Outsourcing has become a strategic necessity in medtech, allowing companies to scale faster and operate more efficiently. But as outsourcing expands, so does exposure to regulatory and data protection risk. Each additional partner adds new compliance demands, making oversight more complex and accountability harder to maintain.

With additional partners in the supply and delivery chain, you’re adding extra data handlers, and with that, the risks of intellectual properties, internal documentation, and consumer data getting leaked increase. Even if your activities are outsourced, your buyers (and regulators) still hold you, as an OEM, responsible for the work completed.

Ensuring regulatory compliance and data protection across all CMOs you outsource to helps you to uphold your reputation with consumers and avoid unwanted attention from enforcers, such as the FDA. Meanwhile, if you trade in Europe, for example, breaching GDPR standards could result in millions of dollars in penalties.

Therefore, it’s wise to consider all the regulatory layers that apply on top of any outsourcing partnerships you undertake, and what you need to have in place to mitigate risk.

Why Outsourcing Expands Compliance Obligations for Medtech Companies

Outsourcing does not reduce or restrict your compliance obligations. In fact, regulators and enforcers expect OEMs to remain wholly accountable for how data may be handled and shared.

That means you are responsible for not only the end products you take to market, but also for their entire lifecycle. Whether you outsource to manufacturers, testers, designers, marketers, or otherwise, it’s your responsibility to ensure all processes are compliant and that data is secure.

That means carefully vetting all your CMOs, running regular vulnerability scans and authenticated penetration tests, specifically against your public and private supply chain engagement systems. These two vulnerability management controls are critical to ensuring the integrity, confidentiality, and availability of your data usage across your supply chain.

Typically, you must build regulatory oversight across all your outsourced partners into your QMS and understand that any products entering the market with your name and filing are crucially your responsibility.

The more partners you outsource to, the more regulatory touchpoints you bring on. Extra layers are added, and in some cases, your outsourcing may even cross international borders. For instance, if you are an EU-based OEM using a North American CMO, you’ll need to comply with the FDA and the European Union.

What’s more, just because your partners are technically compliant doesn’t mean they follow the same documentation standards, for example. Your regulators want to know what data you share and who has access to it, and why.

Understanding the Regulatory Layers that Apply Across Outsourcing Partnerships

When outsourcing to new CMOs, you create new regulatory layers that stack up. For example, at the foundation, you need to adhere to ISO 13485 for quality management, ISO 14971 for device risk management, and data privacy standards such as the GDPR, where applicable.

At the forefront, ISO/IEC 27001 should lead your approach, as it feeds critical cybersecurity and data protection requirements into your QMS and, by extension, into your supply chain’s QMS. On top of this, wherever end-user card payments are processed, you must also adhere to the requirements put forth by the Payment Card Industry to ensure information is kept secure.

You must ensure that:

• All CMO and supplier processes match or integrate with your regulatory requirements
• Any outsourced projects are controlled for risk
• CMO IT systems are adequately protected and safeguarded regardless of the differences in setup
• You understand CMOs’ varying IT setups and how they manage risk

Vitally, as an OEM, you must understand that any one CMO can affect product safety, data handling, payment processing, and IT infrastructure. The regulatory layers you follow may vary depending on who you work with; however, the first important step is to be open to and plan for complex compliance needs that cover every partnership you have in place.

Common Data Protection Weak Points in Outsourced Medtech Workflows

Following are some common and typically unintentional weaknesses, often overlooked during scaling with new CMOs and outsourcing partners:

• Poor due diligence regarding CMOs, vendors, and partners
• Inadequate encryption and access controls between CMOs
• Weak, outdated, or otherwise poorly secured devices and endpoints
• Data held and processed unnecessarily (e.g., cardholder information stored without a purpose)
• Data leaked or compromised via human error (such as via phishing, which remains a huge risk in the broader healthcare industry)
• Over-sharing of information between vendors/CMOs
• Poor data accountability planning and blurred ownership
• Inadequate cross-border regulatory accountability
• Varied IT visibility and security standards across CMOs and the OEM
• Overall insufficient records to establish clear data trails

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Practical Steps to Strengthen Compliance and Reduce Risk

Following are reliable, practical steps you can take to ensure your compliance and data risk assessments move in the right direction:

• Carefully audit all CMOs on regulatory standards and practices to ensure they align with your own
• Ensure that all vendors you work with are covered by your QMS, effectively treating them like a physical extension
• When outsourcing overseas, carefully research and plan for regulatory standards that apply across borders
• Verify all vendor IT security measures, including access controls and DNS settings, to minimize risk
• Only retain data that is wholly necessary, and limit access only to those who need to
• Have a robust incident response plan and a clear chain of accountability for data across your whole chain, incorporating CMOs and their staff
• Set up airtight data responsibility agreements and ensure all teams and CMOs legally sign-off on expectations
• Ensure contract integrity with your supply chain by flowing down top-level obligations throughout all tiers, so the entire supply chain operates with the highest standards of integrity. Require that any exceptions to these standards are reported back up the supply chain, enabling evaluation of risk and timely corrective action.

The average cost of a data breach across industries is around $4.4 million at the time of writing. Regardless of the time and money you might save on outsourcing to CMOs, if you don’t take compliance seriously, you’ll end up paying a lot more. Managing risk is an ongoing exercise, not a one-off fix.

Building a Strong Governance Framework Across All Vendors

Building strong governance into a complex CMO setup isn’t a simple, one-off process. However, a strong framework supports your compliance expectations and ensures your business remains transparent and trustworthy in the eyes of partners, regulars, and customers.

Given that cybercrime is always evolving, effective security and data protection measures must be built into your everyday operations. Hold your CMOs to your compliance expectations while, at the same time, ensuring your frameworks evolve with your supply chain’s movements and trends in cybercrime worldwide.

Outsourcing holds many strong advantages. However, if you don’t account for compliance and data protection across your CMOs, you may end up paying more money than you actually save.

Michael Aminzade is vice president of Managed Compliance Services at VikingCloud and has over 26 years of experience within the cyber, information security, and compliance industries. His experience covers the full spectrum from internal information security, where he has been the CISO for a large global service provider, to running large global consulting teams. As an industry leader, Aminzade often has articles published across different publications such as Computer Weekly and Compliance Today. He is often asked to speak at different events such as RSA, InfoSec Europe, and Black Hat.