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Life Sciences Update AUGUST 2010 Troubling Trend: Drug heists and liability on the black market In the last several months, there has been media coverage of break-ins at warehouses storing pharmaceuticals and medical devices. Initial thoughts upon hearing of these thefts is that standard property insurance would cover the cost of the stolen goods, business interruption insurance would pay for lost profits and the product manufacturer can go back to business as usual. But the size and sophistication of these heists clearly point to professional thieves with buyers already lined up, and the liability can ultimately lead back to the drug manufacturer. "There have been 10 pharmaceutical heists so far in 2010, valued at a total of $100 million." — U.S. Division of FreighWatch International, a supply chain security consultant Besides the obvious street market for pain killers such as oxycontin, there is an extensive black market for other drugs, as well as medical devices and equipment. Stolen goods find their way to online pharmacies as well as to foreign countries where drug regulations are lenient or non-existent. Eventually these stolen goods end up being used by unwitting consumers and patients. In the process, there is no guarantee that the manufacturer’s strict handling and storage protocols, such as refrigeration, are maintained, resulting in adulterated products. This poses a health risk to the consumers and, in turn, exposes the manufacturer to potential product liability claims. Manufacturers may be held liable for adverse reactions suffered by patients using the adulterated products. In addition to claims alleging defective products, injured patients may also claim the manufacturer was negligent by not providing adequate security to prevent such thefts in the first place. How can a Life Science manufacturer minimize this risk? Some risk management measures include: Reassess security at warehouses. Establish procedures to quickly notify the FDA of a theft and to communicate to the public. Implement tagging systems to aid in identifying and tracing stolen goods. Perfect claims-handling procedures internally and with insurers and counsel. Check Products Liability policy to ensure there are no exclusions that would deny coverage for these claims. WGA’s years of knowledge and leadership in serving the global life sciences industry can provide you with skilled professional assistance in effectively managing a landscape of risk that is evolving and changing as rapidly as the life sciences industry itself. For more information, contact the WGA Life Science Practice Group or your WGA Client Executive, by emailing info@WGAins.com. WGA InsureBlog Recent Posts The cost of Health Net’s privacy and security breach MORE > Ageism is the next Employment Practices Liability frontier MORE > Privacy risks extend beyond your own systems MORE > Pharmaceutical heist highlights a growing trend MORE > Over 700 life science companies look to WGA for information and advice on risk management, ranging from the latest venture-backed startups to large publicly-traded, global operations. BioTechnologyInsurance.com