Insurance Marketplace Realities 2023 Spring Update – Life sciences

Rate predictions: Life sciences

	Trend	Range
Favorable risks and loss history		+5% to +7% (for attractive risks, the market may deliver rates close to or at flat)

While Berkshire Hathaway recently announced they are withdrawing from the medical product liability space in North America effective July 2023, we do not anticipate a ripple effect in the marketplace, and overall capacity is expected to remain stable. That being said, capacity for certain litigated product classes, such as orthopedic implants and proton pump inhibitors continues to tighten.

Following are items of concern for insurers; manufacturers and distributors of drug products might expect to see exclusionary language in the market relating to:

• Acetaminophen: Manufacturers and sellers of acetaminophen products, including Costco, CVS, Walgreens, Safeway and Walmart, are in litigation with plaintiffs who are alleging that the defendants failed to warn that prenatal use of acetaminophen products could result in autism spectrum disorder (ASD) or attention-deficit/hyperactivity disorder (ADHD) in infants. As a result, carriers are introducing exclusions for in-utero ingestion of acetaminophen actually or allegedly causing neurodevelopmental disorders.
• Impurities: In 2018, potentially carcinogenic nitrosamines were found in products used for treating high blood pressure, diabetes, stomach acid and smoking cessation. This led to a series of costly recalls and product liability claims with the marketplace eventually excluding all nitrosamine-related claims. More recently, similar concerns have arisen with respect to benzene, azido and other product impurities, leading to broader impurities exclusions being added to product liability programs.
• PFAS: As with several other sectors, litigation over per-and polyfluoroalkyl substances (PFAS) in the United States is causing concern for life sciences product liability carriers. These forever chemicals are prevalent in cosmetics as well as medical devices and pharmaceutical products. While there is still much unknown about the long-term effects of these chemicals, we are beginning to see PFAS exclusions on liability programs, particularly in the London marketplace.

There were significant opioid settlements throughout 2022. The national combined settlement amount from all manufacturers, distributors, pharmacies, etc. is around $54 billion and growing.

Wearable technology, automation and artificial intelligence are among the technological advances continuing to impact the medical device landscape. Underwriters are challenged with shifting their understanding of traditional medical device exposures to incorporate the additional risks presented by these new developments.

According to the FDA, there were 2,160 total medical device recalls in 2022 (168 of these were Class I) and 1,321 total drug recalls (83 of these were Class I). While these numbers were down compared to recent years, product safety and associated recalls remain a major concern for medical product manufacturers. Companies should be exploring stand-alone product recall coverage as a potential addition to their insurance portfolio for reputational and balance sheet protection.

With the demand for pharmaceuticals and medical devices continuing to rise, along with the rapid advances in technology and science, this sector is set to see strong growth well into the future. It is critical to the long-term success of life science companies that they can effectively quantify, mitigate and transfer risk wherever it is appropriate.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).