Pharmaceutical Sector Burdened, Say Angus Rodger and Todd Corey

On 10 June 2005, Insurance Day published “Pharmaceutical Sector Suffers Burden,” by Angus Rodger and Todd Corey of the London office.  Their article details the challenges facing insurance companies’ coverage of the pharmaceutical industry: a constricted supply of drugs, looming expiration of lucrative patents, and adverse publicity about some drugs’ dangerous side effects.

As a result of product problems and litigation against manufacturers, the insurance market has become more cautious, as insurers reconsider whether pharmaceutical companies are worth the risk. Given the possible regulatory scrutiny and the real expenses of the discovery process, the very question of insurance becomes more complex as the risk—and potential payout— increases.

Pharmaceutical companies face three phases of legal scrutiny: regulator-issued warnings or voluntary product withdrawal, product liability or consumer fraud claims, and consideration of insurance coverage against legal liability to third parties.

While insurers may be able to apply contractual protection provisions or have common-law remedies if an insured fails to inform its insurers of a drug’s potential problems, drug-related litigation is burdening pharmaceutical companies, and, in turn, insurance companies. What effect these losses will have on the insurance industry depends on the individual policies’ terms and particular claim’s facts.

This article was first published in Insurance Day, 10th June 2005, and has been reproduced by kind permission of Insurance Day.