Insurance prescription for clinical trials

As you read this there are probably as many as 100,000 people taking part in clinical trials in 165 countries around the world. Such trials, involving pharmaceuticals or medical devices, can last for years and are necessary if products are to be used safely to treat illnesses or alleviate medical conditions.

While clinical trials are almost always completed without incident, thanks to the strict controls in place, a major incident sometimes grabs the headlines. In 2006, for example, six men became critically ill with multiple organ failure while taking part in the trial of a drug dubbed TGN1412, intended by its maker TeGenero for use in treating rheumatoid arthritis and leukaemia.

The drug had been developed in line with all regulatory and clinical guidelines, and had been shown to be safe in earlier non-human studies.

Compensation protection

Not surprisingly, pharmaceutical manufacturers and companies that conduct clinical trials all need to purchase insurance to cover themselves against the risk of a study going wrong and being subject to massive compensation payouts.

“The owner of the product obviously bears the important product liability risk – the risk of the product harming the patient in the trial,” says Lyn Rossano, Head of Global Life Sciences at the Lloyd’s insurer Navigators.

In addition, the physician or company carrying out the trial is exposed to medical malpractice risk. “That relates to the doctor and the possibility of something going wrong when they administer the drug, resulting in injury to the test subject,” Rossano explains. “In reality, if there is a problem in a clinical trial everyone involved gets named in the legal action - and then the courts figure out who was at fault.”

There are also big financial risks attached to clinical trials, especially in a litigious environment like the US where pharma companies trialling a drug need approval from the Food & Drug Administration (FDA). “If the FDA says no, it is not satisfied that the product is safe or effective, it could lead to the product being delayed or scrapped. In such a case, D&O suits could be brought by shareholders who have suffered financial loss,” Rossano points out.

Similarly, clinical research organisations (CROs) who conduct trials on behalf of clients could face Errors & Omissions (E&O) risks where, for example, they have failed to fulfil their part of the contract leading to delay and/or financial loss for another party.

Challenging trials

Availability and scope of insurance is not usually a problem because the claims experience for clinical trials has been very good, according to Christopher Bryce, EMEA Practice Leader for Life Science at Lloyd’s broker Marsh. “That is not to say that all clinical trials are easy to insure,” Bryce adds. “Any clinical trial involving children can be difficult, and women who are pregnant are also a group that can be challenging.”

Another challenge for underwriters is the relatively small premium base measured against a trend for higher [insured] limits to be requested, Bryce says. “The increase in limits that are being requested may reflect pressure on healthcare budgets and the fact that in Europe, as most healthcare is provided by the State, Governments do not want to be left with the results of a failed clinical trial.”

Clinical trials policies normally have “claims made” wordings which means that insurance coverage does not automatically extend beyond the trial dates. “Pharmaceuticals companies who have annual Products Liability insurance deal with this by retaining the retroactive date on their annual Products Liability policy which are worded as a legal liability insurance contract and will respond to legal liability associated with a clinical trial,” Bryce says. “The potential gap is where you arrange insurance, let the policy end and have no insurance for an event which may occur sometime in the future that can be attached to the clinical trial.”

Serious problems in clinical trials are rare, as Rossano points out. “But what I would say is that clinical trials are not without risk. The risk of a clinical trial is that the human body is very complex and in rare cases there can be unforeseen outcomes, as happened in cases like TeGenaro.”