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PDF Report | 8 Pages | Third-Party Risk for Life Sciences
Companion intelligence page for the Ethixbase360 2025 Industry Outlook: Navigating Third-Party Risk Management in the Pharmaceutical and Life Sciences Sector. This 8-page industry outlook is for pharmaceutical and life sciences compliance and risk executives.
Executive Summary
Pharmaceutical and life sciences companies are squeezed between unyielding regulatory scrutiny and the pressure to remain agile and competitive. Regulators are tightening oversight rules as competition pushes companies to accelerate innovation, contain costs, and secure shifting supply chains in a marketplace defined by rapid change.
Third-party relationships sit at the heart of this tension. Vast networks of external partners move medicines to market, but they also increase risk exposure. If not properly managed, this risk can lead to compliance failures, eroded trust, operational disruption, and higher costs.
In 2025, the stakes are higher. Environmental, social, and governance (ESG) standards, which were once primarily a reputational concern, are becoming mandatory. Geopolitical volatility is exposing the fragility of supply chains, making it more challenging to manage resources, contain costs, and meet regulatory expectations. In response, some pharmaceutical executives are shifting third-party risk management (TPRM) from a defensive function to strategic infrastructure in a market where trust, speed, and transparency determine success. This is achievable with the right approach. Leaders need a grounded understanding of sector-specific vulnerabilities and challenges, the regulatory trajectory, and the necessary capabilities.
Pharma & Life Sciences 2025 Industry Outlook: Navigating Third-Party Risk in a Shifting Landscape
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Key statistics & data points
More than 70% of active pharmaceutical ingredient (API) manufacturing facilities supplying the United States are in higher-risk markets, with a high concentration in China and India.
Source: U.S. Department of Labor / FDA congressional testimony, “Safeguarding Pharmaceutical Supply Chains in a Global Economy,” October 30, 2019, as cited in Ethixbase360, September 2025
70% of manufacturers in a recent survey reported that inefficiencies in their TPRM expose them to reputational and regulatory risk.
Source: KPMG, “Manufacturers continue to struggle with TPRM,” 2022, as cited in Ethixbase360, September 2025
Since the first life sciences-related FCPA enforcement action in 2002, over 35 healthcare and life sciences companies have paid more than $1.5 billion in FCPA-related penalties and disgorgement.
Source: Charles Duross, Global Co-Chair of the FCPA & Global Anti-Corruption Practice, Morrison & Foerster LLP, and former Chief of the DOJ FCPA Unit, as cited in Ethixbase360, September 2025
In June 2025, Tianjin’s antitrust authority fined four domestic pharmaceutical companies a combined CNY 360 million for price-fixing sodium dexamethasone, while the individual organizer received a record personal fine of CNY 5 million.
Source: Ethixbase360, “Navigating Third-Party Risk Management in the Pharmaceutical and Life Sciences Sector: 2025 Industry Outlook,” September 2025
In August 2025, a foreign-invested veterinary pharmaceutical firm was fined for distributing holiday gift packages deemed illicit commercial bribery.
Source: Ethixbase360, “Navigating Third-Party Risk Management in the Pharmaceutical and Life Sciences Sector: 2025 Industry Outlook,” September 2025
Expert Quotes and Insights
"Since the first life sciences-related FCPA enforcement action in 2002, over 35 healthcare and life sciences companies have paid more than $1.5 billion in FCPA-related penalties and disgorgement."
"Globalization and growing complexities across supply lines have proven to be a double-edged sword for third-party risk management."
Chapter Breakdown
Globalized Supply Chains and Geopolitical Risk (p.3)
More than 70% of active pharmaceutical ingredient (API) manufacturing facilities supplying the United States are in higher-risk markets, with a high concentration in China and India. Both countries have documented issues related to labor rights, environmental controls, and data integrity.
Contract Manufacturing and Data Integrity (p.3)
The use of Contract Manufacturing Organizations (CMOs) and Contract Research Organizations (CROs) allows pharma companies to scale rapidly, adding capacity, specialist skills, and geographic reach to shorten time to market. But companies also inherit their partners' governance standards, which means variability in quality systems, data-integrity controls, audit trails and access rights, change control, and ethics and compliance programs across vendors and jurisdictions.
ESG and Human Rights Risks (p.3)
No longer a corporate social responsibility issue, recent regulations have elevated ESG to a strategic liability, carrying both legal and reputational consequences. The European Union's Corporate Sustainability Due Diligence Directive (CSDDD), Germany's Supply Chain Act (LkSG), and modern slavery laws in Canada, the United Kingdom, and Australia place responsibility for ESG violations on the lead company.
Regulatory and Enforcement Landscape (p.4)
Regulators have consistently prioritized the pharmaceutical and life sciences sector for the enforcement of anti-bribery and corruption measures. Enforcement agencies are not only sustaining this focus but also evolving their expectations, placing greater emphasis on effectiveness, accountability, and cross-border cooperation.
What to expect over the next 24–36 months (p.4)
The EU Corporate Sustainability Due Diligence Directive (CSDDD): Pharmaceutical companies with significant EU operations will be expected to map human rights and environmental risks throughout their entire supply chains, with penalties for failure. U.S. Foreign Extortion Prevention Act (FEPA): Enacted in 2024, FEPA criminalizes bribe solicitation by foreign officials. Global human-rights import bans: Australia, Canada, and the EU are finalizing UFLPA-style regimes, adding customs and import screening obligations for raw materials and APIs.
Addressing evolving regulatory priorities: practical guidance for executives (p.6)
Amid these pressures, the most effective response is simple: focus on the fundamentals that travel across jurisdictions to ensure a strategically optimized TPRM program. Companies should start by tiering third parties based on geography, business activity, and government exposure, applying deeper scrutiny only where risk is highest.
Moving beyond compliance to strategic value (p.7)
For pharma companies seeking resilience in their compliance programs, technology is key. The shift is to treat TPRM not as a cost center but as growth infrastructure, a platform for differentiation enabled by digitized, robust frameworks.
Conclusion: TPRM as strategic infrastructure (p.7)
In 2025, third-party risk is both a liability and a means to an end. Executives who approach TPRM as a growth strategy, part of the operating system rather than a backroom compliance function, will have a competitive advantage over their peers.
Definitions and Entities
TPRM
Third-Party Risk Management (TPRM). Used as the guide’s core subject throughout; the source document does not provide a standalone definition beyond this expansion.
CSDDD
European Union’s Corporate Sustainability Due Diligence Directive. Per the guide: pharmaceutical companies with significant EU operations will be expected to map human rights and environmental risks throughout their entire supply chains, with penalties for failure, extending beyond API sourcing to packaging, logistics, and marketing vendors.
LkSG
Germany’s Supply Chain Act. Named alongside the CSDDD and modern slavery laws in Canada, the UK, and Australia as placing responsibility for ESG violations on the lead company. The source does not provide further definitional detail.
UFLPA
Uyghur Forced Labor Prevention Act. Per the guide: enacted by the United States to block imports unless they could be proven to be free of forced labor, in response to documented forced labor in Xinjiang.
FCPA
Foreign Corrupt Practices Act. Per the guide: remains the primary U.S. enforcement tool for anti-bribery and corruption in the pharmaceutical sector, despite a recent change of focus by the DOJ.
FEPA
U.S. Foreign Extortion Prevention Act. Per the guide: enacted in 2024, FEPA criminalizes bribe solicitation by foreign officials, placing heightened emphasis on monitoring interactions between third parties and overseas government stakeholders.
CMO / CRO
Contract Manufacturing Organizations and Contract Research Organizations. Per the guide: allow pharma companies to scale rapidly, adding capacity, specialist skills, and geographic reach to shorten time to market.
API
Active Pharmaceutical Ingredient. Referenced in the context of manufacturing facility risk concentration in higher-risk markets, particularly China and India.
Key Takeaways and Actions
In a high-trust industry, reputation is king
When operating across multiple jurisdictions, default to the strictest regulatory standards. A risk-based third-party program is not only a regulatory necessity; it’s a strategy for long-term resilience, ethical leadership, and operational integrity.
See the whole network
Ethical and legal judgment depends on visibility across your third parties. Since assessing each supplier and sub-supplier is unworkable, risk-based due diligence focuses effort where risk is highest and fills knowledge gaps.
Set regulatory priorities
Heightened focus on ESG standards underscores the importance of human rights and ethical sourcing. Ethical operations and supply chains are becoming a prerequisite for gaining market access, maintaining a positive reputation, and mitigating liability.
Make culture visible
With low public trust in the pharmaceutical industry, it is essential to examine behavior throughout the ecosystem, including corporate decision-making, records, escalation, and incentives.
Go beyond regulation
In a volatile and uncertain environment, a visible and sustained commitment to ethical standards within the company and across third parties mitigates risk early.
Standardize due diligence
Develop a central framework that can be applied across all markets, with local expertise serving as the final review.
AI is no substitute for human judgment
Take advantage of AI and workflow automation to collect and analyze data rapidly, but it’s vital to use human judgment for assessing culture, reputation, and complex structures.
Citation-Ready Snippets
↗Cite this Finding
Since the first life sciences-related FCPA enforcement action in 2002, over 35 healthcare and life sciences companies have paid more than $1.5 billion in FCPA-related penalties and disgorgement.
Source: Charles Duross, Morrison & Foerster LLP, as cited in Ethixbase360 2025 Industry Outlook
↗Cite this Finding
More than 70% of active pharmaceutical ingredient (API) manufacturing facilities supplying the United States are in higher-risk markets, with a high concentration in China and India.
Source: U.S. FDA congressional testimony, October 2019, as cited in Ethixbase360 2025 Industry Outlook
↗Cite this Finding
In June 2025, Tianjin’s antitrust authority fined four domestic pharmaceutical companies a combined CNY 360 million for price-fixing sodium dexamethasone, with the individual organizer receiving a record personal fine of CNY 5 million.
Source: Ethixbase360 2025 Industry Outlook, “Navigating Third-Party Risk Management in the Pharmaceutical and Life Sciences Sector”
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Pharma & Life Sciences 2025 Industry Outlook: Navigating Third-Party Risk in a Shifting Landscape | Guide | 8 Pages | September 25