Insurance in Life Science

Emerging Risks Dossier

Insurance in Life Science
The Life Science Industry - also called: Life Sciences, Biological Sciences, Medical Supplies Industry, Health Care Supplies Industry, Medical Equipment Industry, Medical Devices Industry, Natural Sciences, Medical Devices, Medical Device Industry, Medical Products Industry, Health Care Equipment Industry, Medical Instruments Industry – is an industry of smaller research based companies and large and often multinational pharmaceutical or device manufacturers.

Although there are significant differences between the R&D companies – often referred to as biotech – and the manufacturers they all share the same basic problem: an insurance industry that cannot or will not cater for their needs. Only a few insurers throughout Europe offer product liability and human clinical trials insurance for the Life Science Industry. And even fewer are available if the insured has sales or performs human clinical trials in the US.

Some insurers will only cover clinical trials, if the company has sales of marketing approved products. This has led some of the big multinational pharmaceutical manufacturers to establish their own Captive Insurance Companies, which in large will help solve their problems, but what about the small research based companies?

They have to use the commercial insurance market as the only option for true risk transfer. In addition, most countries in the world require a company to insure its clinical trials in the local insurance market. In other words Human Clinical Trials (HCT) insurance is compulsory.

As a specialist broker we have difficulties understanding why most insurers are unable to offer HCT cover. Is it due to the severity or frequency of claims? Hardly. Except one serious incident in the UK a few years ago, the HCT insurers confirm that there have been very few claims over the past 10 years. Is it due to uncertainty? Perhaps, but one has to bear in mind that HCT is one of the most well regulated areas in terms of legislation and approvals. Is it lack of understanding?

Might be the explanation. Insuring HCT requires knowledge and the ability to understand a technical description of the study, the drug or device to be tested, the study design and purpose. The protocol, however, offers more risk information to underwriters than the widely used proposal forms for other lines of insurance.

Setting up a clinical study of a pharmaceutical drug – at least for a smaller R&D company – will often imply that a number of functions are outsourced to third parties. Contract Research Organizations (CROs) offer various services, among others study design, protocol writing, identification and monitoring of sites and contract negotiations.

Contract Manufacturing Organizations (CMOs) offer development and manufacturing services, repackaging, labelling and storage of drug products. The cooperation with each of these third parties is regulated by written agreements in which the parties define which risks and exposures they respectively will carry. Supply chain management and insurance of API (Active Pharmaceutical Ingredient), drug substances and drug products becomes important elements.

The insurance market seems to understand these issues and offer adequate protection against All Risks losses. In general and at least in Scandinavia, insurers have no problem offering liability insurance protection to CROs and CMOs, as they are considered "normal”.

A CRO is just another advisory service and a CMO just another production entity. What insurers seem to miss is the fact that the liability for injuries sustained by trial subjects during clinical trials may very well end up with the CRO or the CMO due to their respective roles. The CRO may become liable for errors and omissions in the study design or the wording of the Patient Informed Consent Document.

The CMO may end up with the product liability for defective drugs tested in humans. In addition, the R&D company may need to license certain technologies from third parties and will have to indemnify the licensor for claims related to injuries or damages arising out of the use of the technology, whether during trial or later. When providing risk management and insurance solutions to the LifeScience industry everything starts and ends with an understanding of the contractual obligations our clients have accepted.

A company which intends to perform a clinical trial in one or more countries is referred to as "Sponsor”. The hospital or clinic where the trial takes place is referred to as "Institution” and the MD, who actually treats the trial subjects, is the "Investigator”. Definitions of the various concepts used in HCT can be found in the GCP-guideline (Good Clinical Practice), and the Declaration of Helsinki (ICH).

These standards have been adapted by the EU, USA and Japan, and are used all over world as the basic principles for conducting clinical trials. If the Sponsor is a smaller R&D company it will typically enter into a service agreement with a CRO.

As mentioned above the CRO services vary, but often Sponsor will require help in designing the study and writing the Protocol. (The Protocol is a document in which the study and its rationale is described). The CRO will also be asked to identify the Investigators and make arrangements for their participation.

The drug product to be tested will be processed by a GMP (Good Manufacturing Practice) approved manufacturer – a CMO. Often more CMOs will be involved in the drug product preparation.

One may manufacture bulk, another will provide packaging and labelling services, a third may provide storage capacity. If the study results are measured in blood samples or biopsies Sponsor may need the services of external Laboratories or in general, Data Management providers.

For each of these — the Investigators (Institutions - hospitals/clinics); the CRO; the CMO(s); the Licensors; the Laboratory; the Data Management Company — sponsor enters into a contractual agreement, which describes the obligations and liabilities of both parties. Thus it is not unusual that a Sponsor has 5-10 contracts with different players, contracts which will have an impact on the insurance coverage needed for the clinical study. Clinical trials are either single-centre or multi-centre studies.

The latter will typically be spread over several countries. Phase I studies are typically smaller studies in healthy volunteers, Phase II and III trials are studies in patients, of which Phase III trials often involve a large number of trial subjects. Performing a Phase III multi-centre trial can involve up to 40-50 countries and several thousand trial subjects. In terms of insurance most countries require Sponsor to establish a locally admitted insurance policy in accordance with local legislation and in local language.

A locally admitted policy is a policy issued by an Insurer licensed in the country in question. Sponsors may elect to insure each country and/or trial on a stand-alone basis or to establish a Master program structure with local underlying policies. In some countries the legislation regulates which limits per trial subject/protocol/annum Sponsor must provide.

In others it will be up to Sponsor to decide how much cover, he is prepared to pay for. All HCT policies are per definition liability policies, some based on no fault or strict liability, others on negligence/culpa. In some countries participation in an insurance pool for pharmaceutical products and trials is compulsory, in others voluntary.

Scope of coverage will vary from country to country. Some countries require Sponsor to establish an insurance policy covering both Sponsor and Investigators, for other countries there are no obligation to insure or an obligation to insure Sponsor’s liability only. Although the European Medicines Agency, EMEA and the FDA have done much to agree on a set of uniform rules for performing human clinical trials, insuring them is still subject to local legislation.

The administration and practical handling of insurance policies also vary from country to country. In some countries insurers require the Sponsor to sign either the policy or the certificate and return original paper copies. In other countries Sponsor is required to pay the premium before certificate and policy can be issued. For all clinical studies Sponsor needs approval, either by the national health authorities and/or from ethics committees, which can be national or regional.

An application for approval of a study must contain (1) the Protocol, (2) the Patient Informed Consent Document, (3) the names and addresses of Investigators and (4) information regarding insurance coverage for trial related injuries. Especially the ethics committees focus on patient safety issues, including insurance coverage. Only if the benefits of a study are far greater than the risks and discomforts for the trial subject, approval will be granted.

The process of evaluating the application is time-consuming and may take several months. Health authorities and/or ethics committees may require Sponsor to make changes not only in study design and protocol, but also in the Informed Consent Document and the insurance cover. Questions may be asked and Sponsor may have to fulfill certain subjectivities, before approval is obtained. Some countries require Sponsor to translate the protocol into local language.

A clinical protocol is often a comprehensive document, so in planning the study Sponsor will also have to allow time for translation. The Patient Informed Consent Document must always be translated and for those countries that require locally admitted insurance coverage, the HCT policy must be in local language. Setting up a multi-centre trial in several countries – from the first draft of the protocol to the first patient screening – may take well over a year.

Each protocol will most often have a set of defined exclusion and/or inclusion criteria in order to qualify or disqualify the trial subjects. These criteria will be dependent on the type of study, the indication area, and whether it is a Phase I or II/III study. For example, in the cardiovascular area certain blood pressure values may exclude a trial subject from participating. Especially in the area of life threatening diseases, such as cancer, HIV and diabetes it may be difficult for an Investigator to deny a potential trial subject the possibility of participating. For many people experimental medicines may be the last resort.

Every clinical trial starts with a screening phase where potential trial subjects are tested for their eligibility. Some will be excluded, others included. In large trials it may be difficult to obtain the assumed number of trial subjects, especially if the study is atypical. In this context high ethical standards of the

Investigators are necessary to ensure that patients or trial subjects participate on a correct and informed basis. Unfortunately, there have been examples, where Investigators accepted certain protocol deviations in order to recruit as many trial subjects as possible, or where trial subjects failed to understand that they were participating in a clinical trial. In third world countries where certain parts of the population are illiterate or lack basic medical care, Sponsors and Investigators will have to be careful, who they enroll. Once the screening phase is complete and the trial subjects have consented to their participation, the trial can begin. Studies may be out-patient or in-patient trials.

During the trial Adverse Events may occur. Adverse events or reactions are often in practice side-effects, known or un-known, serious or non-serious. The GCP guideline contains definitions and requirements for both Sponsor and Investigator to report such Adverse Events to health authorities and/or ethics committees.

Serious Adverse Events may result in the trial being suspended or stopped, or may lead to a change of study design and thereby a change of the Protocol. All amendments will require a new submission and approval procedure, and will often also require an amendment of the insurance coverage.
Changes in number of trial subjects, trial period, Investigators and/ or trial documents (mainly protocol and Patient Informed Consent Document) will result in insurance policy amendments. Serious adverse events are not necessarily caused by the drug being defective, or by other circumstances, for which the Sponsor and/or Investigator can be held liable. Even if a causal relationship is established not all serious adverse events lead to claims.

As mentioned above insurers have seen very few claims over the past 10 years. In cases where the trial drug is aimed at life threatening diseases or at CNS (central nervous system) related diseases, and trial subjects experience improvements in health, survival rates or quality of life, Sponsor may be asked to continue supplying the drug after trial end.

This is called Compassionate Use and will require Sponsor to set-up a different type of insurance coverage, typically something in between product liability and HCT. Some Insurers consider compassionate use a prolongation of the trial, and offer an extension of the HCT policy, whereas others find that the exposure is best insured under a product liability policy.

Before the Sponsor obtains a marketing approval in a certain geographical area, he may enter into Named Patient Supply. The difference between compassionate use and named patient supply is that the patients in the latter category never participated in the clinical trial. Although the Sponsor is selling products, not yet approved for sales, he will have to insure his liability exposure under a product liability policy.

In advising the LifeScience industry on how to manage clinical trial risks and how to set up the necessary insurance coverage the most important prerequisite is to understand the process, and the huge amount of documents, such as contracts and agreements, protocols, informed consent documents, guidelines and other documents that are associated with a trial. Insurance in itself becomes less important and serves the main purpose of securing compliance with rules and regulations.

As most HCT policies in the world cover in accordance with local legislation or industry accepted guidelines, the insurance broker’s premier task is to advise the client on the legal system, the legislation and the country specific exposure. Another very important task for the insurance broker is to act with speed and work with knowledgeable and experienced partners. Time is paramount and planning essential.

If the CRO, the clinical trial manager or the insurance broker is clueless in terms of the process, what it requires and how it should be managed, the trial will never fly. As can be seen from the above the complexity of the process is an advantage, not least for the underwriter. Insurers have access to all thinkable risk information. No other type of risk or exposure is that well regulated. In addition, insurance is compulsory in most countries.

Underwriters will gain access to: 
• Contracts and agreements with CROs, CMOs; 
• Contracts and agreements with Institutions and Investigators; 
• Contracts and agreements with Licensors, Laboratories, Data Management Firms, (if applicable); 
• Protocols; 
• Patient Informed Consent Documents;
• Adverse Events; • Safety Data Reports; 
• Audit and inspection reports; 
• Trial results. 

And what are their real risks? That something health authorities and ethics committees have approved after scrutiny goes wrong. Yes, certainly, but ask around in the insurance market. Most insurers earn a pretty nice margin on providing insurance coverage for clinical trials. So, let me end this article by inviting Insurers, who so far have chosen to stay out of this area, to join the small, but very capable group of people, who can and will

Lone Hertz, Managing Partner and co-owner of Hertz & co. Insurance Brokers, Brokerslink member
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