Data room for life sciences: Requirements, benefits, and best practices

The healthcare, biotech, and life sciences industries share large volumes of sensitive and confidential data daily. At the same time, the healthcare sector tops the charts when it comes to cybersecurity vulnerabilities. Only in the US, 809 cyberattack incidents resulted in data compromise in 2023. 

This calls for a secure solution to the sharing and management of sensitive data. That solution is a virtual data room (VDR).

This article defines a healthcare data room, its main use cases, advantages, and requirements. Additionally, we provide a list of documents you might need to include or exclude in a data room during biotech partnerships and other healthcare-related processes.

What is a healthcare data room?

A healthcare data room is a dedicated virtual data room software used specifically in the healthcare, life sciences, and biotech sectors. It’s a cloud-based repository for securely storing and sharing sensitive data such as medical records or patients’ personally identifiable information and effective collaboration over it. 

A healthcare data room can also be called a biotech data room, life sciences data room, or pharmaceutical data room due to overlapping healthcare industry sectors.

Advantages of using healthcare data room

Healthcare, biotech, and life science companies use virtual data rooms because of these key reasons:

• Enhanced security
  Data rooms offer robust security features like encryption, multifactor authentication, and granular access controls, protecting sensitive healthcare information from unauthorized access and data breaches. This is especially important considering the rising number of data breaches in the healthcare industry — the first half of 2024 saw almost 88% more breached records than the first half of 2022
• Compliance with regulations
  Virtual data rooms also facilitate adherence to healthcare regulations such as HIPAA (Health Insurance Portability and Accountability Act) or GDPR (General Data Protection Regulation), ensuring the secure handling of personal and medical data
• Improved collaboration and efficiency
  Virtual data rooms provide secure environments for efficient collaboration over confidential or sensitive data without putting it at risk. They also centralize all critical healthcare data, making it easily accessible to authorized users, including healthcare professionals, researchers, and administrative staff. This significantly enhances overall efficiency
• Transparency
  Thanks to audit trails provided by virtual data rooms, all the activity inside a data room can be easily traced. This substantially enhances data security and is also crucial for regulatory compliance and internal monitoring
• Scalability
  Data rooms are easy to scale when there’s a need to accommodate growing amounts of data, making them suitable for organizations of various sizes — from small clinics to large healthcare networks
• Cost savings
  By digitizing document management and reducing the need for physical storage and manual handling, data rooms can lower operational costs and minimize administrative overhead.

Best practices for choosing a healthcare data room

Here are several recommendations to follow when looking for a reliable data room solution in the life sciences sector:

• Prioritize security and compliance
  Healthcare deals with sensitive patient data and must adhere to strict regulations like HIPAA and GDPR. Ensure the data room offers advanced encryption and multifactor authentication and is fully compliant with industry standards
• Look for industry-specific features
  Choose a VDR with features tailored to healthcare and life sciences, such as tools for managing clinical trial data and regulatory submission support. Also, look for advanced data protection tools, such as redaction, that help to keep patient data confidential
• Evaluate collaboration tools
  The right VDR should include tools for real-time collaboration, such as Q&A modules and version tracking. These features are essential for streamlining communication during clinical trials, mergers, or licensing processes
• Ensure scalability and support
  Healthcare projects often grow in scope, so pick a VDR that can scale with your needs. Additionally, round-the-clock customer support is essential to address urgent issues or technical challenges promptly
• Check data management capabilities
  Opt for a VDR that simplifies organizing, searching, and sharing complex data sets like medical records, research findings, or licensing agreements. Advanced search functions and file labeling can save time and improve efficiency
• Assess accessibility and ease of use
  A user-friendly platform is crucial for teams across different locations. Ensure the VDR allows easy navigation, seamless file uploads, and quick access for authorized users, without compromising security.

Healthcare industry requirements for a data room

For a virtual data room to be suitable for a healthcare organization, it must meet certain standards in terms of regulatory compliance requirements and security measures ensured by a VDR. Let’s look at the key requirements for a biotech data room.

Note: Check the security measures and compliance certifications of the Ideals virtual data room.

Now, let’s briefly review what each of these requirements is all about.

Regulatory compliance requirements

• HIPAA
  This is a U.S. law designed to protect the privacy and security of individuals’ medical information. It sets national standards for the protection of health information. Some of the key provisions of HIPAA include privacy, security, and breach notification rules. They dictate standards for ensuring data security and confidentiality, as well as covered entities to notify affected individuals (users) of a data breach.
• GDPR
  The GDPR is a comprehensive data protection law in the European Union that governs the processing of personal data of EU residents. Among the main provisions are data breach notification, data subject rights, security of processing, and data protection principles.
• HITECH Act
  The HITECH Act expands HIPAA’s scope, particularly in terms of promoting the adoption of electronic health records and enhancing privacy and security protections.
• FDA
  The FDA is responsible for assuring the efficacy and security of biological products, medical devices, cosmetics, and drugs. In terms of healthcare VDR, it governs the use of data in clinical trials and other FDA-regulated processes.
• ISO 27001
  ISO 27001 is an international standard for information security management systems (ISMS). It provides a systematic approach to managing sensitive company information so that it remains secure. The key required elements for a VDR include risk management mechanisms, security control, and continuous improvement.
• SOC 1, 2
  This is an auditing procedure that ensures service providers manage data securely to protect the privacy of clients’ data. It’s based on five “trust service principles”: security, availability, processing integrity, confidentiality, and privacy.
• FedRAMP
  This is a U.S. government-wide program that provides a standardized approach to security assessment, authorization, and continuous monitoring for cloud products and services. It requires virtual data rooms to ensure sufficient security controls and continuous improvement measures.  

VDR security measures

• Data encryption
  Clients’ data inside a virtual data room should be encrypted at rest and in transit to protect against unauthorized access. Typically, 256-bit encryption is expected
• Access controls
  A VDR provider should implement role-based access controls to ensure that only authorized users can access sensitive documents. Access permissions can also be set on a document-by-document basis
• Audit trails
  Virtual data rooms should maintain detailed logs of all document access and actions performed within the VDR for accountability and compliance
• Data backup and recovery mechanisms
  There must be robust backup solutions and disaster recovery plans to protect data against loss or corruption
• Multifactor authentication
  To enhance the security of clients’ data and ensure only authorized access, a multifactor authentication process is expected
• Regular security assessments and penetration testing
  A virtual data room provider should also ensure that they regularly conduct security assessments and penetration testing to identify and mitigate any potential vulnerabilities
• Data residency and sovereignty
  VDR vendors ensure that data is stored in compliance with jurisdictional requirements regarding data residency and sovereignty.

Main use cases of a virtual data room for life sciences and healthcare

A biotech virtual data room is typically used in the following cases:

• Clinical trials
  As of April 2024, there are 491,306 registered clinical studies worldwide. At the same time, the probability of the new drug’s success is only 52%, which highlights the importance of the well-planned and executed process of clinical research. Healthcare virtual data rooms help with arranging the clinical trial process efficiently and securely
• M&A
  Global deal volumes declined across all sectors in 2023, but the deal value rose, mainly because of the large deals in the pharma and medtech sectors. The healthcare industry often witnesses megadeals, such as Pfizer’s $43-billion acquisition of Seagen. And megadeals are always about lots of data sharing, which implies higher risks as well. To handle this, virtual data rooms help securely host financial statements, contracts, intellectual property documents, and compliance records, enabling thorough evaluation by potential buyers
• Fundraising
  Virtual data rooms are also often used by healthcare organizations that undergo capital-raising rounds. VDRs allow for presenting a company’s financial statements, business plans, and other relevant documents to potential investors and, and the same time, ensure the security of sensitive information and confidential documents
• IP management
  Virtual data rooms provide a secure space for storing patents, trademarks, and proprietary research, facilitating safe sharing with partners and protecting intellectual property rights
• Regulatory compliance
  Data rooms help healthcare organizations manage and maintain compliance-related documents, ensuring they are easily accessible for audits by regulatory agencies such as the FDA or EMA
• IPO
  The healthcare industry was the second-largest sector in terms of IPO activity in 2023 with $10.7 billion of IPO proceeds. During an initial public offering, virtual data rooms help healthcare companies securely share financial statements, business strategies, and legal documents with underwriters, regulators, and potential investors
• Licensing and partnering
  Virtual data rooms also facilitate the sharing of confidential information during negotiations for licensing deals or partnerships, including research data, IP, and contract details
• Medical records management
  Often, VDRs are used as data storage for the management of electronic health records (EHRs) and patient records, ensuring secure access for authorized personnel while maintaining patient data security and confidentiality.

Ideals VDR for pharmaceutical companies

Ideals virtual data room is widely used by healthcare companies for many reasons: from managing data during clinical trials to fundraising rounds and due diligence process.

Clients appreciate Ideals customer-oriented approach, easy-to-use interface, and high-level security measures.

Jeff Hsu from Sorrento Therapeutics Inc. also marks Ideals’ user-friendly interface together with analytical capabilities:

This is what Ideals offers for handling secure data storage and management issues with its life sciences data room:

• Compliance
  Ideals is ISO 27001 and SOC 1 and 2 certified, as well as HIPAA- and GDPR-compliant. What’s more, Ideals employs multiple data centers around the world with robust physical security measures.
• Ease of use
  Ideals offers an easy-to-use and intuitive interface, ensuring that every user will navigate a data room effortlessly regardless of their technical background. Additionally, Ideals is available across multiple platforms and in different languages.
• Efficient collaboration
  Ideals users can effectively collaborate inside a virtual data room thanks to such collaboration features as Q&A workflows, expert auto-assignments, and instant notifications.
• Data security
  There are multiple security features offered by Ideals that ensure the security and confidentiality of users’ data. These include but are not limited to dynamic watermarking, built-in redaction, fence view, remote shred, and IP address restriction.
• Access controls
  Ideals employs 8 levels of granular access permissions, ensuring that only authorized users have access to specific files. Additionally, there’s mandatory two-factor authentication.
• Audit and reporting
  Ideals allows for getting analytics of all actions performed inside a virtual data room, which minimizes the risk of undesired actions with confidential data. There are detailed audit trails with advanced filters, granular reports, and a dashboard with all the aggregated activity information. 

Overall, Ideals can be a go-to data room solution for any healthcare-related case regardless of its complexity. Users always get secure data storage that’s easy to use and collaborate with and offers capabilities for project monitoring.

How to structure a VDR for biotech partnering

The structure of a virtual data room heavily depends on a specific use case, the size of the company using it, and the company’s goals. However, a virtual data room for pharmaceutical companies and biotech partnering might include the following elements:

What documents shouldn’t be included in a biotech data room

Among the documents and data that are better to be excluded from a healthcare data room are the following:

• Unverified or incomplete data
  Adding preliminary data or unverified information could mislead or misrepresent the situation.
• Irrelevant legal disputes
  Details of unrelated litigation or disputes that do not impact the partnership are better not to be added.
• Unnecessary proprietary information
  Overly detailed technical specifications that are not relevant to the partnership discussion can confuse potential partners.
• Obsolete data
  Avoid adding outdated documents that no longer reflect the current status of the company or its projects.

Key takeaways

• A healthcare virtual data room is a data room software that is used specifically in the healthcare, life sciences, and biotech sectors.
• Healthcare virtual data rooms are typically used for clinical trials, M&A, licensing and partnering, medical records management, fundraising, IPO, regular compliance, and IP management.
• For a virtual data room to be suitable for the healthcare industry it has to be compliant with such laws and regulations as HIPAA, GDPR, FDA, and others.
• Additionally, a healthcare virtual data room should also offer robust security measures in terms of data backup and recovery, audit trails, access controls, data encryption, and more.

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