Ephedra Product Liability Coverage Now Offered By Fewer Than 10 Insurers
This article was originally published in The Tan Sheet
Executive Summary
Between five and 10 product liability companies have stopped offering coverage for ephedra alkaloid-containing products since June, when HHS Secretary Tommy Thompson issued a statement on ephedra's safety
|
Between five and 10 product liability companies have stopped offering coverage for ephedra alkaloid-containing products since June, when HHS Secretary Tommy Thompson issued a statement on ephedra's safety. As a result, according to data from the insurance brokerage company Hilb, Rogal & Hamilton (Glen Allen, Va.), dietary supplement companies can now obtain product liability coverage for ephedra products from fewer than 10 insurers. Further restrictions are possible in the next several months, the firm noted. Of the approximately 200 product liability underwriters in the U.S., fewer than 20 offer coverage for any type of supplemental food products, based on HRH data. "Main line" insurers have gotten out of ephedra product liability underwriting entirely. HRH is a broker for "middle market businesses" and insurance companies that underwrite client risks, 1 the broker's Web site states. The firm is the sixth largest broker in the U.S. In June, Thompson emphasized HHS' commitment to expanded scientific research on ephedra and urged product manufacturers to adopt measures such as including FDA's MedWatch toll-free number on product labeling to encourage consumer reports of adverse events (2 (Also see "HHS/FDA Ephedra Strategy: A Risk Management Approach?" - Pink Sheet, 17 Jun, 2002.), p. 5). More recently, ephedra-containing products have drawn even greater attention due to hearings held by Sen. Richard Durbin (D-Ill.) and the federal criminal probe of Metabolife's handling of safety data (3 (Also see "Herbal Regulatory Category Creation At FDA Suggested By Sen. Durbin" - Pink Sheet, 5 Aug, 2002.), p. 4). However, insurers' concerns about governmental scrutiny of ephedra products can be traced back at least to the mid-1990s. HRH said insurance companies began following ephedra in July 1995, when FDA issued a final rule banning ephedrine in OTC cough/cold products effective July 29, 1996 (4 (Also see "Nebraska ephedrine law exempts new Primatene Tablets, Bronkaid Dual Action." - Pink Sheet, 5 Aug, 1996.), p. 11). Concerns were further heightened when FDA, in a 5 March 18, 1999 Federal Register notice, requested ephedra adverse event data to review the substance's abuse potential and medical usefulness in preparation for a World Health Organization meeting. In addition to fewer ephedra liability policies being available, those that are offered are increasingly more expensive. Although HRH does not have a separate break-out for ephedra insurance costs, the brokerage firm reported the cost of policies for most companies with ephedra, kava and/or yohimbe product lines have increased by 50% to 100%, and in some cases have increased five- to 10-fold over the last three years. HRH said it is aware of one company with a significant ephedra business that paid $50,000 for product liability coverage three years ago and now is paying $750,000. In contrast, product liability premium increases for more "routine" vitamin lines have averaged about 50%, HRH reported. Kava also has raised some concerns for liability insurers, but the impact has been much smaller than for ephedra, HRH noted, citing the smaller amount of U.S. media attention and lawsuits concerning kava. International attention on kava's adverse events has resulted in temporary and permanent product bans. Many insurers have lowered the ceiling on maximum coverage for ephedra liability. For example, a year ago, limits of up to $25 mil. were available for ephedra product lines, but $5 mil. is a typical limit now. Some underwriters have lowered their limits coverage to $1 mil., HRH added. Some supplement companies are responding to these issues, in part, by reformulating products or dropping product lines (see 6 (Also see "Chattem Exiting Ephedra Market With Dexatrim Reformulations" - Pink Sheet, 9 Sep, 2002.)). Regarding actual product liability litigation, HRH explained the issue for liability carriers is not only the number of ephedra lawsuits, but also that the outcomes so far have not set clear precedents that can be factored into pricing decisions. Most lawsuits appear to deal with situations where ephedra was taken in bulk or in combination with caffeine, the brokerage firm noted. In setting insurance premiums, the carriers consider such factors as product labeling, including warnings and claims, testing data and the percentage of company business derived from ephedra products. Insurance companies also look specifically at the amount of ephedra in each product. For example, coverage for liquid ephedra products may be easier to obtain, as it is less likely to be taken in bulk and therefore less likely to harm the user, the broker explained. |