Insuring Clinical Trials and Tribulations
Clinical trials continue to be an integral part of innovation within the life-sciences arena. As biotech companies continue to grow, human testing of effectiveness and safety of drugs and medical devices has grown in to a $20 billion a year industry.
The liability exposures associated with clinical trials conducted at health care institutions has dramatically increased as well. According to a recent survey conducted by Jury Verdict Research, half of the payouts in the last 10 years in single–claimant biotechnology cases exceeded $1 million, with a mean award of $3 million. The largest reported settlement during this period of time was $43 million. Common allegations include failure to warn, bodily injury, and conflicts of interest among sponsor companies, investigators and healthcare organizations.
Even with a large increase of highly publicized verdicts, the highly competitive nature of clinical research may lead biotech companies, investigators and institutional review boards to subrogate risk-management considerations to other priorities. In order to properly protect themselves, administrators of healthcare organizations involved in clinical testing must be aware of the liability exposures that exist at every stage of the marketing and product development process. These include professional liability, regulatory sanctions, civil penalties, product liability and even criminal prosecution.
First and foremost it is imperative to put together a comprehensive risk-management program that contemplates the risks mentioned above. Then it is essential to buy the proper insurance coverage specifically for your trial. Here is a quick summary of some of the coverage considerations for insuring clinical trials
Blanket Coverage vs. Coverage by Endorsement
The breadth of clinical trial coverage depends on whether trials are covered on a scheduled or a blanket basis.
Coverage by Endorsement Requires That All Trials Be Identified. Some carriers provide clinical trial coverage by an endorsement to the products liability-completed operations policy. If a particular trial is not specified and scheduled on the endorsement, it is not covered.
Blanket Coverage Is More Inclusive. In contrast, clinical trial coverage provided on a “blanket” basis means that all trials in progress at the policy inception date and started during the policy period are automatically covered. Trials are not individually scheduled, so no endorsement to the policy is necessary. The ideal scenario is a products liability policy that provides blanket coverage, which is broad and mitigates the potential for coverage gaps.
Treatment of New Trials
New trials that begin during the policy period are handled differently depending on the coverage provided.
Coverage by Endorsement Means New Trials Are Subject to Underwriting Review. Insurance policies that require a schedule of clinical trials do not provide coverage of new trials unless the insurer is notified, in advance, of the trial and agrees to add the specific trial to the policy. Thus, additional paperwork and data will be required by the insurance company prior to extending coverage. This means there may be some lead time prior to coverage becoming effective, which may mean delaying a trial start date. Failure to report the new trial under such policies may leave a sponsor without coverage. Even with notice, the carrier may decline to add coverage for the new trial. Adding the new trial also may have premium implications for the sponsor, adding to insurance costs.
New Trials are Covered Automatically if Done on a Blanket Basis. Blanket coverage works differently. New trials that begin mid-term are automatically covered and there are no reporting requirements or additional premium charges imposed by a new trial.
Changes to Protocols
Changes to protocols that occur during the course of the trial also may impact coverage. Notification of Protocols Changes May Be Required. Some insurance companies require notification of changes to protocols and if they don’t receive such notifications, trials may not be covered should a claim arise. As a result, it is important that the clinical trial sponsor notify its carrier of any protocol changes.
With Blanket Coverage There Are No Reporting Requirements. Under blanket coverage, it is understood and expected that trial protocols may change and changes to protocols do not add any additional reporting requirements, nor will they jeopardize coverage.
Increasing the number of participants may impact both coverage and premium if the policy is subject to audit.
Additional Audit Premium May Be Assessed at the End of the Policy Period. As part of the insurance application process, a clinical trial sponsor must provide an estimate of the number of participants taking part in each clinical trial to be covered. Many insurers use the sponsor’s estimate to set a “per participant” charge and to calculate a deposit premium. This type of policy is termed an “auditable” policy, which means the final premium to be charged will be determined by an audit at the end of the policy period. An auditable policy has several downsides. First, at the end of the policy period, the sponsor must submit updated data regarding the trials conducted during the period. Collecting and assembling the data can be a time-consuming process, especially when there are multiple clinical trials being conducted and at different sites. Audits also can be cumbersome and the insurer may require the data to be broken down by study, phase, site and participant population, etc. Lastly, any increase in the actual number of participants compared to the original estimate generally means an additional, unexpected, unbudgeted premium charge.
Human testing is indispensable to medical and scientific progress. However, failure to adhere to proper risk-management and insurance strategies can create a heightened litigation exposure with potentially catastrophic financial consequences. By focusing on these areas you can dramatically reduce the level of risk your organization will be exposed to during a clinical trial. Swingle, Collins & Associates specializes in commercial health care insurance coverage. The descriptions of coverages listed on this website are brief and subject to the provisions, limitations, and exclusions that can only be expressed in your policy and related endorsements. For additional information of how Swingle, Collins & Associates can assist in meeting your coverage needs for health care insurance, or insurance for clinical trials, please contact your dedicated risk manager to discuss the benefits and services of commercial insurance coverage.
The information contained on this page is provided for informational and educational purposes only. It contains general information on insurance issues and may not reflect the most current developments in insurance coverage and is unlikely to apply in all factual scenarios. The information does not include all the terms, coverages, exclusions, limitations or conditions that may be contained in the actual insurance contract language. The policies themselves must be read for those details. Sample policy forms will be made available upon reasonable request.