Kathryn T. Klaus, Esq. Courtney S. Young, Esq. October 22, 2019 Ripped from the Headlines: Medmarc’s Risk Management Team Discusses Today’s Top Life Sciences News Stories
Agenda New Life Sciences Developments and the Response of Insurance Markets The Next FDA Commissioner Products Liability and Healthcare Medical Device Cybersecurity Lightning Round 1
Products Liability & Healthcare
What’s going on? 3
Hospital Liability Landscape Manufacturers and other entities in the product supply chain can be held strictly liable for injury to end users. Over the years, several attempts have been made to impose products liability on hospitals as providers/suppliers of medical devices and supplies. Courts have rejected these attempts on public policy grounds, concluding that whatever supply of products hospitals are undertaking is merely incidental to their main function of providing a service . 4
Hospital Liability Evolving? Probably not. Yet. Hospitals will still be shielded by virtue of long-standing public policy (and case law, in many states) concluding that the provision of products is merely incidental to the hospital’s primary function of delivery a service. However, as the activities hospitals undertake (3D printing, retaining the IP to products, developing products, direct-to-consumer advertising) begin to look more like that of true product sellers, these protective doctrines will likely be eroded. 5
The Next FDA Commissioner
FDA Commissioner: Who’s Next? Scott Gottlieb, M.D. Assumed office as FDA Commissioner on May 11, 2017 Resigned effective April 5, 2019 Leadership Priorities Faster drug approval times Crackdown on tobacco and vaping Profile Seen as ambitious, too close with industry and industry lobbyists 7
FDA Commissioner: Who’s Next? Ned Sharpless, M.D. Assumed office as acting FDA Commissioner on April 5, 2019 Leadership Priorities Intends to “maintain FDA’s current course of action in every area and proceed full speed ahead.” Profile Oncologist and former head of the National Cancer Institute Endorsed by multiple former FDA commissioners 8
FDA Commissioner: Who’s Next? Stephen Hahn, M.D. Radiation Oncologist and Chief Medical Executive, MD Anderson Cancer Center Leadership Priorities Unknown, but not unreasonable to expect a continued focus on drug approval times Profile Top choice of the administration, but lags behind Sharpless for medical community’s and former commissioners’ endorsements 9
FDA Commissioner: Who’s Next? The Federal Vacancies Reform Act only permits “acting” agency heads to remain in place for 210 days. The deadline to name a nominee is November 1 st . 10
New Developments and the Responses of Insurance Markets
Opioids – What’s going on? 12
How are insurance markets responding? GL Products/completed operations hazard exclusion P/CO Bodily injury Occurrence Expected/intended Exclusion 13
How are insurance markets responding? Evolution of opioid-specific exclusions BI only antagonist carve-outs Absolute Government proceedings exclusions Creative approaches Sub-limits, different deductible structures Bottom line – Coverage becoming impossible to find Takeaways for life sciences companies Scrutinize exclusions– make sure opioids are being excluded only to the extent they are “your product” 14
Cannabis Products – What’s going on? 15
Cannabis Market Global market 50 countries have legalized cannabis in some way Worldwide consumer spending on legal cannabis projected to reach $57 billion by 2027 U.S. is world’s largest legal market 34 states have legalized medical marijuana $13 billion in retail sales in 2019 New Frontier Data. 16
U.S. Legal Cannabis Market 17
How are insurance markets responding? Slowly. (Broad exclusions; Narrow appetites.) McCarren-Ferguson Act Business of insurance left to the states In those states where marijuana is legal, statutes generally legalize insuring it Insurers still proceeding cautiously No actuarial data Legal landscape still uncertain – federal/state divide Boutique carriers popping up Larger, national firms will likely wait 18
How are insurance markets responding? Potentially Applicable Exclusions Illegal acts Pollution Distinguishing Among Product Types Veterinary Uses Topicals vs. Ingestibles Are health claims being made? 19
Cybersecurity for Connected Medical Devices
Medical Devices: Software as the Weak Link 21
Remembering “WannaCry” 2017 global cyber attack in which hackers demanded ransom payments via Bitcoin in order to restore data access Losses in the hundreds of millions to billions range Notably impacted was the UK National Health Service • 70,000 devices – computers, MRIs, blood- storage refrigerators, OR equipment 22
Cybersecurity and Products Liability Risk You failed to warn me that a Your product does not cyber vulnerability could effectively warn against result in bodily injury/ hazards of which you property damage. knew or should have Warning Defect known. Something went wrong You failed to implement the in the manufacturing appropriate security patch. process, which rendered the device Manufacturing Defect less safe. You failed to effectively design the product to protect There is a reasonably against cyber vulnerabilities safer alternative design and/or be interoperable that you failed to use. without risk to other systems, networks, or components. Design Defect 23
Cybersecurity and Products Liability Risk Vulnerabilities are known to exist, particularly in devices that may be approaching their end of life Mitigate risk through preparedness Regular security evaluation and patching Recall plan Crisis management plan What is your product’s viable shelf life? Data 24
Lightning Round
CBD – Is It Legal? 2018 Farm Bill Removes hemp and hemp seeds from Schedule I of CSA Interstate transportation of hemp and hemp seeds 2018 Farm Bill regulations have not yet been written 2014 Farm Bill • Pilot programs for industrial hemp Supply chain is critical for CBD 26
Sales Rep Contact with Docs Declining Half of physicians restrict visits from sales reps Half of doctors say they never have a question for a rep that they can’t find the answer to themselves online Physician Payment Sunshine Act What does this mean for life sciences companies? Sales rep training Alternative methods of communication Scrutinize online content See the DRG 2019 ePharma Physician Report. 27
Drug Approvals: Another Record-Breaking Year 28
Robotic Surgery & 5G Surgical robot adoption has been relatively slow, partly because of technical limitations and the high demand for precision. Advances in processing and better data analysis could help make robotic surgery more effective The advent of 5G technology will make the connection fast enough to make robotic surgery possible form thousands of miles away. 29
Vaping 30
FDA’s Breakthrough Devices Program, 1 Year in Authorized in 21 st Century Cures Act New pathway for the expedited approval of medical devices, diagnostics and certain combination products that aim to improve upon the safety of those currently on the market. 31
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