3D Risks

3D Printing Offers New Risk Challenges

Revolutionary 3D printing processes offer known and unknown risks.
By: | March 17, 2014 • 3 min read
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As commercial 3D printing advances from occasional to routine use, the product liability landscape will shift around it. Defective and counterfeit product exposures, among others, will arise for all participants along the manufacturing continuum, industry experts said.

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In an adverse incident, said Rob Gaus, product risk leader, Marsh, liability will be apportioned among participants in the manufacturing and distribution stream: product manufacturer, printer manufacturer, software designer, feedstock supplier, distributor (especially if it modifies the product) and retailer (if the manufacturer is not well capitalized). No case law exists yet.

In 3D printing, a computer sends the software containing a product design to one or more printers, which builds the product, layer by layer, from many kinds of materials — plastics, metals, drugs, paints and even human tissue.

David Carlson, U.S. manufacturing and automotive practice leader, Marsh, said 3D-printed products are treated the same as any other new operation that poses new risks.

Underwriters and brokers must first assess the company’s risk management profile and risk appetite. When production, research and development teams look at technology, “they should loop in risk management. Risk management should be part of the continuum, or the company could get into sticky situations.”

The emerging risks include unregulated manufacturing, said Mark Schonfeld, a partner at Burns & Levinson LLP in Boston specializing in business and intellectual property law.

If 3D printing enables production of, say, just 100 hip implants or 100 hearing aids, such work will generally take place outside of a traditional mass-production factory, which is subject to government regulation and inspection.

“Insurance companies like FDA oversight of manufacturing because it makes products safer and helps identify responsibility when things go wrong,” Schonfeld said.

To protect themselves and their clients, Schonfeld advises insurers to keep abreast of technological developments, consult with a creative and knowledgeable attorney about how to address liability exposure, and adjust existing policies to be fair to consumers and prevent injury to the insurance company.

3D printing also raises the risk of counterfeit products, said Peter Dion, line of business director-product liability, Zurich Insurance. The digital “recipe” in the software design, and is vulnerable to capture, he said.

Although there is no encryption mechanism for the software, one solution might be to transfer the digital file in pieces only as they are needed by the printer to prevent capture of the entire design signature, Dion said.

Manufacturers have always struggled with counterfeit products, but 3D printing magnifies the risks because it can slash the time from product development to market-ready product to a matter of hours and requires no molds or prototypes. “Hackers can take the proprietary blueprint or software, send it to a third-world country, and have the product ready for market tomorrow,” said Carlson. “That’s a business disruption issue. Counterfeiters can put a company out of business.”

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Drug manufacturers may subvert counterfeiters by adding tracer elements and watermarks to their formulations, which protects their reputations, profits and public health. “If the counterfeiters get the recipe wrong, they might not produce high-quality drugs for public consumption,” Carlson said.

Other manufacturers can also use watermarks and digital rights management (DRM) software to prevent file sharing. Still, Carlson said, counterfeiting is an old problem. “Bad guys have always exploited new technologies for their personal gain.”

The materials used by manufacturers present a greater potential loss exposure than the 3D printer itself, said Dion, noting that it is just another piece of equipment, like a pencil or a lathe.

For example, if a 3D printer is used to replicate a cupcake, the manufacturer should be as careful of contaminants in the mix as traditional bakers need to be. “When 3D printer manufacturers purchase materials from suppliers, they need to perform due diligence on their supplier’s products also.”

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]
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The Opioid Epidemic

More Comp Claimants Turning to Heroin

Efforts to limit opioid addiction are leading to heroin abuse.
By: | July 30, 2015 • 5 min read
Drug syringe, cooked heroin on spoon and money

An increasing number of workers’ comp patients who are addicted to opioid painkillers are now turning to heroin.

Experts talk about the growing problem, and how it could lead to more lawsuits against employers and others within the workers’ comp system. They also discuss how to spot red flags of possible heroin abuse, and ways to minimize use among workers’ comp patients — starting with more responsible painkiller prescribing to reduce opioid painkiller addiction, “the strongest risk factor for heroin addiction,” according to the Centers for Disease Control.

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Indeed, 45 percent of people who used heroin were also addicted to prescription opioid painkillers, the CDC contends. Between 2002 and 2013, the rate of heroin-related overdose deaths nearly quadrupled, and more than 8,200 people died in 2013.

Switching to heroin could “absolutely” lead to lawsuits, said Joseph Paduda, principal of Health Strategy Associates in Syracuse, N.Y. and president at the PBM consortium, CompPharma LLC.

“If an injured worker is on opioids and the workers’ comp payer cuts them off, then they might switch to heroin,” Paduda said. “Potentially the payer could find out and not cover their claim anymore, which could trigger a lawsuit for getting them addicted in the first place. I have no idea if it’s a viable case, but attorneys in many states can be quite creative.”

While utilization of opioids has dropped considerably in states like Texas that have made it more difficult for workers’ comp patients to get opioids, there is concern that some patients who had their opioid prescriptions cancelled are now resorting to heroin, he said. Other states like Ohio are now adopting a much more rigorous approval process for the initial use of opioids, with an even greater focus on patients prescribed long-acting opioids and renewals of prescriptions for longer than a few weeks.

“Ohio is doing something fundamentally different,” Paduda said. “The state is carefully planning its approach to addressing long-term opioid patients with an eye towards ensuring addiction treatment is available if and when workers’ comp patients need it.”

“Potentially the payer could find out and not cover their claim anymore, which could trigger a lawsuit for getting them addicted in the first place. … attorneys in many states can be quite creative.” — Joseph Paduda, principal, Health Strategy Associates; president, CompPharma

Andrew Kolodny, chief medical officer at New York City-based Phoenix House substance abuse treatment centers, said that people who become addicted to opioids and are having trouble maintaining a supply of painkillers are likely to switch to heroin if they live in an area where it is available. However, even though they may switch to heroin, prescription opioids are usually preferred because the medications are pure and the people are less likely to be arrested than if they were buying heroin from a drug dealer.

“Heroin use increased because the number of people who developed opioid addiction from exposure to prescription opioids increased sharply over the past 20 years,” Kolodny said. “The medical community needs to prescribe more cautiously so that we stop creating new cases of addiction.”

Mark Pew, senior vice president at Prium in Duluth, Ga., said that as it becomes more difficult for workers’ comp patients to secure opioids if they are misusing or abusing them, many of those patients switch to heroin because it’s less expensive and easier to obtain on the street than prescription drugs.

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“There is great concern, and rightfully so, that lawsuits on parties within the workers’ comp system could be forthcoming from patients claiming it was the doctor’s fault they became addicted to opioids and then heroin,” Pew said. “The liability costs associated with lawsuits and death benefits could be even greater with the addition of heroin because of its even higher possibility of abuse and misuse.”

Brigette Nelson, senior vice president, Workers’ Compensation Clinical Management Express Scripts in Cave Creek, Az. said that it’s really important to flag problematic claims, when workers “may be going off the rails before they start using heroin.”

“Physicians can monitor for medication abuse, as well as heroin use, with urine drug testing,” Nelson said. “Physicians can also check for needle tracks.”

“The medical community needs to prescribe more cautiously so that we stop creating new cases of addiction.” — Andrew Kolodny, chief medical officer, Phoenix House

Workers’ comp specialists can also check if the use of multiple medications is overly high, which can also lead to use of illicit drugs, she said. Express Scripts’ Morphine Equivalent Dose (MED) management program can help them with this, she said. The potency of various opioids can be equated to one another and to morphine. If someone is taking a strong opioid or multiple prescriptions, the values can be added to determine if the person is over a particular trigger limit.

The MED value can be calculated at the point of sale for a particular prescription, and other prescriptions coming from other pharmacies can be added, to determine if all of the prescriptions are over the recommended guidelines.

“We can flag these claims, and then the workers’ comp adjuster would need to authorize the prescription fill is it is appropriate for the patient,” Nelson said. “We also reach out to physicians to let them know the patient has exceeded the MED limit. This is also good in that it gives physicians a prescription history, as sometimes they may not know about prescriptions from different physicians.”

It’s really important that payers proactively manage opioid utilization and review concurrent therapy to ensure safe use, she said.

“The key is early intervention before it comes a problem,” Nelson said. “That’s where we come in as the PBM. Our programs can help prevent abuse or misuse of opioids, which in turn can prevent the potential for downstream addictions to illicit drugs like heroin.”

The most important thing is to prevent patients who do not have severe conditions from receiving opioids — “period,” said Gary M. Franklin, research professor in the Department of Environmental and Occupational Health Sciences at the University of Washington.

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“There is no evidence supporting the use of opioids for non-specific musculoskeletal conditions, headaches or fibromyalgia,” Franklin said. “If a prescription is needed, generally it should not go beyond 30 days. If a patient takes opoids for four to six weeks and then tries to withdraw,  they will experience physical withdrawal because they are already very likely dependent,  and that is the first step towards addiction.”

The CDC also recommends that health care providers use prescription drug monitoring programs and ask patients about past or current drug and alcohol use prior to considering opioid treatment; prescribe the lowest effective dose and only the quantity needed for each patient; link patients with substance use disorders to effective substance abuse treatment services; and support the use of FDA-approved MAT options (methadone, buprenorphine, and naltrexone) in patients addicted to prescription opioid painkillers or heroin.

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected]
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Sponsored: Lexington Insurance

Pathogens, Allergens and Globalization – Oh My!

Allergens and global supply chain increases risk to food manufacturers. But new analytical approaches help quantify potential contamination exposure.
By: | June 1, 2015 • 6 min read
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In 2014, a particular brand of cumin was used by dozens of food manufacturers to produce everything from spice mixes, hummus and bread crumbs to seasoned beef, poultry and pork products.

Yet, unbeknownst to these manufacturers, a potentially deadly contaminant was lurking…

Peanuts.

What followed was the largest allergy-related recall since the U.S. Food Allergen Labeling and Consumer Protection Act became law in 2006. Retailers pulled 600,000 pounds of meat off the market, as well as hundreds of other products. As of May 2015, reports of peanut contaminated cumin were still being posted by FDA.

Food manufacturing executives have long known that a product contamination event is a looming risk to their business. While pathogens remain a threat, the dramatic increase in food allergen recalls coupled with distant, global supply chains creates an even more unpredictable and perilous exposure.

Recently peanut, an allergen in cumin, has joined the increasing list of unlikely contaminants, taking its place among a growing list that includes melamine, mineral oil, Sudan red and others.

Lex_BrandedContent“I have seen bacterial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant.”

— Nicky Alexandru, global head of Crisis Management at AIG

“An event such as the cumin contamination has a domino effect in the supply chain,” said Nicky Alexandru, global head of Crisis Management at AIG, which was the first company to provide contaminated product coverage almost 30 years ago. “With an ingredient like the cumin being used in hundreds of products, the third party damages add up quickly and may bankrupt the supplier. This leaves manufacturers with no ability to recoup their losses.”

“The result is that a single contaminated ingredient may cause damage on a global scale,” added Robert Nevin, vice president at Lexington Insurance Company, an AIG company.

Quality and food safety professionals are able to drive product safety in their own manufacturing operations utilizing processes like kill steps and foreign material detection. But such measures are ineffective against an unexpected contaminant. “Food and beverage manufacturers are constantly challenged to anticipate and foresee unlikely sources of potential contamination leading to product recall,” said Alexandru. “They understandably have more control over their own manufacturing environment but can’t always predict a distant supply chain failure.”

And while companies of various sizes are impacted by a contamination, small to medium size manufacturers are at particular risk. With less of a capital cushion, many of these companies could be forced out of business.

Historically, manufacturing executives were hindered in their risk mitigation efforts by a perceived inability to quantify the exposure. After all, one can’t manage what one can’t measure. But AIG has developed a new approach to calculate the monetary exposure for the individual analysis of the three major elements of a product contamination event: product recall and replacement, restoring a safe manufacturing environment and loss of market. With this more precise cost calculation in hand, risk managers and brokers can pursue more successful risk mitigation and management strategies.


Product Recall and Replacement

Lex_BrandedContentWhether the contamination is a microorganism or an allergen, the immediate steps are always the same. The affected products are identified, recalled and destroyed. New product has to be manufactured and shipped to fill the void created by the recall.

The recall and replacement element can be estimated using company data or models, such as NOVI. Most companies can estimate the maximum amount of product available in the stream of commerce at any point in time. NOVI, a free online tool provided by AIG, estimates the recall exposures associated with a contamination event.


Restore a Safe Manufacturing Environment

Once the recall is underway, concurrent resources are focused on removing the contamination from the manufacturing process, and restarting production.

“Unfortunately, this phase often results in shell-shocked managers,” said Nevin. “Most contingency planning focuses on the costs associated with the recall but fail to adequately plan for cleanup and downtime.”

“The losses associated with this phase can be similar to a fire or other property loss that causes the operation to shut down. The consequential financial loss is the same whether the plant is shut down due to a fire or a pathogen contamination.” added Alexandru. “And then you have to factor in the clean-up costs.”

Lex_BrandedContentLocating the source of pathogen contamination can make disinfecting a plant after a contamination event more difficult. A single microorganism living in a pipe or in a crevice can create an ongoing contamination.

“I have seen microbial contaminations that are more damaging to a company’s finances than if a fire burnt down the entire plant,” observed Alexandru.

Handling an allergen contamination can be more straightforward because it may be restricted to a single batch. That is, unless there is ingredient used across multiple batches and products that contains an unknown allergen, like peanut residual in cumin.

Supply chain investigation and testing associated with identifying a cross-contaminated ingredient is complicated, costly and time consuming. Again, the supplier can be rendered bankrupt leaving them unable to provide financial reimbursement to client manufacturers.

Lex_BrandedContent“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet. Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”

— Robert Nevin, vice president at Lexington Insurance, an AIG company


Loss of Market

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While the manufacturer is focused on recall and cleanup, the world of commerce continues without them. Customers shift to new suppliers or brands, often resulting in permanent damage to the manufacturer’s market share.

For manufacturers providing private label products to large retailers or grocers, the loss of a single client can be catastrophic.

“Often the customer will deem continuing the relationship as too risky and will switch to another supplier, or redistribute the business to existing suppliers” said Alexandru. “The manufacturer simply cannot find a replacement client; after all, there are a limited number of national retailers.”

On the consumer front, buyers may decide to switch brands based on the negative publicity or simply shift allegiance to another product. Given the competitiveness of the food business, it’s very difficult and costly to get consumers to come back.

“It’s a sad fact that by the time a manufacturer completes a recall, cleans up the plant and gets the product back on the shelf, some people may be hesitant to buy it.” said Nevin.

A complicating factor not always planned for by small and mid-sized companies, is publicity.

The recent incident surrounding a serious ice cream contamination forced both regulatory agencies and the manufacturer to be aggressive in remedial actions. The details of this incident and other contamination events were swiftly and highly publicized. This can be as damaging as the contamination itself and may exacerbate any or all of the three elements discussed above.


Estimating the Financial Risk May Save Your Company

“In our experience, most companies retain product contamination losses within their own balance sheet.” Nevin said. “But in reality, they rarely do a thorough evaluation of the financial risk and sometimes the company simply cannot absorb the financial consequences of a contamination. Potential for loss is much greater when factoring in all three components of a contamination event.”

This brief video provides a concise overview of the three elements of the product contamination event and the NOVI tool and benefits:

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“Until companies recognize the true magnitude of the financial risk and account for each of three components of a contamination, they can’t effectively protect their balance sheet,” he said. “Businesses can end up buying too little or no coverage at all, and before they know it, their business is gone.”

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Lexington Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




Lexington Insurance Company, an AIG Company, is the leading U.S.-based surplus lines insurer.
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