Life Sciences

Offshore Trial and Error

Clinical trials conducted abroad are a necessity in life sciences, but the complex risks must be carefully managed.
By: | December 14, 2016 • 6 min read

American life sciences companies conducting clinical trials abroad confront a tangle of risks that require careful planning, well-drafted documents and the aid of local organizations to navigate laws, regulations and customs of each test site, lest errors and oversights produce costly delays and faulty clinical data.

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The biggest risk for overseas clinical trials, said Jim Walters, managing director, Aon Risk Solutions’ life sciences group, is “working through the myriad regulations,” both for insurance and clinical requirements, so “sponsors can meet local ethics committees and regulatory requirements to get the trial started.”

American companies’ efforts to grapple with compliance risk, said Jack Bodden, managing director, global risk management, Marsh, is complicated by different regulatory requirements in each country.

Compensation requirements for participants in clinical trials vary broadly between countries, he said, and the “ask” of sponsor companies from regions and clinical sites often differ from the country’s written regulations. “Not getting regulatory risk managed well can delay or halt the trial,” he said.

For example, the United States does not require clinical trial liability insurance coverage — the equivalent of product liability insurance for clinical trials. But as a practical matter, the ethics committees of the hospitals where trials take place would reject any trial that did not show evidence of the sponsor’s insurance, said Frank Goudsmit, senior vice president, life sciences and food market segments, Chubb.

Likewise, accident insurance for participants’ travel to and from the trial site has become customary in Germany, although it’s not required by statute, Goudsmit said.

Jack Bodden Managing director Global risk management Marsh

Jack Bodden
Managing director
Global risk management, Marsh

Until recently, said Bodden, several European Union countries required sponsors to provide evidence of insurance protection for its patient population that exceeded protections in commercially available products.

“Sponsors couldn’t comply because there wasn’t even an insurance option available to satisfy the requirement,” he said. Ultimately, pharmaceutical companies organized and negotiated a compromise with regulators that enabled their compliance while preserving the highest standards of patient safety and protection.

Local Partners

Even within a country, regional and local customs can vary, calling for experienced local partners to navigate variations in written and unwritten rules, said Dan Brettler, life science and technology co-practice leader, Conner Strong & Buckelew.

Individual clinical sites may look to expand requirements beyond clinical trials liability, he said, such as indemnification for professional liability, or they may require local admitted insurance even where the country permits nonadmitted cover.

How does a sponsor control its risk in environments where inconsistency is the only consistent factor?

“Dealing with experienced contractors and writing comprehensive contractual agreements is part of the liability equation,” Brettler said.

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“Sponsors must be mindful of insurance and indemnification contractual provisions with their CROs, clinical sites and supply chain partners, especially in countries with a history of product contaminations or regulatory violations.”

CROs, or contract research organizations, are local companies that sponsors hire to help manage development and implementation of their trials. CROs should know the local statutes, customs, ethics committees and decision-makers in the sites where a trial is proposed, said Walters.

CROs should also be vetted, said Dr. Rasika Birewar, owner, sehatINDIA Healthcare Services in Mumbai.

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“The CRO shouldn’t escape risk assessment because it’s local to a country. Sponsors have to do their own due diligence on the CRO because the onus is on them to comply with regulations and laws in every site’s country.”

“The sponsor needs eyes and boots on ground in addition to the CRO,” said Rob Dickey, chief financial officer of Tyme Technologies Inc., which has conducted clinical trials in North America, Europe and India.

A manager in the direct employ of the sponsor should oversee the CRO, Dickey said. “If something falls off a table in the treatment room and hits a patient’s foot, who’s responsible?”

Medical care in that case, where the injury is unrelated to the investigational product, might be a standard part of coverage in their world, he said, but not necessarily in ours. “A lot of stuff can happen when you’re not there and there’s a seven-hour time difference. You need someone to oversee that.”

As in the case with rare diseases, sponsors sometimes conduct trials all over the world to accrue a statistically valid sampling of patients with a particular disease state, said Goudsmit. That could involve two or three patients in a dozen countries — and local representation in each of those.

Good Documents

A secondary risk, almost rivaling compliance, is appropriate documents that meet regulatory standards in the right hands well before the start of the trial, said Walters.

“Sponsors don’t want wrong language in the insurance documents to delay the trial,” said Dickey. “The ethics committee in a given hospital may not meet for another six months.”

Clinical trial liability insurance, which responds to bodily injury to patients arising from the trial, is near-standard in custom if not by statute. In an industry that quantifies risk assiduously and prices its coverage accordingly, Bodden said, “clinical trial liability insurance may cover drugs and devices that have not yet proven to be safe and effective.”

Drugs undergoing clinical trials aren’t always new; approved drugs may undergo new trials for treatment of a different disease state.

Dan Brettler Life science and technology co-practice leader Conner Strong & Buckelew

Dan Brettler
Life science and technology co-practice leader
Conner Strong & Buckelew

In addition to clinical trial liability coverage, all trials must include informed consent documents that provide prospective participants “adequate information to allow for an informed decision about participation in the clinical investigation,” according to the FDA.

The document must be written in language understandable by laypeople, describing the study’s purpose, duration, expectations of participants and any risks exposed in the animal trials that precede the human trials.

Many CROs buy errors and omissions (E&O) insurance to protect themselves against sponsors’ allegations of financial injury arising out of negligence.
That can easily run into millions of dollars if the trial has to be repeated, Goudsmit said.

“If the clinical data isn’t acceptable to the regulatory body because of mistakes in research — if the CRO didn’t follow good clinical practices — E&O insurance would cover the cost of re-conducting the trial,” Goudsmit said.
Clinical trials can account for two-thirds of the cost of developing a new drug, said Praveen Gupta, managing director, chief executive officer, Raheja QBE General Insurance Co. Ltd., in Mumbai.
A demonstration that an investigational drug or device meets its safety and efficacy targets is the litmus test for regulatory approval. Trials can fail to meet their endpoints — generally not insurable — if they can’t demonstrate sufficient efficacy.

If the product fails because of safety concerns that manifest themselves during the trial, participants may well have suffered bodily injury.

“If a product fails to meet the regulatory endpoint because of safety concerns,” Goudsmit said, “that can absolutely result in a human clinical trial liability claim.”
In that case, he said, patients’ attorneys will ask, what did the sponsor know about possible adverse events, or what should it have known? Was the informed consent document thorough? Was it understandable?

FDA Approval: Gold Standard

Sponsors conduct their clinical trials where they can find patients with their targeted disease state or a specific DNA pool; they may go offshore to find “treatment naïve” patients to produce unambiguous clinical data; but they universally seek their regulatory endpoint — proof of safety and efficacy — and they almost universally seek FDA approval.

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FDA approval is the coveted gold standard of regulatory approval both because the U.S. market is the world’s most lucrative, offering the innovator company the greatest pricing flexibility, and because most countries will also grant approval if a product meets the FDA’s high standards, Goudsmit said.

The FDA, and most other regulatory bodies, will accept data from clinical studies conducted anywhere in the world, said Walters. “Sponsors just have to adhere to the approved protocols and follow good clinical practices.”

“Countries want to protect their populations from unproven drugs and devices,” said Bodden. “And pharmas will do everything possible to keep patients safe.”

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]

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Hidden Risks of Violence

The Las Vegas shooting and other tragedies increase demand for non-physical damage BI coverages. The market is growing, but do new products meet companies’ new needs?
By: | December 14, 2017 • 5 min read

Mass shootings in the United States and the emergence of new forms of terrorism in Europe are boosting demand for insurance against losses caused by business interruption when a policyholder suffers no direct property damage, according to insurers.

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But brokers say coverage for non-physical damage BI (NDBI), needs to evolve to better meet the emerging needs of corporate clients.

For years, manufacturing clients sought a more comprehensive range of NDBI coverages, especially due to the indirect effects of natural catastrophes such as the Thai floods that disrupted global supply chains in 2011.

More recently, however, hospitality and entertainment companies are expressing interest as they strive to adapt to realities such as the mass shootings in tourism hotspots Las Vegas and Orlando and terror attacks in such popular destinations as New York, Paris, Berlin, Barcelona and London.

In addition to loss of life and property, revenue loss is a real risk. Tragedies that cause a high number of fatalities can cause severe financial losses, especially for companies relying on tourism, as visitors shy away from crime scenes.

Precedents already exist. Paris received 1.5 million fewer visitors than expected in 2016, after the French capital was targeted by a series of deadly terror attacks the year before.

More recently, bookings declined in the immediate aftermath of a shooting at the Mandalay Bay Resort and Casino in Las Vegas that took the lives of 58 people on October 1: Bookings at the hotel have since recovered.

Joey Sylvester, national director of operations & planning, Public Sector, Gallagher

“The recent horrific mass shootings in Las Vegas, Nev., and in Sutherland Springs, Texas, raised awareness and concerns about similar events occurring in areas where the public congregates, such as entertainment venues like sporting events, concerts, restaurants, movie theaters, convention centers and more,” said Bob Nusslein, head of Innovative Risk Solutions Americas, Swiss Re CS.

“The second highest NDBI cover to natural catastrophes is terrorism, including active shooter and mass shootings.”

However, products available in the market do not always provide the protection companies would like. Active shooter coverages, for example, focus mostly on third-party liabilities that policyholders may face after a shooting.

Loss-of-attraction policies often define triggering events with a high degree of detail. These events may need to be characterized as a terrorist attack or act of war by authorities. In some cases, access to the venue needs to be officially cut off by police.

It follows that an attack by a 64-year old ex-accountant who shoots hundreds of people for no apparent reason — as was the case in the Mandalay Bay tragedy — isn’t likely to align with a typical policy trigger.

But insurers say they are trying to adapt to the evolving realities of both mass shootings and terrorism to meet the new needs expressed by clients.

“The active shooting coverage is drawing much interest in the U.S. market right now. In Europe, clients are increasingly inquiring about loss of attraction,” said Chris Parker, head of terrorism and political violence, Beazley.

“What we are doing at the moment is to try and cross these two kinds of products, so that a client can get coverage for the loss of attraction resulting from an active shooting event.”

Loss-of-attraction policies cover revenue loss derived from catastrophic events, and underwriters already offer alternatives that provide coverage, even when no property damage is involved.

To establish the reach of such a policy, buyers can define a trigger radius — a physical area defined in the policy. If a catastrophic event takes place within this radius, coverage will be triggered. This practice is sometimes called “cat in a box.”

Some products specify locations that, if hit by a catastrophic event, will result in lost revenue for the insured. For resorts or large entertainment complexes, for example, attacks on nearby airports could cause significant loss of revenue and could be covered by NDBI insurance.

Measuring losses is a challenge, and underwriters may demand steep retention levels. According to Parker, excess coverage may kick in after a 20 percent to 25 percent revenue drop.

Insurers will also want proof that the drop is related to the catastrophic event rather than economic downturn, seasonal variances or other factors.

“Capacity is very large for direct acts of terrorism but lower for indirect terrorism and violent acts because the exposure is far greater,” said Joey Sylvester, national director of operations & planning, Public Sector, Gallagher.

“Commercial businesses, public entities, religious and nonprofit organizations have various needs for this type of coverage, and the appetite is certainly trending upward.”

It is difficult to foresee which events will cause business disruption. As a result, according to Nusslein, companies generally prefer to purchase all-risk NDBI covers rather than named-perils coverage.

“The main reason is that, if they have coverage for four potential NDBI events and a fifth event occurs, the fifth event is not covered,” he said. “Insurers, new to NDBI covers, still prefer named-perils covers over all-risk cover.”

Current geopolitical tensions are also fueling buyers’ demands.

“Many companies want nuclear, biochemical, chemical and radiological exclusions removed from terrorism NDBI covers. While this is more difficult for insurers, it is not impossible,” Nusslein said.

“War risk NDBI cover is becoming more sought after due to political tensions between the U.S. and North Korea.”

“Many companies want nuclear, biochemical, chemical and radiological exclusions removed from terrorism NDBI covers. While this is more difficult for insurers, it is not impossible.” — Bob Nusslein, head of Innovative Risk Solutions Americas, Swiss Re CS

Natural catastrophes still constitute the largest share of perils underlying NDBI products.  Parametric indexes are increasingly employed to provide uncontroversial triggers to policies, said Duncan Ellis, U.S. property practice leader, Marsh.

These indexes range from rainfall levels and wind speed to the measured intensity of earthquakes. Interest in this kind of NDBI coverage expanded after the recent hurricane season.

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“The benefit of these products is that you do not have to go through the settlement process, which clients hate,” Ellis said.

NDBI policies are often bespoke, which is more common for very large insurance buyers.

“Usually, the market offers bespoke coverages for individual industries or clients, with very significant deductibles,” said Tim Cracknell, partner,  JLT Specialty.

NDBI cover can also help transfer regulatory and product recall risks. The life science sector is expressing interest in this kind of solution for cases where a supplier goes bankrupt or is shut down by a regulator, or a medication needs to be recalled due to perceived flaws in the manufacturing process.

Experts say that concerns still to be addressed are NDBI losses caused by cyber attacks and pandemics.

Capacity is an ongoing concern. According to Swiss Re CS, $50 million to $100 million, or even more, can be achieved through foundation capacity provided by a lead insurer, with syndicated capacity to other insurers and reinsurers, depending on the risk. &

Rodrigo Amaral is a freelance writer specializing in Latin American and European risk management and insurance markets. He can be reached at [email protected]