MARSH AND THE DRUG DEVELOPMENT INDUSTRY

Transcription

1 MARSH AND THE DRUG DEVELOPMENT INDUSTRY

2 On average it takes about 10 to 15 years for a new medicine to complete the journey from initial discovery to the marketplace. A very small number of products, relative to the number that enter the development pipeline, achieve approval. The process is expensive, the average cost of a new approved drug being between USD4 billion to USD11 billion 1. 1 Source: InnoThink Center For Research In Biomedical Innovation; Thomson Reuters Fundamentals via FactSet Research Systems, 2012 i Marsh and the Drug Development Industry

3 CLINICAL TRIAL RISK MANAGEMENT While your organisation develops the next life-saving medical product or tomorrow s breakthrough drug, it remains exposed to issues that can threaten its reputation, its ability to compete, and even the business itself. Marsh has over many years provided services and solutions in response to those risks that your industry has to manage, allowing developers of medicinal products to achieve their goals and objectives for the benefit of humankind. In the UK, Marsh delivers risk and insurance solutions to the biotechnology industry at all stages of the drug development process and has developed a number of unique solutions in response to key areas of risk that have supported the development objectives. We see this as consistent with our objective of helping our clients reduce costs, control risk, protect their organisation and thereby achieve their objectives. Our aim is to reduce the cost of risk for clients. We understand the risks faced by the sector and through our ability to understand and benchmark risk, design and deliver relevant solutions and secure cost effective risk transfer to the insurance market, we deliver best value for clients. ILLUSTRATIVE DRUG DEVELOPMENT CYCLE Drug Discovery and Pre-Clinical RISK ISSUES Protection of revenue such as milestone payments. Security. Protection of intellectual property. Preservation of data. Clinical Development RISK ISSUES Clinical trials such as compliance with regulations and insurance. Contractual risk management with partners such as product manufacturers, contract research organisations. Management of data. Management of stakeholder relationships. Approval and Launch RISK ISSUES Sales and marketing protection of revenue. product liability. Contractual risks with partner toll manufacture. distribution. Investor risks Public offering prospectus and compliance. Investor exit governance. legal liabilities. Marsh has an understanding and knowledge of how each stage of the development process should be risk managed and is able to advise on how risk should be managed and treated. Marsh 1

4 Risk Example Cyber Risk Due to a targeted cyber-attack, a leading UK biotech company lost research data eight months prior to a new product launch. A foreign competitor accessed this data, and as a result released a cheaper replica ahead of the UK company. The UK company suffered financial loss (having invested GBP1 billion in research and development), future funding was compromised and foreign competitors introduced further products based on the stolen research data. Source: UK Communications Electronics Security Group (CESG) October 2012 STAGE1: DRUG DISCOVERY AND PRE-CLINICAL There are three elements to the protection of revenue: Firstly, ensuring that there is protection for revenue that may be anticipated on achieving performance milestones or under the terms of grants, endowments or other financial contributions negotiated with third parties. Secondly, the additional expenditure that may be incurred in avoiding any interruption to research and development activity. Thirdly, any additional costs incurred to either rework, reinstate or recreate data and/ or records that relate to previously completed contracts or projects for research. Business interruption wordings do not automatically contain language that would respond to these risks. Physical security is an important risk management feature to protect both the premises and employees particularly where activism may be a threat plus the research data that exists. This can be either the threat of disease to animal subjects, which can be insured, or the design and implementation of business continuity plans to protect physical data upon which revenue depends. An emerging risk is the threat to research and development data from third parties exploiting computer security; third party liability policies traditionally do not cover preclaim expenses, damage to electronic data, or criminal or intentional acts of the insured or its employees where computer data is involved and property policies typically limit coverage to damage to/loss of use of tangible property resulting from a physical peril so that coverage for any damage to data would not be insured. Protection of intellectual property whether enforcing the developer s intellectual property (IP) or defending developed IP from third party allegations is a risk where insurance solutions are available. Whilst the insurance market is not extensive and the due diligence process associated with underwriting is intensive, it remains possible to transfer the risk to the insurance market. 2 Marsh and the Drug Development Industry

5 THE PRoPoSED CHaNgES and How THEy affect CoMPENSaTIoN and INDEMNIfICaTIoN for volunteers PaRTICIPaTINg IN CLINICaL TRIaLS The proposed regulation makes a distinction between (a) those clinical trials that do not pose a risk (defined as lowintervention) and (b) those that do pose an additional risk: where there is no additional risk, or where the additional risk is considered negligible, it will not be necessary to provide a specific damage compensation (be it an insurance or an indemnification) for the clinical trial. In these cases, the insurance coverage of the medical practitioner, the institution, or product liability insurance is considered to provide sufficient coverage. In cases where a clinical trial does pose an additional risk, the proposed regulation obliges the sponsor to ensure compensation exists for the benefit of the participant in the trial be it through insurance, or through an indemnification mechanism, in the event of either the sponsor or investigator s liability. Regarding the indemnification mechanism, the proposed regulation puts member states under an obligation to set up a national indemnification mechanism that works on a not-for-profit basis. article 72 of the proposed regulation The proposed regulation, while replacing states that for all clinical trials, other the Directive 2001/20/EC, maintains than low-intervention clinical trials, the the supremacy of national civil law sponsor shall provide compensation within a member state. The effect of this independent of the financial capacity of is to maintain the current compensation/ the sponsor and the investigator. indemnification regime within member states. other PRoPoSED CHaNgES THaT RELaTE To THE MaNagEMENT of RISk TIMESCaLES for IMPLEMENTaTIoN The changes that relate to risk In the first instance, the proposal is management are: subject to approval of the European Parliament and Council of Ministers. The The regulation introduces the concept proposal identifies 2014/2015 as being of co-sponsorship, recognising that the dates when expenditure associated a clinical trial can occur in more than with implementation is budgeted to be one member state. The proposed incurred. regulation allows co-sponsors to split the responsibility for the clinical EURoPEaN PaRLIaMENT DRafT trials among themselves and to enter REPoRT (May 2013) IDENTIfyINg into contractual relationships that CoMPRoMISE amendments To THE define their respective responsibilities. EURoPEaN CoMMISSIoN (JULy 2012) where a contract does not specify CoNSULTaTIoN PRoCESS which sponsor has a responsibility the responsibility sits with all sponsors. The key compromise amendments are as follows: The proposed regulation will permit the Commission to inspect clinical Low intervention clinical trial is to be trials performed in countries outside replaced by low risk clinical trial defined the EU to ensure compliance with the as: proposed regulation. Clinical trials on authorised medicinal all data and information will be products tested in accordance with submitted via an EU portal and stored their marketing authorisation. on an EU database. Clinical trials on authorised medicinal The Directive 2001/20/EC will be products tested outside their marketing replaced by a regulation, which will authorisation but supported by mean that one regulatory framework evidence, guidance, or established will apply in place of the existing medical practice. patchwork of 27 national frameworks. Prior to obtaining informed consent, the what THE PRoPoSED REgULaTIoN potential subject will be provided with DoES NoT CHaNgE information on damage compensation, as part of information relating to the across the EU, national civil law as it clinical trial. applies to medical liability varies by member state. So matters such as the In certain circumstances, low-risk degree of negligence (e.g. no-fault or clinical trials may be conducted without objective liability), rules on the burden obtaining informed consent. of proof and on calculating the extent of damage, and is all different. financial penalties, described as effective, proportionate, and dissuasive, The 2012 will be consultation applied by member process states on the where 2001 Clinical Trials Directive (DIR 2001/20/EC) identified a number of changes that could affect the insurance and risk management of clinical trials within the European Union (EU). In May 2013, the European Parliament published a draft report identifying a number of amendments to the July 2012 European Commission proposal. This document looks at the potential implications for insurance and risk management procedures from the proposed regulatory changes. It examines changes in indemnification and compensation for volunteers in clinical trials, and also looks at sponsor responsibility and how this is allocated within sponsor teams and member states. This paper will also look at the areas the proposed regulation will not affect. SUMMaRy The key takeaways are as follows: No requirement for specific insurance article 72 of the proposed regulation or indemnification in respect of lowintervention clinical trials. requires: The sponsor shall ensure that Introduction of a national compensation exists. indemnification mechanism, which works on a not-for-profit basis. Self-insurance is not permitted. European Commission considers that Exporting of custom and practice national indemnification mechanism applicable to clinical trials to third will benefit non-commercial countries (i.e., outside the EU) which sponsors. will be monitored by inspection. The proposal will be enacted Supremacy of member state as a regulation, replacing the civil law reaffirmed, confirming current Directive and so achieving the continuation of current consistency across all 27 member compensation/indemnification states. regime within member states. the sponsor does not provide the clinical where clinical trials are not intended study report for the medicinal product to be used to obtain a marketing to the EU database within 30 days of authorisation for a medicinal product (at marketing authorisation being granted; the point of submitting the application this also applies where a clinical trial has for the authorisation of the trial), the been completed but the sponsor decides use of the national indemnification not to make an application for marketing mechanism shall be free of charge. authorisation. Member states shall be able to charge for low-risk clinical trials, member states sponsors appropriate fees retrospectively shall ensure that damage compensation in case the sponsor decides to use the is covered by the general compensation trial to obtain marketing authorisation. system established under the national social security or health care system. for all other clinical trials, the use of the national indemnification mechanism for clinical trials other than low-risk shall be subject to a fee. The fee will be clinical trials, the sponsor shall ensure established by the member state on a that compensation in accordance with not-for-profit-basis, taking into account the applicable laws on liability of the the risk of the clinical trial, the potential sponsor and the investigator is provided damage, and the likelihood of the for any subject; this shall be provided damage. independently of the financial capacity of the sponsor and the investigator. adequate and comprehensive information will be provided to the subject on the limits and conditions of damage compensation, and the conditions of use of the national indemnification mechanism. for more information about Chemicals and Life Sciences Industry Practice and other solutions from Marsh, visit marsh.com, or contact your local Marsh representative. CHRISToPHER BRyCE Industry Practice Leader Chemicals and Life Sciences Industry Practice Marsh Limited Tower Place London EC3R 5BU United kingdom Tel:+44 (0) christopher.bryce@marsh.com The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Marsh is one of the Marsh & McLennan Companies, together with guy Carpenter, Mercer, and oliver wyman. In the United kingdom, Marsh Ltd. is authorised and regulated by the BaCkgRoUND financial Conduct authority for insurance mediation activities only. on 17 July 2012, the European Copyright 2013 Marsh Ltd. all rights reserved. Commission published a proposal graphics No to repeal the Directive 2001/20/ EC, which applies to clinical trials performed in the EU. The background to this proposal is: Criticism voiced by all stakeholders including patients, industry, and academic research as to how the Directive operates. a reduction of 25% in the number of applications for clinical trials between 2007 and 2011 (source: European Parliament News 29 May 2013). an increase in the costs for conducting clinical trials over this period. The average delay for launching a clinical trial has increased by 90% to 152 days (source: EHC Stakeholders Roundtable Clinical Trials Meeting Report 2012). The objective of the proposal is to provide solutions that will correct the identified shortcomings. A healthy volunteer who suffers injury as a result of participation in the study of a new medicine will not find it easy to establish an entitlement to compensation. This is because injury can arise in research studies without evidence of fault by either the Sponsor or the Investigator. Similarly, a volunteer will find it difficult to establish strict liability against the producer of the medicine due to (a) the informed consent process and (b) the development risks defence. The above notwithstanding, UK industry generally accepts that there is an obligation to compensate a volunteer even where legal liability under general law could not be established. Medicines for Human Use (Clinical Trials) Regulations 2004 applicable to the UK state that a clinical trial may be undertaken only if provision has been made for insurance or indemnity to cover the liability of the Investigator and Sponsor in relation to the trial. The UK Department of Health advises that this requirement is not met by the Sponsor providing evidence of his financial ability to meet a claim made in response to the contractual undertaking given under the ABPI compensation guidelines. Insurance or an indemnity by a third party is required and self-insurance is insufficient. Sponsors in practice choose to take out specific clinical trial insurance that will indemnify the Sponsor in respect of claims made by volunteers, in accordance with the ABPI compensation guidelines. The compensation that the volunteer receives should extend to where the volunteer is injured through negligence of the Investigator. In this situation, the Sponsor (and by subrogation to the Sponsor s rights, the insurer) can separately seek contribution or full indemnity from the Investigator for any payments made in respect of claims attributable to the investigator s negligence. 2 Insurance and compensation in the event of injury in Phase I clinical trials in the United Kingdom A distinction now exists between (a) first into man studies and (b) those studies where experience has been obtained of studies involving comparable doses. A first into man study is defined as the administration of a new molecule to man (healthy subjects and or patients) for the first time by dose (single and repeated), and a new molecule is a unique molecular structure irrespective of whether the molecular class or the therapeutic target is known. A study of a new fixed combination of known active substances, used already in an authorised medicinal product, but not previously used in a fixed combination, is not considered to be a first into man study. The guidance requires a minimum level of cover of 5 million in aggregate per protocol for first into man studies, with such cover reduced to a minimum of 2.5 million in aggregate per protocol in respect of other studies. This is subject to the Sponsor being able to confirm, before the commencement of each study to which this guideline applies, that the required level of aggregate cover is still available in respect of the protocol in question. This is applicable where the Sponsor arranges insurance that applies to more than one study i.e., an annual policy. In each case the aggregate level of indemnity should be exclusive of reasonable legal costs and expenses incurred by the insured i.e., legal costs and expenses to be in addition to the limit of indemnity. The basis of the insurance policy is no-fault liability. This enables the volunteer to obtain compensation without needing to prove either negligence or strict liability, merely that the injury arose through participation in the study. To allow for the possibility that a volunteer s injury will only manifest after the study has ended, the insurance should continue to apply to any claim made within a reasonable period after the completion of the study (final dose) which is determined to be not less than three years. To achieve consistency of approach it is recommended that Ethics Committees, who approve studies, request that the Sponsor provide a declaration of insurance. An example is set out in Appendix 1. Before commencing a Phase I study, the Sponsor must indemnify the Investigator (and any Contract Research Organisation (CRO) providing the Investigator) against any loss incurred by the Investigator as a result of claims arising from the study, except to the extent that such claims arise from the negligence of the Investigator. Where the Investigator is negligent, the Investigator remains responsible. The Investigator is understood to be the person responsible for the conduct of a study at a trial site and, where the study is conducted by a team of individuals, is the Principal Investigator. Should the Sponsor pay compensation in circumstances where the investigator is negligent, the Sponsor can seek recovery from any person whose negligence caused the injury. The Investigator(s) must therefore have insurance to cover claims for negligence in respect of its employees or sub-contractors, or must provide evidence of financial resources to meet any such claim. The aggregate level of protection for each study in respect of negligence should generally be equivalent to that recommended in respect of a Sponsor purchasing insurance cover. The Investigator and other physicians involved in Phase I studies must have insurance or indemnity against claims based upon negligence. This could be provided under the insurance of the Sponsor or of the CRO or through personal membership of a medical defence organisation or a policy of insurance purchased personally by the Investigator and other relevant physicians. The aggregate level of protection against negligence should be equivalent to that recommended in respect of a Sponsor purchasing insurance cover. Where the insurance is provided via medical defence organizations it should be confirmed that the insurance extends to cover claims arising from commercially sponsored studies. Nurses and other qualified persons involved in Phase I studies must hold medical professional liability insurance, such as that provided by membership of the Royal College of Nursing. As a leading insurance broker serving the life sciences industry, Marsh is able to offer three products that respond to the new UK Phase I guidelines: insurance available to provide indemnity per protocol Three-year extended reporting period Medical malpractice for investigators is not excluded legal costs and expenses in addition 12-month extended reporting period Medical malpractice for investigators is not excluded legal costs and expenses in addition Coverage as per either Phase I or All other trials Policy limit available that displays annual aggregate Each time a trial attaches to the policy a new limit will be allowed for that trial Insurance available for Phase I protocol (Up to 15 trials can attach to the policy) Insurance available for all other protocols (Up to 30 trials can attach to the policy) Three-year extended reporting period for Phase I trials 12-month extended reporting period for all other trials Medical malpractice for investigators is not excluded legal costs and expenses in addition A separate declaration page will be issued demonstrating how the limits accumulate per trial and this can be used to evidence to the Ethics Committee that a sufficient aggregate is available per the new guidelines. In order to comply with the ABPI s concerns regarding exclusions there is a separate exclusions page, which will act as a useful and quick point of reference for submissions to Ethics Committees. Marsh 3 STAGE 2: CLINICAL DEVELOPMENT Clinical Development Phase I Phase II Phase III CLINICAL TRIALS IN HUMANS Phase I: healthy volunteers (sometimes patients) circa years Phase II: patient volunteers (safety, dosing) circa years Phase III: 1,000-10,000 patients (efficacy, adverse events) circa 2-4 years Clinical trials occur in approximately 170 countries a number of whom do not have any regulatory framework that applies to clinical trials and how participants in trials should be compensated. Those that do have regulations, particularly in the EU, have different compensation, jurisdictional and indemnification requirements. Keeping up to date with the regulations can be challenging and poses compliance risks to the developer. Chemicals and Life Sciences Industry Practice EuropEan Commission proposal (July 2012) to repeal 2001 CliniCal trials DirECtivE (Dir 2001/20/EC) the legal position changes to compensation guidelines the Insurance position Insurance or IndemnIty of the InvestIgator Chemicals and Life Sciences Industry Practice Insurance and compensation In the event of Injury In phase I clinical trials In the united KIngdom marsh solution PHASE I TRIAlS All OTHER TRIAlS ANNUAl TRIAlS ATTACHINg POlICIES APPlICABlE TO All POlICIES Marsh 3

6 The 2001 Clinical Trials Directive, which includes the UK, is likely to be changed in 2014 (see Marsh Technical Note) although the UK regulator, the Medicines and Healthcare Products Regulatory Agency (MHRA), has in conjunction with industry in the UK, specific requirements particularly for Phase I clinical trials. Marsh s technical guidance note describes what these are. UK CLINICAL TRIALS EXPERIENCE QBE CLINICAL TRIALS FACILITY There were 57,065 clinical claims through the NHS Litigation Authority between 1995 and Of these, just 6 related to clinical trials (0.01%of total). Of the six claims recorded, 3 were rejected, one is on-going and two received payment. Clinical trials are currently undertaken in more than 170 countries around the world. The vast majority of these countries adhere to strict regulations, requiring companies which conduct clinical trials to have comprehensive local insurance. It is therefore important for these companies to partner with providers that understand how the regulations operate and how they apply to insurance. Bowring Marsh and QBE Insurance Whether single or multi-site (Europe) Ltd have together territories, this facility is compliant developed an international insurance with regards to scope of cover, facility specifically for clinical trials. adherence to regulations and The facility offers customers the A+ compliance with country guidelines. security of QBE Underwriting Limited at Lloyd s of London or QBE IN ORDER TO REQUEST A Insurance (Europe) Ltd, as rated by QUOTATION PLEASE SUPPLY Standard & Poor s (May, 2013). THE FOLLOWING Furthermore, the partnership of INFORMATION: Bowring Marsh and QBE provides clients with industry expertise, The trial protocol (English knowledge and global reach. language) Patient information and consent The facility is available to any form (English language) company, organisation or institution undertaking a clinical trial, with the Patient split (by territory) exception of - Proposed duration of trial trials involving permanently invasive medical devices This exception is considered by Bowring Marsh outside of this facility. THE FACILITY OFFERS THE FOLLOWING BENEFITS: Currently available for 64 countries (additional countries can be considered) Lloyd s of London licensing or (pre-arranged) local insurer fronting with QBE-backed reinsurance Quotes within 24 hours Documentation issuance within 24 hours Trials underwritten for their full duration (up to five years) Cover includes extended reporting periods up to ten years (subject to local legislation) All phases of trials considered Up to GBP75 million capacity per trial protocol No minimum fees The total amount paid in damages for clinical claims (minus those related to trials) between 1995 and 2010 was GBP8,660,644,000. The total amount paid out in damages for claims relating to clinical trials was GBP235,000 (GBP160,000 plus costs). This is just 0.002% of the total damages figure. Source: There has since been a six figure compensation settlement involving the Royal Marsden NHS Foundation Trust announced in late The comparable experience for commercial clinical trials is unavailable although within the industry the TeGenero event of 2006 and the 6 patients who sustained serious bodily injury is remembered by most. The manufacture of the product that will form the subject of the clinical trial will very likely be outsourced to a specialist contract manufacturer organisation (CMO) who will tend to contractually limit their liability in the following areas: CMO liability to developer limited to the value of the contract. CMO will seek to exclude all liability for consequential losses. CMO will contractually require developer to accept product supplied is fit for purpose within a specified timescale once delivered. Therefore the developer needs to be aware of the contract terms and responsibilities/indemnification provisions in any contract with the CMO. This will also extend to other stakeholders within the Clinical Trial process, such as the Contract Research Organisation (CRO) who will provide specialist services in physically organising and managing the Clinical Trial and investigators and/or venues who may have their own contractual limitations which will govern the circumstances in which they could be liable. New changes are being introduced regarding patient data for those participating in clinical trials. In the USA it is the Health Insurance Portability and Accountability Act of 1996 (HIPAA) regulations that operate, within the EU both the 2001 Directive and the proposed changes to the Directive contain language on patient data, how it should be handled, plus the process of informed consent which implicitly places a responsibility upon the CRO or other specialist service provider in the event of a breach of duty. Errors and omissions policies typically limit coverage to claims arising from negligence in performing specifically defined services and exclude coverage for criminal or intentional acts of insured s or their employees and preclaim expenses associated with a privacy breach. 4 Marsh and the Drug Development Industry

7 In addition, coverage may not exist where there is a claim arising from a disclosure or mishandling of confidential information or where there exists a vicarious liability for a privacy breach by third-party vendors or business process outsourcing firms, as can occur in a clinical trial where tasks may be sub-contracted to specialists. At the early stage of development, investor support will be obtained to support the research and development; the composition of investors may change as the product(s) under development progress. Investors will rely upon data that evidences progress and if the process goes wrong, as in the example below then there is the potential for litigation. BIOTECH DEVELOPER AND INVESTOR RESPONSE TO SHARE PRICE A biotech developer said clinical data was unreliable, blaming an unnamed outsourcer for major discrepancies found in the distribution of clinical trial supplies used in the study. As part of the trial they had contracted with an independent third-party contractor to manage treatment group assignments and oversee clinical trial material coding and distribution according to established procedures. A subsequent review of information determined that the source of these discrepancies appeared to have been associated with the independent third-party contracted to code and distribute the investigational drug product. Part 11 of the UK Companies Act 2006, broadens the circumstances in which derivative actions may be brought, extending to actions for actual or proposed act or omission involving negligence, default, breach of duty or breach of trust. The Act also requires that the company be made a defendant in the claim. Overseas companies and their directors may face derivative actions in the UK for alleged conduct in other countries. Directors and officers (D&O) insurance policies can be tailored to cover these exposures. The share price collapsed damaging investor sentiment and potentially giving rise to litigation. STAGE 3: APPROVAL AND LAUNCH Once the product has approval as a licensed medicine the true product liability risk will exist when the product is made available to consumers. If the route to market is a licensing and distribution agreement with a third party then the contractual liability becomes very important. Specifically what risk remains with the developer and what risk is transferred to the third-party? If the developer assumes the sale and distribution risk themselves then this will create a greater product liability risk (on the basis that there will be no third party in the relationship). In both cases product liability insurance would be recommended. CUSTOMISED CONSULTING SOLUTIONS FOCUSED ON YOUR BUSINESS SUCCESS Within the UK, Marsh has a dedicated placement team focused on this industry sector which can access the global markets, located in London, Dublin, Zurich, Bermuda,and New York, who have an appetite for this industry. Marsh has deep and long-standing market relationships with many of the insurers working with the life science industry, particularly those insurers in the UK who specialise in the industry, such as Allianz, CFC, Chubb, CNA, HDI-Gerling, Markel, Newline, and QBE; all of whom will have an ability to underwrite product liability. Marsh s value proposition for the clinical trial phase of drug development is based around two solutions: Access to our database of clinical trials regulations and the insurance compensation requirements. The existence of two insurance market facilities with QBE and ACE which can provide insurance cover with ease of documentation issuance. Clinical trials occur in approximately 170 countries a number of whom do not have any regulatory framework that applies to clinical trials and how participants in trials should be compensated. Those that do have regulations, particularly in the EU, have different compensation, jurisdictional and indemnification requirements. Keeping up to date with changes is an important added value service so that the developer can be compliant with what is required by those who approve or regulate clinical trials. Marsh 5

8 6 Marsh and the Drug Development Industry

9 To support our clients we have access to a database of both limits/retentions that allows us to benchmark our clients against similar organisations within the UK and which extends to complementary data for both Europe and USA/Canada. This is all part of the data that can be made available to help in the decision making process around scope of coverage, limits and retentions. We also have a second database of loss data that covers a number of sectors of the wider life science industry. Marsh can review the protection of revenue particularly if manufacture is outsourced to a CMO, and we are able to evaluate whether the designed insurance covers the principal risks in the supply chain. A supply chain risk assessment report, to be used as an insurance submission to obtain insurance that protects the dependencies within the supply chain, would be a solution deliverable by Marsh. An added benefit would be the identification and implementation of risk management processes that could deliver greater resilience within the supply chain. In 2013, the EU introduced the Falsified Medicines Directive whose aim is to introduce tighter controls, and responsibilities, within the supply chain. This has been matched by the US Food and Drug Administration s Supply Secure project supported by an extension of their inspection programme on suppliers. The regulators within the industry are now taking a much tougher attitude towards compliance where it involves consumer safety, which is an area of risk management activity where Marsh is well placed to add value and deliver both insurance protection and risk management. Marsh 7

10 IF THE EXIT STRATEGY UPON DEVELOPMENT IS TO EFFECT AN INITIAL PUBLIC OFFERING (IPO), THEN A DIFFERENT SET OF RISKS TO THOSE ORDINARILY INSURED UNDER A DIRECTORS AND OFFICERS LIABILITY POLICY ARE CREATED. THE RISKS HERE FALL INTO A NUMBER OF CATEGORIES: REGULATORY RISKS Stock Exchange requirements when preparing for an IPO. Enhanced corporate governance responsibility. Increased regulatory scrutiny. New regulation in relation to the publication of financial statements. COUNTERPARTY RISKS Potential indemnities to underwriters in the event of being sued as a result of the misstatements, etc. EMPLOYEE RISKS Pension plan changes. Insider trading post IPO. SHAREHOLDER RELATED RISKS Alleged errors, omissions, misstatements in the listing offer document. Increase in number of shareholders. Change in geographical location of shareholders. Share price. Poor earnings. 8 Marsh and the Drug Development Industry

11 HOW CAN THESE RISKS BE MITIGATED OR TRANSFERRED? Marsh has specialist teams that work together to ensure a seamless analysis of your new and changing risk profile, making sure that your exposures arising out of an IPO are adequately addressed by insurance products and advice. We are able to: Advise on current directors and officers (D&O) liability cover and the new exposures that need to be addressed. Design a specific six year IPO policy solely to protect directors from potential actions arising out of the IPO. Placement: Marsh places business with all the major UK insurers to the life science industry and is often to be found in the role of one of the largest producers in terms of premium volume. This places us in a good position to act as an advocate for our clients risk transfer needs when it comes to both the design of the insurance programme and scope and breadth of insurance cover. Strategic Risk Management and Advice: Marsh s experience and understanding of your industry, combined with our risk consultancy capabilities, enables us to identify and find solutions for risks that could threaten your strategy, operations and success. Commonly occurring risks and challenges in your industry can be identified in the illustrative risk maps, below. Perform due diligence on the company to be listed. This exercise will advise on risks and related statements within the offer documentation. Identify the business risks to the newly listed firm and advise on risk management culture and practices. Advise and assist in drafting share plans and provide benchmarking on employee compensation and benefits. WHAT MAKES MARSH DIFFERENT? As a leading adviser on risk to the life science industry, Marsh is well positioned to articulate its value proposition in distinct areas of risk and knowledge management that are unique to the life science industry, where our services and solutions can add value: Benchmarking: Marsh can offer life science specific data that allows our clients to determine the most appropriate and cost effective risk financing solution. Our 2012 Limits of Liability report is evidence of the data and supporting analysis that is available on the life science industry. Claims: Marsh possesses both claims advocacy, where we have worked on a number of high profile claims within the life science industry, plus supporting data on industry wide claims across all segments of the life science industry. This adds value to our clients risk management decision making. The relevance of risk mapping to an organisation involved in the development of medicinal products is that it will help: Reach consensus on risks which may have a material impact. Begin to prioritise risks in terms of likelihood and cost. Evaluate the efficacy of risk controls. Identify risk inter-relationships both within the business and externally. Align risk management with corporate objectives. Create accountability in the process of risk management. Marsh 9

12 Marsh is a global leader in insurance broking and risk management. We help clients succeed by defining, designing, and delivering innovative industry-specific solutions that help them effectively manage risk. We have approximately 27,000 colleagues working together to serve clients in more than 100 countries. In the UK Marsh has circa 2,600 employees and offices in 25 towns and cities throughout the UK. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy, and human capital. With more than 54,000 employees worldwide and approximately USD12 billion in annual revenue, Marsh & McLennan Companies is also the parent company of Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; Mercer, a global leader in talent, health, retirement, and investment consulting; and Oliver Wyman, a global leader in management consulting. For further information, please contact your local Marsh office or visit our website at CHRISTOPHER BRYCE Industry Practice Leader Chemicals and Life Sciences Industry Practice Marsh Limited Tower Place London EC3R 5BU United Kingdom Tel:+44 (0) christopher.bryce@marsh.com Statements concerning tax, accounting, and legal matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as tax, accounting, or legal advice, which we are not authorised to provide. All such matters should be reviewed with the client s own qualified tax, accounting, and legal advisors in these areas. The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Marsh Ltd is authorised and regulated by the Financial Conduct Authority. Copyright 2014 Marsh Ltd All rights reserved GRAPHICS NO