In the pharmaceutical sector, contract development and manufacturing organizations (CDMOs) play a vital role in advancing healthcare by facilitating drug research, development, and production. However, managing extensive sensitive information comes with unique cybersecurity and compliance challenges. The threat landscape is increasingly perilous, with data breaches on the rise and stringent regulatory demands that CDMOs must meet to safeguard intellectual property and comply with global standards. Many life sciences firms struggle with securing data communications effectively, exposing critical weaknesses that require immediate attention.

With each data breach costing companies millions of dollars, protecting sensitive content isn’t just a regulatory obligation, it’s a financial imperative. CDMOs, especially those working with pharmaceutical clients, face severe consequences if a breach occurs, including reputational damage, regulatory fines, and potential loss of client trust. In an industry where trust is paramount, addressing these cybersecurity and compliance gaps is essential for continued success.

Key Cybersecurity and Compliance Challenges in Pharma/Life Sciences

1. Insufficient tracking and control of sensitive data

One of the foremost issues for CDMOs is the inability to effectively track and control sensitive data shared with external entities. 57% of organizations admit they cannot track or control sensitive content once it leaves their systems. This lack of control creates significant governance risks, especially for CDMOs who frequently exchange data with partners, suppliers, and regulatory bodies. Each interaction with external parties increases the risk of unauthorized access, data leaks, or accidental breaches.

In addition, sensitive information like research data, protected health information (PHI), and proprietary formulas are at risk. For example, a single breach involving research data could result in years of work and millions of dollars lost, not to mention the damage to intellectual property (IP). For CDMOs that lack robust tracking mechanisms, data governance becomes nearly impossible, leaving sensitive content exposed to exploitation.

2. Proliferation of communication tools

The growing reliance on multiple communication tools further complicates data security and compliance. CDMOs in the pharmaceutical sector often use a range of tools to manage data exchanges, but this reliance can backfire. A research report by Kiteworks found that 28% of life sciences firms use five or more tools for sensitive content sharing, making it challenging to enforce consistent security protocols. Each additional tool introduces new security considerations, from encryption to user access controls, which can result in inconsistent practices across the organization.

For example, a CDMO may use different tools for email, file sharing, and collaboration with research partners. If each tool has different security configurations, it becomes difficult to maintain a consistent security posture, increasing the risk of accidental breaches. Moreover, this proliferation of tools can lead to data silos, where critical information is not easily accessible or trackable by cybersecurity and compliance teams, complicating data governance and response efforts when breaches occur.

3. High litigation and compliance costs

Data breaches are an expensive reality for CDMOs, with 17% of pharmaceutical organizations spending over $7 million annually on litigation linked to breaches. In addition, 34% of these companies generate audit logs more than eight times a year, increasing operational costs and underscoring the burden of compliance.

Legal costs associated with data breaches often encompass regulatory penalties, notification costs, legal fees, and potential settlements with affected parties. For CDMOs, these expenses can disrupt budgets and force them to divert resources away from innovation. The burden of compliance is also heavy. Many pharmaceutical companies must adhere to various regulations such as HIPAA for patient data, GDPR for data privacy, and CCPA for consumer protection. Meeting these regulatory requirements demands extensive resources for data tracking, reporting, and audit preparation.

4. Risk from third-party and supply chain vulnerabilities

Third-party risks are growing, especially with the increased frequency of supply chain attacks. According to Verizon’s 2024 Data Breach Investigations Report, 68% of data breaches involved third-party vulnerabilities. This statistic is particularly alarming for the pharmaceutical sector, where data frequently traverses through a web of suppliers, partners, and regulatory bodies. Without rigorous third-party risk management, CDMOs risk exposure from partners who may not adhere to the same stringent security standards.

For CDMOs, third-party risks can originate from multiple sources, including contracted research organizations, raw material suppliers, and outsourced manufacturing facilities. Each of these parties may have different security protocols, and any weak link can expose sensitive data to unauthorized access. CDMOs, with their complex supply chains, need stringent vetting processes and continuous monitoring of third-party security measures.

5. Regulatory pressure and complexity

CDMOs operate in a heavily regulated environment, facing compliance demands across multiple jurisdictions. This level of focus is substantially higher than other sectors, demonstrating the pressure on CDMOs to navigate a constantly evolving regulatory landscape. With new privacy regulations such as the NIS 2 Directive and country-specific data privacy laws, CDMOs are constantly adapting, increasing both operational costs and the complexity of compliance.

For CDMOs working globally, maintaining compliance requires adapting to each region’s specific requirements, whether it’s GDPR in Europe, HIPAA in the U.S., or Japan’s Act on the Protection of Personal Information (APPI). These regulations often have overlapping but distinct requirements, making compliance a complex and continuous process. Any misstep can lead to significant fines, legal liabilities, and reputational damage, especially given the pharmaceutical industry’s sensitive nature.

6. Zero-trust implementation and content security

Zero trust is a critical component of modern cybersecurity, yet only 39% of pharmaceutical companies report having achieved zero trust at the content security level. This lag in zero-trust adoption leaves sensitive data vulnerable to unauthorized access and internal threats. The pharmaceutical sector, with its reliance on proprietary data and high-value research, must prioritize zero-trust practices like multi-factor authentication (MFA) and real-time monitoring to safeguard valuable information assets.

Zero trust enforces a “never trust, always verify” philosophy, which is essential for data-rich industries like pharmaceuticals. Implementing zero trust means that every user and device accessing the network is continuously authenticated and verified. For CDMOs, this approach can prevent unauthorized lateral movement within networks, protecting against both external attacks and insider threats. However, achieving zero trust requires considerable resources, including advanced security tools and continuous monitoring, which can strain smaller CDMOs or those with limited cybersecurity budgets.

Actionable Strategies for Enhancing Security and Compliance

To address these challenges, CDMOs must adopt a proactive approach to cybersecurity and compliance. The following strategies can help organizations improve data governance, reduce risks, and streamline compliance processes.

1. Invest in unified communication and data management platforms

Reducing the number of communication tools by consolidating them into a unified platform can greatly enhance data governance. By managing data within a single system, CDMOs can streamline tracking, improve visibility, and enforce consistent security policies across all data exchanges. This strategy not only reduces risk but also makes compliance audits more manageable, as data can be traced more effectively across a centralized platform.

2. Adopt AI-driven security solutions

AI-based security tools provide advanced capabilities for monitoring and threat detection. With machine-learning algorithms, AI-driven solutions can detect unusual patterns in data access, helping CDMOs identify and mitigate threats before they escalate. AI-driven tools also support real-time analysis, enabling quicker response times to potential security incidents.

For instance, AI can detect anomalies in data usage patterns, such as an unusual spike in data downloads or access attempts from unfamiliar locations, which may indicate a breach.

3. Implement zero-trust principles

Zero trust is essential for safeguarding sensitive data in the pharmaceutical industry. CDMOs should enforce zero-trust protocols across their networks, requiring all users to be authenticated and verified continuously. This approach minimizes the risk of lateral movement within networks and provides stronger protection against both external and internal threats.

Achieving zero trust involves implementing strict access controls, network segmentation, and continuous monitoring. While this may require significant investment, it is crucial for CDMOs to protect sensitive research and patient data, which are frequently targeted by cybercriminals.

4. Enhance compliance reporting efficiency

Automating compliance reporting processes can significantly reduce the burden on IT and compliance teams. CDMOs should consider implementing tools that automate audit log generation, enabling quicker access to required reports. By using automation to handle routine compliance tasks, companies can lower operational costs and reduce the risk of human error.

5. Prioritize third-party risk management

Third-party risks can be mitigated by conducting rigorous vetting and ongoing monitoring of partner organizations. CDMOs should establish comprehensive third-party risk management programs that include contractual obligations for data security and compliance. Regular assessments and audits can ensure that third-party partners meet the same standards as the organization, reducing exposure to supply chain threats.

6. Increase training and awareness

Human error is a significant contributor to data breaches. CDMOs can reduce this risk by implementing regular training sessions for employees on data security best practices and compliance obligations. Training programs should focus on threat awareness, secure data-handling practices, and guidelines for identifying phishing and social engineering attacks. Continuous education can empower employees to act as a frontline defense against data breaches.

Safeguarding the Future: A Strategic Imperative for CDMOs

The cybersecurity and compliance challenges facing CDMOs in the pharmaceutical and life sciences sectors are complex and multifaceted. Rising data breach costs, an expanding regulatory landscape, and persistent third-party risks demand a comprehensive and proactive approach to data security.

By investing in unified communication platforms, adopting AI-driven security measures, enforcing zero-trust protocols, and enhancing compliance processes, CDMOs can close the gaps in their cybersecurity posture.

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Frank Balonis is chief information security officer and senior VP of operations and support at Kiteworks, with more than 20 years of experience in IT support and services. Since joining Kiteworks in 2003, Frank has overseen technical support, customer success, corporate IT, security and compliance, collaborating with product and engineering teams. He holds a Certified Information Systems Security Professional (CISSP) certification and served in the U.S. Navy. He can be reached at fbalonis@kiteworks.com.