves

Customers often make the mistake of not giving governance the priority it needs, both during the early negotiations between the parties and in the outsourcing agreement. There are a number of reasons for this. Often the deal teams negotiating the outsourcing agreement will not have operational responsibility for implementing it. An outline governance framework may be agreed with the service provider but for internal political or other reasons, names of individuals cannot be inserted in it. There is also a tendency to assume that participation in governance is an activity that many of those most suited to it would not want, and the difficult decision of nominating participants is therefore postponed. However, the sooner these key roles are identified and filled, the sooner the governance team will start working together cohesively.


• Involve regulatory personnel in the negotiations and governance framework

There is no one better than the regulatory professionals themselves to explain the applicable regulatory requirements and to keep abreast with changes that are applicable an outsourced function. Involving regulatory professionals in the negotiations will ensure that any potential issues in the service provider's solution which may impact on the customer's regulatory compliance are identified quickly and resolved. One or more regulatory personnel should also be given a key role in the governance team to address issues that arise post-signing and monitor the outsourcing arrangement generally for regulatory compliance.


• Review the agreement on a regular basis

The chosen governance team should be responsible for regularly reviewing the outsourced services and the underlying agreement. To ensure this takes place, a formal process should be established by the agreement which allows the governance team to assess and evaluate the outsourcing relationship, and specific factors including whether the agreement objectives and transition or service deliverables are being met, overall customer satisfaction, compliance with policies and procedures, and customer-service provider relationship issues. In addition, it can be used as a forum for the customer to assess potential business enhancements and innovation to be provided by the service provider, and if applicable, any potential gain-sharing opportunities.


• Include a specific regulatory compliance review

Including a formal review process for regulatory compliance will require the governance team to look regularly at whether the outsourced functions are meeting the required regulatory or industry standards, to address any regulatory or legal changes that may impact on the services, and to assess whether the service provider is living up to its expectations in terms of providing the flexibility and innovation the customer requires.


• Consider regulatory compliance when agreeing change management procedures

The change management procedures in the agreement should lay down a well-defined set of roles and responsibilities for the governance to team to follow in order to adjust the services or the agreement. In typical outsourcing agreements, this will comprise one procedure for minor changes and another for major changes. However, customers should consider whether a separate procedure should be included in the agreement to quickly address changes to applicable legal requirements. It is not uncommon for life science companies to be given specific, time restricted directions from a regulatory body or for changes requiring immediate action to be made to existing legal requirements.

The above highlights just some of the steps life science companies can follow to provide for and establish an effective governance structure. Following steps like these and generally keeping in mind the importance of governance when negotiating outsourcing agreements will help life science companies to maintain successful long-term relationships with their chosen outsourcing service providers.