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Biotech Start-Ups: Regulatory Barriers to Innovation

The global biotechnology industry is far from being a level playing field. Most countries have legislative and regulatory restrictions which impose an often lengthy and onerous trial and authorisation process on biotech and life sciences companies. There is a consensus among pharmaceutical companies that the strictest regime of all operates in the US. The country’s Food and Drug Administration (FDA) as well as its significant health care regulations make it the world leader in erecting barriers to innovation.

In the UK, regulation may not be as draconian as across the Atlantic but it can still result in high compliance costs and largely unnecessary delays in getting products to market. The impact of this is felt particularly keenly by companies in their startup phase when securing venture capital funding can be extremely difficult. If the barriers to innovation are set too high then financial resources can simply dry up before successful trials and certification are completed.

The problem of regulation is common across Europe but in some countries, such as France, there is a culture, promulgated from government downwards, of encouraging dynamic startups which have the ambition and the ideas to become global enterprises. This ameliorates to some extent the harsher effects of regulation. Across Europe, there are somewhere in the region of 25,000 companies developing medical technologies, more than 1,000 of them in France. 53 per cent of these French companies are at the startup phase, with workforces of 1-10 people, while 41% are less than five years old, many of them in the early stages of scaleup [1].

According to a report from the Deloitte Centre for Health Solutions, the current fragmentary nature of regulation in the life sciences industry is expected by 2025 to evolve into one of coordination and alignment amongst regulators [2]. If their predictions are accurate, we can look forward to far faster assessment of innovation and a more collaborative relationship between companies and regulators.

However, optimism aside, the current landscape for a life sciences startup driven by an ambition to innovate is very hard to navigate. Early stage European biotech companies operating not just in Europe but also in the US have to deal with a daunting variety of regulations, including the EU’s Good Manufacturing Practice, the FDA’s 21 CFR Part II and CFR Part 820, the EU’s Medical Device Regulation and In-Vitro Diagnostics Regulation plus the mandatory application of ISO 13485: 2016. These are just a few of the hurdles on the course ahead.

Startups are forced to balance the cost of compliance with the potential return on investment of each product. If they fail to meet their requirements according to the designated timetable, or the costs of tests, trials and delays eliminate the profit margin, then a product will almost inevitably be abandoned as unmarketable. It’s impossible to estimate how many innovative ideas and how much hard work goes to waste as a result of this imbalance.

There are some steps a biotech company – particularly a vulnerable startup – can take to minimise this risk. Firstly, at the earliest stage of a project, the company needs to define precisely the category into which the product falls so it can determine the regulations with which it must comply. Without this certainty, there could be some expensive surprises ahead. The classifications are mostly based on the level of potential risk to patients and they are described in exhaustive detail on the websites of the various national and international regulatory bodies.

Secondly, the research and development process must be accompanied by a regulatory strategy, entrusted to personnel who may not have a background in science or medicine but have the managerial skills to oversee the documentation, testing and compliance procedure.

As part of their regulatory strategy, companies need sound Quality Management Systems to avoid fragmented use of different software, applications and methods of recording. The use of a unified and accredited set of tools is an important part of compliance and a failure in this area has resulted in warning letters. A coordinated and automated QMS will remove this risk and accelerate the time to market. Several developers now offer suites of software solutions designed to standardise and streamline what could otherwise be piecemeal processes.

Harmonisation of regulatory regimes as envisaged by Deloitte would certainly shift the emphasis of the life sciences industry away from bureaucracy and back to where it belongs, on the development of life-changing medical technologies. The discovery of the Ebola vaccine, the adoption of AI and the rapid development and roll-out of several Covid-19 vaccines are just some of the examples of the life sciences pushing the limits of regulation. The unanswered question is whether the speed of technological advance and scientific discovery will be matched by much needed regulatory reform. Inherent in this question is an acknowledgement of the tension between the two which will only increase, with the risk of impeding progress.

None of this is to suggest that regulation is unnecessary. On the contrary, the application of rigorous safety standards is essential not only to the effectiveness but also the credibility of the life sciences. The MMR debacle demonstrated how quickly public trust can be eroded to life-threatening levels, even when that erosion is based upon discredited evidence. A robust system of testing and authorisation is essential. The problem faced by life sciences companies big and small, old and new is that many of the current regulatory measures are indeed barriers when they need to be gateways.

There are signs that change is coming. When it does, any reformed regime needn’t be a dilution or lowering of standards but it must be a partner rather than an adversary.

If you are looking for expert advice on navigating the regulatory landscape, then book a call with one of our consultants and let us help you avoid the pitfalls.


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ScaleX Consulting offer trusted business consulting and recruitment services to life sciences and biotech companies, ready to take the next step in their journey, particularly with life science recruitment, sales and marketing.