life science companies face manufacturing scrutiny like ... · over the past 15 years, life science...
TRANSCRIPT
Over the past 15 years, life science companies have incurred almost $10 billion in business interruption losses caused by regulatory actions arising from manufacturing issues. The FDA and other regulators around the world are scrutinizing life science companies more closely than ever to ensure current Good Manufacturing Processes (cGMP) are being followed. Regulatory inspections can result in a suspension of manufacturing, either voluntary by the company or enforced by a regulator. Up until now, the resulting costs have been borne by the company because a typical business interruption insurance policy responds only in the event of physical damage to an insured’s property.
The ever-increasing complexity of companies’ supply chains only adds to their potential exposure. More companies are relying on third parties to supply key elements of their products or to provide manufacturing capacity to supplement or even replace what they provide in-house.
The impact of regulatory inspections can be far reaching:
�� Regulatory non-compliance can lead to 483s, warning letters, withdrawal of marketing authorization and ultimately enforced suspension of manufacturing by the regulatory agency
�� Suspension at a key supplier or manufacturer can lead to suspension of product manufacture and loss of sales if no alternative is available.
�� Regulatory suspensions can be lengthy and the approval process to re-start production is often complex.
No. of Regulatory Shutdowns in the Global Biopharmaceutical
Industry from 2001-2015 (MUSD)
Life science companies face manufacturing scrutiny like never before
Non damage business interruption insurance (NDBI)Working with Munich Re, Willis Towers Watson now offers a solution; an insurance policy to cover business expenses and loss of income in the event of a suspension of manufacturing as a result of a “non-physical damage business interruption.” Following either the withdrawal of regulatory approval or license by the FDA as a direct result of significant manufacturing deficiencies or manufacturing irregularities or by the the manufacturer’s voluntary decision to suspend operations and a subsequent recall of a product as a result of such deficiencies or irregularities. Covered loss can include the loss of gross margin, expenses incurred to avoid or diminish the loss and the cost to restore the product supply to resume normal business operations. The life science company can choose to insure certain of their facilities (‘mission critical locations’) or all of them.
Companies who outsource manufacturing can cover their own business interruption losses relating to the close-down of their manufacturing partners’ facilities where they may feel that they have less ability to ensure regulatory compliance.
What is covered?Base cover: Total or partial suspension of manufacture by or on behalf of the insured as a direct result of
�� An order by a defined regulatory authority (DRA) to suspend manufacture, or
�� Action by the Insured or supplier to pre-empt a DRA order to suspend manufacture at an Insured’s named own site or a named supplier’s site as a direct result of irregularities in the manufacturing process which were discovered at that site and not rectified to the satisfaction of the DRA.
�� The client can select which sites or products to insure.
Optional coverages: Total or partial suspension of manufacture by or on behalf of the insured as a direct result of:
�� Import ban in respect of products manufactured at sites situated in non-DRA countries
�� Off-specification materials discovered prior to incorporation into the manufacturing process
�� Product recall costs as a result of irregularities in the manufacturing process
�� Loss on agreed value basis for expected contractual licence or royalty streams not received as the result of DRA or pre-emptive action resulting in suspension of manufacture by or on behalf of the third party
�� The policy covers loss of gross margin and direct expenses, such as remediation costs, extra expenses such as destruction costs, and direct loss of market share during the indemnity period.
�� Limits available from $10 million to $150 million from Munich Re with additional capacity available from other sources. Minimum deductible is 10% of Munich Re’s limit.
�� Key exclusions:
�� Defects not related to manufacturing defect (e.g., design failure)
�� Fines, penalties and liquidated damages
�� Losses arising from actual property damage (covered under standard PDBI policies)
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John ConnollyLife Sciences Practice Leader+1 610 254 5686 [email protected]
Kevin Velan National Broking Specialist +1 312 288 7140 [email protected]
Brandon SielenNational Broking Specialist +1 602 [email protected]
Life science expertise
�� 350 industry colleagues in more than 100 countries including 200 in USA
�� More than 500 clients in North America and 700 Globally
�� The most advanced loss modeling in the industry
�� A globally integrated practice that operates as a key part of your team, providing industry specialist insight and complete insurance solutions
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