2021 LS&HC Horizons - Flipbook - Page 46
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Hogan Lovells
New technologies come with new litigation risks
As life sciences companies increasingly embrace
advanced technologies to aide research and
development and other business critical efforts,
they must also prepare for the inherent litigation
risks. Yet, a recent Hogan Lovells survey of
life sciences executives indicates that many
companies have not taken steps to examine
and mitigate these risks. Below is a summary of
key litigation risks and risk mitigation strategies
to consider.
Key technology risks
Cybersecurity: A data breach can lead to
confidential medical data being exposed, and
significant reputational damage. Such a breach
may prompt regulatory investigations by
multiple government enforcement agencies,
collective and class action lawsuits, and even
shareholder class actions. Moreover, while the
adoption of Internet of Things (IoT) devices
by pharmaceutical companies has allowed
the industry to automate important business
processes, the vast amounts of data stored
and shared by these smart devices and
systems compounds the cybersecurity-related
litigation risk.
Privacy Risks: Consumers are increasingly
focused on their privacy rights and many
jurisdictions have tightened data privacy
regulations. Failures to comply with fastchanging privacy regulations threaten
significant reputational and financial
consequences. Moreover, uses of consumers’
data in ways that are not anticipated or beneficial
to the consumer, even if legally compliant, could
erode consumer trust.
Technology Failures: As technology advances,
so too does the risk of a failure. Because product
liability theories are applicable to many new and
emerging technologies, a failure in a company’s
critical technology could lead to costly products
liability lawsuits.
Potential Inherent Biases: Most improvements
in AI systems are made because of advances
in machine learning. However, algorithms
underlying machine learning often reflect
unwanted biases found within the data on
which they are trained. Algorithmic bias can
also be embedded in business operations such
as in technologies used to screen resumes and
determine which applicants are qualified for
open positions.
Partnership risks: The drive to get access to
innovative technologies often leads life sciences
companies to enter transactions with companies
in new or emerging markets. Thus, life sciences
companies are increasingly partnering with
technology companies through joint ventures,
mergers and acquisitions, and by outsourcing
key business functions to technology companies.
These ventures frequently must navigate
regulatory regimes that may not have been
designed with the current technology in mind,
which may give rise to litigation risks.
Mitigation strategies
The following strategies should be considered
to mitigate against the litigation risks described
above:
• Enhance board oversight of technology risk
by increasing the time the board spends
discussing risk, adding new technology roles
to the board, and creating a technology risk
board committee where relevant.
• Review cyber incident response plans
to ensure they have adequate input from
the legal team, are up-to-date, and are
regularly practiced through appropriate
simulation exercises.
• Ensure suppliers have adequate
cybersecurity practices in place.
