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Streamlining stewardship: A balanced approach to life sciences risk management | Baker Tilly
Article
Streamlining stewardship: A balanced approach to life sciences risk management
April 1, 2025 · Authored by Darren R. Jones, Morgan DiSanto-Ranney, Stephen Eng
The role of the life sciences industry in corporate social responsibility
The life sciences industry consistently demonstrates leadership in corporate social responsibility through various stewardship activities within the global healthcare economy. However, these efforts can often be perceived as attempts to influence therapeutic choices within the industry. This unfair characterization stems from poor public perception and trust, combined with aggressive enforcement actions against unethical business practices from a few bad players. As a result, many organizations have adopted broad life sciences risk management strategies to mitigate the highly subjective risk of misperception.
This aversion to risk has led to inefficient programs for engaging and supporting the needs of the industry. Today, as academic research institutions face potential reductions in National Institutes of Health (NIH) funding, their need to solicit stewardship initiatives from life sciences innovators will increase dramatically. As demands rise, the industry's inefficient and risk averse practices now stand in the way of progress.
Types of stewardship activities
Stewardship activities in the life sciences industry take multiple forms, including educational grants (accredited and non-accredited), charitable contributions, corporate sponsorships and investigator sponsored research. These activities can either be unplanned or planned initiatives, and a thorough review of these engagements is needed to ensure life science companies adhere to applicable laws, regulations and industry guidelines. Let's delve deeper into each type:
Educational grants: These grants are provided to support educational programs and initiatives without influencing the recipient's agenda. They aim to enhance knowledge and skills of healthcare professionals which further supports innovation and improvements in patient care.
Charitable contributions: These contributions are made to various charitable organizations and causes, supporting their efforts to improve healthcare outcomes and address public health challenges. Most notably this includes supporting the activities of patient advocacy organizations and various healthcare foundations. These contributions must be provided without any expectation of return or influence on the recipient's activities.
Corporate sponsorships: Sponsorships offer brand or corporate recognition, often with an opportunity to promote a company's innovation. They can include funding for events, conferences, or other activities that align with the company's values and goals.
Investigator sponsored research: This type of stewardship activity involves funding research initiatives sponsored by researchers, who are often affiliated with academic research hospitals or other leading institutions. The support is provided to advance scientific knowledge and innovation without directing the research agenda.
The importance of compliance and ethical engagement
When performed correctly and in full compliance with regulatory standards, stewardship activities play a crucial role in supporting the broader healthcare industry. These initiatives not only facilitate the exchange of scientific knowledge but also strengthen research collaborations, accelerating the development of innovative treatments and medical advancements. By fostering partnerships between life sciences companies, healthcare providers and academic institutions, stewardship efforts can help address unmet medical needs, improve patient outcomes and drive the evolution of therapeutic areas.
Moreover, life sciences companies have an inherent corporate social responsibility to engage in stewardship activities that align with their strategic goals and overarching objectives. This responsibility extends beyond financial contributions to include knowledge sharing, ethical engagement with healthcare professionals, investment in sustainable healthcare solutions and ensuring equitable access to medical innovations. Companies that prioritize responsible stewardship enhance their credibility, build trust with stakeholders and contribute meaningfully to public health initiatives.
In aggregate, the life sciences industry channels billions of dollars into the healthcare ecosystem through these efforts, making a substantial impact on research funding, healthcare accessibility and scientific advancement. However, despite these contributions, companies often refrain from actively promoting their stewardship initiatives due to concerns about how their intentions might be perceived. The fear of being accused of self-interest or undue influence can lead organizations to under communicate their positive contributions, ultimately limiting the recognition and awareness that could support their broader corporate strategies.
By proactively and transparently communicating the value of these stewardship efforts, life sciences companies have an opportunity to strengthen their corporate reputation, enhance stakeholder trust and demonstrate their commitment to ethical and impactful healthcare advancement. Recognizing these initiatives in a responsible manner can help shift perceptions, fostering greater appreciation for the industry's role in driving medical innovation and improving global health outcomes.
Impact of large false claims and anti-kickback settlements
Over the past 25 years, the life sciences industry has faced significant challenges due to large-scale false claims and anti-kickback settlements, which have shaped its practices and reputation. Aggressive enforcement actions, particularly in the early 2000s, intensified the industry's risk aversion.
The False Claims Act (FCA) and Anti-Kickback Statute (AKS) have been central to these efforts, with high profile settlements underscoring the need for compliance and ethical practices. Enforcement actions remain active, as evidenced by the 2024 Department of Justice (DOJ) resolutions involving improper marketing and kickbacks that inflated federal healthcare costs.
These settlements have reinforced the importance of compliance but also fueled a risk-averse culture that has led to inefficiencies — delayed decision making, increased administrative burdens and stifled innovation — ultimately hindering partnerships and slowing industry progress. As the industry continues to navigate these challenges, further complexities arise with the recent shift in federal policy under the Trump administration.
Impact of the Trump administration's reduction of NIH funding
One significant development under the Trump administration is the proposed reduction in NIH funding, which is set to have a profound impact on both the life sciences industry and academic research institutions. The administration has suggested a $6 billion cut to the NIH budget, representing a 20% decrease. This has sparked widespread concern among researchers and industry experts about the long-term effects on scientific research and innovation.
Additionally, there is a new NIH policy that limits funding for "indirect" costs to just 15% of new federal grants, a substantial decrease from the typical rate provided. Indirect costs cover essential infrastructure needs, such as utilities and administrative salaries, that support research efforts. By imposing this cap, the NIH aims to save approximately $4 billion annually. However, this reduction in funding could delay or even prevent a range of research projects, as universities assess whether they can afford to move forward with new initiatives under tighter financial constraints.
The biotechnology sector, which heavily depends on NIH funded basic scientific research, is especially vulnerable to these cuts. Many groundbreaking discoveries made in academic labs lead to the formation of new drug startups backed by venture investors. Furthermore, therapeutic areas that have historically received significant NIH support — such as oncology, infectious diseases, neurological disorders (e.g., Alzheimer's and Parkinson's diseases) and cardiovascular diseases — are at risk of seeing reduced progress. Additionally, nearly 7,000 rare diseases affecting over 30 million Americans, which have long struggled to secure funding, are particularly dependent on NIH support.
Shifting industry landscape: A need for balancing compliance and stewardship
While the life sciences industry continues to play a crucial role in corporate social responsibility through various stewardship activities, the legacy of large false claims and anti-kickback settlements, coupled with the Trump administration's reduction of NIH funding, is rapidly shifting the overall environment. Moving forward, it is essential for the industry to balance compliance with proactive engagement in stewardship initiatives to support the healthcare ecosystem effectively.
When taken in aggregate, stewardship programs should allocate resources to organizations and activities that reflect the company's values and commitment to social responsibility. By participating in educational grants, charitable contributions, corporate sponsorships and investigator sponsored research, companies can demonstrate their dedication to improving healthcare outcomes and fostering innovation. These stewardship activities not only support critical healthcare initiatives but also enhance the company's reputation by showcasing its ethical standards and commitment to the public good.
Effective stewardship practices, such as those facilitated by platforms like stewardshipNOW™, ensure transparency, compliance and strategic impact, thereby strengthening the corporate brand and building trust with stakeholders. Through these efforts, companies can create a positive corporate image, attract socially conscious customers and investors and ultimately achieve long-term success.
For more information on this topic or to explore our stewardship and compliance solutions, connect with us today.
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