Pharmaceutical Liability
The Growing Storm
Product Withdrawals
• 15 product withdrawals between 1997 and 2005
– 14 Prescription Drugs, 1 Vaccine
– Combined peak sales potential of these drugs is greater
than $13 Bn
• In 26 years prior to 1997, there were only 8 product
withdrawals
1
Complaints
Filed
Against
Investigators
Complaints
filed
per Investigator
Annual Complaints Received by FDA
Annual Complaints Received by FDA
150
131
118
106
75
11
9
13
11
8
15
9
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Source:
FDA FDA
Office
of Compliance,
Source:
Office
of Compliance,CenterWatch
CenterWatch
2
Pooled Data
Losses
21
20
# of Losses
• Gathered in 2002 from 14 major
pharmaceutical companies
• 30 Claims with Incurred > $20
Million
• Minimum = $20.8 Million
• Maximum = $3 Billion
• Since this data was collected, 2 of
the losses in the 20-100 category
have moved into the 300+
category (actually both north of
$1bn).
25
15
10
4
3
2
5
0
20-100 101-200 201-300 301+
$ in millions
3
Vioxx
• COX-2 selective inhibitor NSAID marketed by Merck
• Used in the treatment of osteoarthritis, acute pain
conditions and dysmenorrhoea
• Worldwide, over 80 million people have been
prescribed Vioxx
• Withdrawn in 2004 because of concerns about
increased risk of heart attack and stroke
4
Vioxx (cont)
• Merck had Vioxx sales of $2.5B in the year prior to
withdrawal
• There are currently over 10,000 cases and 190 class
actions filed against Merck due to Vioxx
• Merck has vowed to fight every claim
• Merck currently has 3 wins & 3 losses
5
Other Publicized Events
• Ambien
– Reports of sleepwalking, sleep driving & sleep eating
• Bausch & Lomb
– Renu contact solution possibly causing eye infections
• Pfizer’s Viagra
– May cause blindness
• Merck’s osteoporosis drug Fosamex
– May cause rare disorder that causes patient’s jawbone to rot and
die
• Zocor / Crestor
– May cause muscular degeneration
6
Why the increase in Issues?
• More complex drugs
• Rush to be first to get a product to market
• Patent expiration on existing drugs
• Information on side effects are known much faster
• Lawyers are more organized and able to use
information on side effects much faster
7
Problems Pharmaceuticals face in court
• Pharmaceutical companies are seen as deep pockets
– This makes them an attractive target for lawsuits
• Many people view pharmaceutical companies as more
concerned with profits than people
– In court, perception can be more important than fact
• The Plaintiff bar has gotten much better organized and prepared
– Currently, there are seminars on how best to prosecute Vioxx
claims
– The Plaintiff bar analyses wins and losses and does a better job of
sharing information
8
Actuarial Issues
• Insurance Pricing
– Is it possible to develop a fair insurance structure that
reflects the potential for loss?
– Would Pharmaceutical companies buy it?
– Would Insurance companies offer it?
• Reserving
– How do you determine reserves for these “Batch”
claims due to a particular product
• What is the frequency?
• What is the severity?
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Pharmaceutical Insurance
• Pharmaceutical insurance tends to have $3 to $5 MM
retentions for small companies and $100 to $300 MM
for larger companies
• Individual claims from a single product such as Vioxx
would not usually exceed the retention limit
• However, based on the terms of the Pharmaceutical
coverage, the individual company may declare
individual claims from a particular product to be a
“Batch” claim
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“Batch” Claims
• Parameters established in the policy such as a dollar
threshold determine at which time the insured must
declare a batch.
• All claims related to the product in question and
occurring prior to the date the claims were declared
“Batch” claims are combined
• For the policy year in which a “Batch” is declared, the
company’s retention is increased for “Batch” claims
• Claims related to use after the product has been
declared a “Batch” claim are not included in the
combined “Batch” claim
11
“Batch” Claim Data
• “Batch” claims represent a huge cost for
Pharmaceutical companies
• As many of these claims are on-going and subject to
discovery, the companies’ lawyers are very hesitant to
release any data to insurance markets
• In general, the companies tend to be very protective
about any loss data and are very hesitant to release it
• Also, lawyers tend to do the claim reserving and may
not even show estimates of loss reserves on their files
• For actuaries, lack of data is a big problem
12
Rescission
• Rescission
– Rescinding the policy due to misrepresentation by the company
– Full disclosure is an assumption in all contracts, but the
application for insurance acts like a warranty of what the insured
knows at the time of the application. The insurers like the
plaintiffs claim the insured knew more than they disclosed and
move to cancel the policy as if it never existed
– This is an extreme action but it is being pursued or considered in
several cases
13
Insurance Market Response
• Retentions forced significantly higher
Company Sales
Market Desired Retention
< $5B
$25 – 100 MM
$5 - 10B
$100 – 300 MM
> $10B
$300 – 500+ MM
• Market Capacity is evaporating
– Current Estimate: $200-700MM range from >$1B
• Coverage Restrictions
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Market-Wide Product Restrictions
• Entire market effectively working-off extensive product
exclusion list
• Individual insurers freely/constantly add to list
• Focus on excluding substances under all
applications/uses/names rather than just specific products
– exclude “manufacture, distribution, sale, utilization, ingestion or
inhalation of, or exposure to or existence of, as the case may be of
listed substances or their generic equivalents or any other
substance which is comprised of the same active ingredient(s)”
– exclude “listed drugs, or any generic or other versions, or
equivalent active ingredient to any of the foregoing drugs”
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Common Product/Substance Exclusions
•
•
•
•
•
•
•
•
•
•
•
•
•
Accutane (Isotretinoin)
Actos (Pioglitazone)
Adderall
Arava (Leflunomide)
Avandia (Rosiglitazone)
Baycol/Lipobay (Cerivastatin)
Birth Control Products:
Contraceptive pills, drugs or devices
Blood Borne Pathogens AIDS/HIV,
Hepatitis B & C
Bupropion (Zyban/Wellbutrin)
Calcium Channel Blocker products
Celebrex
Chlorofluorocarbons (CFC)
Comfrey (Pyrrolizidine Alkaloids)
•
•
•
•
Diethylstilbestrol or DES
Dienestrol
Duract (Bromfenac Sodium)
Ephedrine, Ma Huang, Chinese
Ephedrine, Ma Huang extract,
Ephedra, Ephedrine sinica, Ephedrine
extract, Ephedrine Herb Powder,
Epitomic or products of any kind or
nature which contain Ephedrine, Ma
Huang, Chinese Ephedrine, Ma
Huang extract, Ephedra, Ephedrine
silica, Ephedrine extract, Ephedrine
Herb Powder, Epitomic or any
derivative thereof.
• Enbrel (Entanercept)
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Common Product/Substance Exclusions (cont)
• All weight management drugs
including, but not limited to, FenPhen/
Pondimin/ Redux (Fenfluramine
Hydrochloride, Dexfenfluramine
Hydrochloride)/ Phentermine
• Fertility Drugs
• FIAU (Fialuridine)
• Halcion (Triazolam) Hormone
Replacement Therapy/Drugs
• Iressa/Gefitnib
• Lamisil (Terbinafine Hydrochloride)
• Kava, ava, ava pepper, awa, kava root,
kava-kava, kawa, Piper methysticum
Forst f., Piper Methysticum G. Forst,
rauschpfeffer, intoxicating pepper, kava
pepper, kawa-kawa, kew, Piper
methysticum, sakau, tonga,
wurzelstock, yangona.
• Methylphenidate
• Latex, Natural Rubber Latex Gloves,
Condoms
• Lead
• L-Tryptophan
• Lotronex (Alosetron Hydrochloride)
• Lymerix vaccine
• Meridia (sibutramine)
• Oraflex (Benoxaprofen)
• Oxycontin/Oxycodone (morphine)
• Parlodel (Bromocriptine)
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Common Product/Substance Exclusions (cont)
• Posicor (Mibefradil Dihydrochloride)
• RU486 - mifepistone/misoprostol
(morning after “abortion” pill)
• Selective Seritonin Reuptake
Inhibitors (SSRI’s)
• PPA (Phenylpropanolamine)
• Serzone (Nefazodone Hydrochloride)
• Paxil (Paroxetine Hydrochloride)
• Polychlorinated biphenyls (PCB)
• Propulsid (Cisapride)
• Prozac/Sarafem (Fluoxetine)
• Raplon (Rapacuronium Bromide)
• Raloxifene / Evista
• Remicade (Infliximab)
• Silicone (implantables)
• SMON (Clioquinol)/(Oxychinolin)
• Sporanox (Itraconazole)
• St. John’s Wort
• Stadol NS (butarphanol)
• Rezulin (Troglitazone)
• Statins/Fibrate Combination
• Ritalin (Methylphenidate)
• Statins
• Rotashield vaccine
• Swine Flu Vaccine
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Common Product/Substance Exclusions (cont)
• Thalidomide
Other Dietary Supplement Exclusions:
• Trovan (Trofloxacin Mesylate)
• GHB (gamma hydrozybutyric acid)
• Urea Formaldehyde Foam
• GBL (gamma butyrolactone)
• Thimerosal -Vaccines or other products
containing any form of mercury
including, but not limited to, mercury,
ethyl mercury.
• BD (1,4 butanediol)
– Vaccines/treatments for Smallpox,
Anthrax, Botulism, Plague
• Vioxx
• Zerit (Stavudine)
• Zoloft (Sertraline)
• Zyban/Wellbutrin
• Tetramethylene glycol
• 2 (3H)-furanone di-hydro
• creatine
• DHEA (dehydroepiandosterone)
• pregnenolene
• andro
• androstenedione
• androstenediol
• steroids
• anabolic hormones
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Company Response
“Carriers and our own recognizance tell us eight of the
top ten major pharmaceutical companies have stopped
buying conventional products liability insurance”
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