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Archive for category: Life Sciences

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Life Science: Managing Risk throughout the Regulatory Process

Medical device product development is both a complex and highly difficult process. The developer must have a vision of the desired outcome before they conduct research, development and marketing of the product and begin regulatory compliance.

Because of their nature of use, regulation and approval of the product must be met before the product’s release. The FDA’s regulation process can include a number of production “kinks” at first. The public’s safety is the FDA’s number one concern and the efficacy of the device is the second. An approval process can include an evaluation of potential risk, manufacturing processes, potential harm the device may cause, pre-market evaluation and approval, and post market evaluation. The FDA will then classify the product as a Tier I, II, or III. The device then must be put through the IDE and IRB processes. The Investigation Device Exemption allows the device developer to test the unreleased product by using it as it has been intended. The data from this test will then reveal important information which will be evaluated by a review board before entering clinical trials.

After the review board sets up a comparable clinical testing environment, the trials can then begin. The clinical trial process is divided into two sets, pivotal and pilot. The pilot phase is less stringent, testing the basic safety of use of the product. The pilot phase sets the stage for the pivotal trials which use a larger group of testers with a more extensive type of safety testing and use testing.  After the product passes these regulatory phases mass development can begin.

Product launches are a key milestone and require a great deal of risk management strategy for success.  It is important to work with an insurance and risk management firm that is knowledgeable about the life sciences industry and understands how to make risk control an important component of your overall program.  Working with a TechAssure Association member can help your firm stay protected through the rigorous regulatory process of medical device development and a new device launch.  

Please contact us to learn more about developing a comprehensive insurance and risk management program for your product development and launches.

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Securities Class Action Lawsuits Against Life Science Firms on the Rise

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Executive liability is a large threat for all sizes of technology and life science firms.  In addition to litigation damages and expenses, companies face distractions, and loss of corporate opportunities.  Although a comprehensive executive liability insurance policy will go a long way towards reducing the exposures, they face greater exposures if they have no risk control practices in place.

Reviewing the Claims Data

Upon the release of this year’s Dechert Survey of Securities Fraud Class Action Lawsuits, many Life Science firms have been forced to take a closer look at their risk avoidance strategies. The Survey showed that securities class action lawsuits against life science firms have continued to rise steadily since 2011. 

The survey showed that in 2012, 27 pharmaceutical, bio-technical, and medical companies faced security suits. This number represents over 18% of all securities suits filed during the year of 2012. During the year of 2011 only 17 companies experienced securities suits, reflecting a total of 9% of total securities claims. This information shows that from 2011-2012, securities claims nearly doubled.  Unfortunately, small cap Life Science firms continue to be targets for suits. Those with market caps under $250 million made up 50% of all claims against Life Science firms. In comparison, the survey showed in 2011 these firms accounted for 58% of total claims. 

Over 43% of the total claims dealt with misrepresentations of products and product safety.  In addition, insider trading still appears to be a common part of most of the complaints that are filed.  It is important to develop a comprehensive Directors and Officers Liability program that includes a solid risk control program. Smaller companies must be especially vigilant as the studies show they are at the highest risk.

Directors and Officers Liability and Risk Control

D&O insurance is designed to protect against claims made against them while serving on a board of directors or as an officer.  These policies are written on a claims-made basis, usually contain no duty to defend policy language and the scope of the coverage, pricing and underwriting criteria can vary. 

When a Life Science firm includes risk control into their comprehensive D&O program they can do a lot to reduce the threat of D&O claims.  D&O loss control programs specifically tailored to their company Includes risk control in areas of securities trading, antitrust compliance, financial integrity, managing conflicts of interests, bribes and kickbacks, board appointments and behavior, misappropriation of corporate assets and confidentiality. The goal of any D&O loss prevention program is to sensitize the company’s executives to exposures and place policies and procedures to minimize the exposures.

Working with a TechAssure Association member can help you develop a comprehensive D&O program.  A TechAssure member will help you customize an insurance plan, which will work seamlessly with your risk control strategy.  Please contact us for more information on how a TechAssure member can help your firm.

 Source: http://www.dechert.com/Dechert_Survey_of_Securities_Fraud_Class_Actions_Brought_Against_US_Life_Sciences_Companies_03-20-2013/

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High Growth Firms and Risk Management

The global financial crisis has led to dramatic and ongoing changes in risk management among many technology and life science firms. As a result, most technology and life sciences business leaders face unprecedented challenges as they grow their firms from the early stage to maturity. However, we continue to witness the growing list of high-growth firms in this category and we believe they have unique insurance and risk management needs. These firms must make risk management central to their business at an earlier stage in the corporate life cycle in order to have the best chance for survival.

Rapid-growth companies aren’t afraid of taking calculated risks. They often learn how to turn risk into opportunity and find themselves doing that better than their competition. This means that before they jump into opportunities, they calculate the risks and are more aware of the potential consequences. Developing a corporate risk management approach at an earlier stage in the firm’s life cycle is crucial for ensuring the continued interest of investors and strategic partners.

A growth firm is recognized by its ability to increase its business by a significant amount very quickly, but it’s important to realize that there are challenges with such a fast increase in business. Demands for capital to increase and expand production, hire additional workers, increase locations and more are necessary to maintain high growth rates. Investors are usually asked to take a new look at a growth business and the potential it has for increased profits and cash flow.

A growth firm will experience increased market share and profits. It puts them in the position of decreasing competition. They will be able to better seek out the latest ideas and innovations in their industry. One important result is that higher skilled workers will want to be a part of a growth firm.

As a growth firm enlarges, its insurance needs will also tend to increase. It will be important to adjust insurance coverage as is necessary. Additional insurance products may be needed and adequate liability insurance needs to be in place as the company changes and grows.

Growth firms do many things to maintain their momentum. Having a risk management plan that changes with your organization is important. Contact a TechAssure Association member to learn about our special services for high growth firms.

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The Multitude of Risks Facing the Life Science Industry

The life science industry by nature carries a multitude of inherent risk. The board of directors and executive body must address risk management on a continual basis, meeting constant demands stemming from partners, insurers, physicians, patients, lawyers, and media. As need arises, added complexity and heightened risk can overlap these issues, creating a more difficult environment for overall efficient company management.

Because of the nuances involved in the life science industry, you must take appropriate precautions to identify and evaluate all risks to your organization. They could include:

  • Compliance with numerous regulatory entities such as the Food and Drug Administration, Department of Health and Human Services, Securities and Exchange Commission, Department of Justice, etc.
  • The ability to adapt to constantly changing and accelerating global regulatory activities
  • Security breaches and IT failures
  • Inadvertent exposure of intellectual capital
  • Cost and availability concerns

Life Science firms can also take risk and turn it into a marketplace opportunity. The most common areas where we witness life science firms that manage the flip side of risk include:

  • Competitor product failure that allows for your firm’s product to become a forerunner for approval
  • Products are approved ahead of schedule, allowing for early availability
  • Product manufacturing improves or is produced ahead of initial projected time frame
  • An unanticipated gain in market need for a product or unanticipated market sharing upon launch of product

It is important to implement a broad risk management plan. Tips for advancing your risk management strategies include:

  • Keeping on or ahead of schedule for product review and release through strategic planning
  • Addressing increased demand for cost effective products from physicians, consumers, politicians and regulators and increased interest from investors
  • Heeding the call from consumers for safer or risk-free breakthrough therapies

Biopharmaceutical and life science firms need to rely on a comprehensive insurance plan to deal with an ever-evolving matrix of risk. TechAssure members can help your firm deal with a multitude of issues concerning risk management including, but not limited to: network and privacy security, increased global competition, loss of intellectual property and delays or business interruption in Research and Development. Please contact us for more information on how our members can help you minimize risk to your life science firm.

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Risk and the Characteristics of Rapid Growth Companies

In the technology and life sciences industries there are small companies, growth companies, mid-size companies, small cap companies and large companies.

A small company can be a grow company by adopting their business practices. While every business is different, many characteristics are common with successful rapid growth companies.

Rapid Growth Companies Usually Take Risk Management More Seriously – Rapid growth companies aren’t afraid of taking calculated risks, but they often learn how to turn risk into opportunity and they do that better than their competition. That means that they before they jump into opportunities they calculate risk and are more aware of the potential consequences. Developing a corporate risk management approach at an earlier life cycle is more important for continued interest by investors and strategic partners.

Rapid Growth Companies are Usually Better at Business Planning – Rapid growth technology firms are always looking ahead in the marketplace and understanding the changing world, view and opinions. This strategy helps them consider and plan their exit strategies. As with any risk management program, it is helpful if you know where you want your organization to be in the next 1-3 years.

Rapid Growth Companies Know their Target Profit Margins – Rapid growth companies usually know their target profit margins. Most emerging technology firms recognize that operating on a low margin for a long period of time makes it difficult to accomplish growth goals. It is important to factor in your total cost of risk as you take steps towards your target profit margin.

Rapid Growth Companies Pay Close Attention to their Market – Rapid growth companies pay close attention to the economy and the views of their investors. If you stay isolated on a narrow part of the market, or have only one product, your companies runs the risk of being stagnant. Rapid growth companies know how to seek out new markets and develop new products and keep risk management central to those decisions.

Technology and Life Science firms are diverse in size, growth prospects and type of businesses. While they share some common characteristics, the rapid growth firms are the ones that drive news in a flat economy.

Contact a TechAssure member to learn more about how these companies are taking risk management and making it central to their growth plans.

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TechAssure Association Reviews Trends in Verdicts and Settlements for First Half of 2013

Click here to view our one-page summary.

 

In June 2013 TechAssure Association reviewed litigation trends in the technology and life sciences industries for the first half of 2013.

The following summarizes the findings on the current trends in verdicts and settlements in the technology and life science industries:

Top 10 Claim Categories in the Technology Industry

TechAssure reviewed 349 verdicts and settlements in the technology industry and concluded the following:

84% of the cases reviewed found the top claim categories: (in rank order)*

  1. Patent
  2. Privacy, Network Security
  3. Price Fixing
  4. Employment
  5. Consumer Class Actions
  6. Fraud
  7. Antitrust
  8. Contractual
  9. Insider Trading/SEC
  10. Trademark

TOP 10 CLAIM CATEGORIES in the Life Science Industry

TechAssure reviewed 310 verdicts and settlements in the life science industry and concluded the following:

82% of the cases reviewed found the top claim categories: (in rank order)*

  1. Products
  2. Patent
  3. False Claims/False Ads/Marketing/Labeling
  4. Price Fixing
  5. Antitrust
  6. Employment
  7. Kickback/Billing Practices
  8. Whistleblowing
  9. Fraud
  10. Contractual

* Verdicts and settlements January 2013 to June 2013.

TechAssure also noted a number of growing litigation trends during the first half of 2013. The growing litigation categories included:

Growing Litigation Categories:

  • Privacy
  • Network Security
  • Data Breaches
  • Whistleblowing