Reputation Risks

Risks of Celebrity Sponsors

Companies should review 'what if' scenarios before attaching their products or services to a celebrity sponsor.
By: | February 11, 2015 • 3 min read
Topics: Reputation
Sponsorship risks

Companies are using actors, prominent sports figures and other celebrities to endorse their products more than ever before.

However, while they may generate lots of publicity around a product or service, not all of it is good publicity.

You only have to open up a copy of the newspaper to read about  scandals engulfing stars such as Bill Cosby, Brian Williams or Tom Brady with the New England Patriots’ ‘deflate-gate’ saga.

Advertisement




Sponsors have reacted by withdrawing their support, most notably in the NFL, where domestic violence allegations hanging over the sport prompted Procter and Gamble to pull the plug on a deal to supply players with pink mouthguards during Breast Cancer Awareness Month and cancel all on-field marketing.

The risks for any sponsor associated with this type of negative publicity are infinite, said experts, often resulting in the cancellation of lucrative advertising and marketing contracts, ultimately costing the company millions of dollars in lost revenue.

Worse still, the sponsor may be forced to pull its product from the market altogether, with the end result that millions of dollars are wiped off its share value.

The main risk of hiring a celebrity to endorse a product is the unexpected or disgraceful behavior of that individual, or unforeseen events such as death. — Lori Shaw, executive director, entertainment practice, Aon Risk Solutions

Lori Shaw, executive director of Aon Risk Solutions’ entertainment practice, said the main risk of hiring a celebrity to endorse a product is the unexpected or disgraceful behavior of that individual, or unforeseen events such as death.

“The first step is to analyze the potential risks, discuss ‘what if’ scenarios; outline the financial consequences; and to be aware of the risks that can be avoided, those that can be transferred contractually to the celebrity or talent, those that can be transferred to insurance and the risks that must be retained,” she said.

Shaw said that companies need to take a holistic approach to their branding and marketing activities in order to assess the potential impact of any adverse publicity on their balance sheet.

Nir Kossovsky, CEO, Steel City Re

Nir Kossovsky, CEO, Steel City Re

Nir Kossovsky, CEO of Steel City Re, a corporate reputation measurement and risk management specialist, said another major problem of negative publicity is the damage to a company’s reputation.

“The primary risk is that an adverse behavior at an event or by a celebrity will be viewed by stakeholders as a reflection of that company’s culture, values or operational ineptitude,” he said.

“In this situation where the stakeholder holds the company culpable for any such action, often they will respond by altering their future expectations and exercising their financial clout, usually to the company’s detriment.”

Kossovsky said that, rather than calculate the potential risk, sponsors need to first determine the value gained from the sponsorship deal, and the costs of acquiring that value.

Then they must assess the costs of communicating to stakeholders the steps it took to mitigate against any adverse events and publicity that may occur, he said.

“There are two instances when a company should walk away from a deal,” he said.

“The first is if the costs of a parallel communication strategy coupled with the direct costs of sponsorship outweigh the value of the expected gain.

“The second is if, on objective reflection, there is a compelling case that the average stakeholder will hold management culpable for an adverse event no matter what the management says to the contrary.”

To mitigate against these risks, corporations are increasingly turning to specialized insurance plans and writing clauses into their contracts allowing them to cancel a deal if the celebrity is considered to have acted in an inappropriate manner that may damage the company’s brand.

Recently, AIG launched a new policy protecting sponsors that hire celebrities to endorse their product.

Advertisement




Celebrity Product RecallResponse is triggered by any “actual or alleged criminal act or distasteful conduct” from the celebrity that has a significantly adverse impact on a company’s product.

It covers certain costs incurred by companies to remove or recall those products bearing the celebrity’s name and image, as well as the costs of removing advertising.

“In this age of social media and instant news,” said Jeremy Johnson, president and CEO of Lexington Insurance Co., which provides the policy, “reports of indiscretions by celebrities or high profile athletes can spread worldwide instantly, with swift, adverse implications for products or brands associated with the individual.”

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]
Share this article:

Risk Insider: Hala Helm

Unseen Costs of Measles Outbreak

By: | February 11, 2015 • 2 min read
Hala Helm is Chief Risk Officer for the Palo Alto Foundation Medical Group where she is responsible for the development and maintenance of the overall risk management program. She holds a JD, MBA, and numerous professional health care and risk management certifications. She can be reached at [email protected]

By now, we have all heard about the measles outbreak in California. We have heard both sides of the vaccination “controversy,” even though all of the evidenced-based research findings are uncontroversial.

What you probably haven’t heard much about is the immense time, effort and expense expended by health care providers and the public health department to respond to a known or suspected case of measles.

When a person begins to experience the signs and symptoms of measles, it is likely that they will seek medical care.

If the medical staff is aware that the patient may have measles they can take precautions like masking the patient and physically isolating them from others to prevent the spread of infection.

In reality, however, the health care providers might not suspect a patient is infected until a medical professional has performed a physical examination and taken their history.

A known or suspected measles exposure triggers a cascade of response activities.

Facility staff must identify the infected patient (the index case), interview the patient to determine where he or she has been, who they might have come in contact with, and whether or not they were masked, and at what point.

Any person who has shared air space with an un-masked measles patient is considered at risk of exposure.

The response costs to a potential measles exposure have been calculated at as much as $100,000 per event in lost productivity and remediation expense.

While waiting one to two days — or up to a week — to get results from measles serology and PCR analysis, facility or public health department staff compile a list of any patients who likely shared air space with the index case.

These are primarily patients who had appointments proximal to the time and location of the index case and for one hour afterwards, who may have shared a waiting room area.

Obviously, this is an incomplete list, as it cannot possibly include contact with individuals in public places like elevators, restrooms, etc.

If measles is confirmed, every patient who is at risk of exposure must be contacted. The clinic or public health department may offer prophylactic MMR vaccinations to any exposed patient who can’t produce documentation of immunity, but that is only effective for 72 hours post-exposure.

If an exposed patient can’t produce proof of immunity and can’t obtain a prophylactic vaccination within the 72-hour time window, the public health department may order them quarantined for 21 days.

The response costs to a potential measles exposure have been calculated at as much as $100,000 per event in lost productivity and remediation expense.

It introduces cost and inefficiency into the health care system, a system that many already criticize as being costly and inefficient. Measles is on the rise, from under 200 documented cases in 2013 to nearly 650 in 2014, and 102 documented cases in January 2015 alone.

An exponential increase in measles will tax the system to the point where it will not be able to respond effectively, leaving our most vulnerable at risk.

And unfortunately, those most at risk from an exposure are exactly the types of people most likely to be found in hospital and clinic waiting rooms.

Read all of Hala Helm’s Risk Insider articles.

Share this article:

Sponsored: Healthcare Solutions

Specialty Drugs Show No Signs of Slowing Down

The emergence of specialty drugs in the workers' comp market comes with a new set of complexities and a hefty price tag.
By: | August 31, 2015 • 4 min read
HCS_BrandedContent

A decade ago, high-cost specialty drugs were commonly referred to as “injectable drugs” and were used to treat conditions not typically covered in workers’ compensation, such as cancer, rheumatoid arthritis and multiple sclerosis.

“Today, however, new specialty drugs are emerging that will be used to treat other chronic and inflammatory conditions,” said Joe Boures, president and CEO of Healthcare Solutions, an Optum company providing specialized pharmacy benefit management services to the workers’ compensation market.

HCS_BrandedContent

Joe Boures, President and CEO, Healthcare Solutions

“Payers in the workers’ comp market are just beginning to feel the cost impact of greater utilization of these drugs, which come with expensive price tags.”

Specialty drugs are often manufactured using biologic rather than chemical methods, and they are no longer just administered by injections. New specialty drugs can also be inhaled or taken orally, likely contributing to the rise in their utilization.

“There isn’t a standard definition of specialty drugs, but they are generally defined as being complex to manufacture, costly, require specialty handling and distribution, and they difficult for patients to take without ongoing clinical support or may require administration by a health care provider,” said Boures.

In 2014, more than a quarter of all new therapies that the FDA approved were through its biologics division. Biologics, and similar therapies, are representative of a future trend in prescription drug spend.

“As the fastest growing costs in health care today, specialty drugs have the potential to change the way prescription benefits are provided in the future,” said Jim Andrews, executive vice president of pharmacy for Healthcare Solutions.

Workers’ Compensation payers may not recognize how specialty drugs are affecting their drug spend.

Specialty drugs like Enbrel®, Humira® and Synvisc® can be processed in conjunction with other medical procedures and, therefore, not recognized by payers as a pharmacy expense.

This leaves payers with little visibility into the costs of these medications within their book of business and a lack of tools to control these costs.

Due to the high costs of specialty medications, special due diligence should be utilized when claimants receive these medications, up to and including utilization review, said Andrews.

HCS_BrandedContent

Jim Andrews, Executive Vice President of Pharmacy, Healthcare Solutions

“Healthcare Solutions recommends that claimants using specialty drugs are monitored for proper medication handling and that the medication is administered appropriately, as well as monitoring the claimant to determine whether the medication is having its desired results and if there are any side effects,” he said.

“At $1,000 per pill for some of these specialty medications, making sure a claimant can tolerate the side effects becomes vital to making sure the claimant achieves the desired outcomes.”

Hepatitis C drugs have made their way to the workers’ compensation market, largely through coverage of healthcare workers, who have exposure to the disease.

“Traditional drug treatments that began in the 1990’s had a success rate of 6% and costs ranging from $1,800 to over $88,000,” said Andrews.

“The new Hepatitis C specialty medications have a treatment success rate of 94-100%, but cost between $90,000 and $226,000.”

Although the new treatments include higher drug costs, the payer’s overall medical costs may actually decrease if the Hep C patient would have required a liver transplant as part of the course of treatment without the drugs.

While the release of new Hepatitis C medications in 2014 demonstrated the potential impact specialty medications can have on workers’ compensation payers, there are some specialty medications under development that target more common conditions in workers’ compensation.

HCS_BrandedContent

Pfizer Inc. and Eli Lilly and Company are currently developing tanezumab, a new, non-narcotic medication to treat chronic pain, which is common in workers’ compensation claims.

Tanezumab has demonstrated benefits of reducing pain in clinical trials and may provide non-addictive pain relief to claimants in the future.  This may change how pain management is treated in the future.

Healthcare Solutions has a specialty medication program that provides payers discounted rates and management oversight of claimants receiving specialty medications.

Through the paper bill process, Healthcare Solutions aids payers in identifying specialty drugs and works with adjusters and physicians to move claimants into the specialty network.

A central feature of the program is that claimants are assigned to a clinical pharmacist or a registered nurse with specialty pharmacy training for consistent care with one-on-one consultations and ongoing case management.

The program provides patients with education and counseling, guidance on symptoms related to their medical conditions and drug side effects, proactive intervention for medication non-adherence, and prospective refill reminder and follow-up calls.

“The goal is to improve patient outcomes and reduce total costs of care,” said Boures.

This article was produced by Healthcare Solutions and not the Risk & Insurance® editorial team.



Healthcare Solutions serves as a health services company delivering integrated solutions to the property and casualty markets, specializing in workers’ compensation and auto liability/PIP.
Share this article: