2015 Most Dangerous Emerging Risks

Vaping: Smoking Gun

As e-cigarette usage rises, danger lies in the lack of regulations and unknown long-term health effects.
By: | April 8, 2015 • 7 min read
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SCENARIO: It’s 2040, and there were not quite as many attendees of the 25-year high school reunion party as expected. Gossip begins to circulate just as it did around the cafeteria and corridors a couple of decades earlier.

“Is John coming tonight?” one man asked an ex-classmate.

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“No, didn’t you hear? He’s in the middle of chemo treatments right now,” she responded solemnly. “Esophageal cancer.”

“Hey Kelly!” another alumnus shouted. “I don’t think I’ve seen you since Nationals senior year. How are you? Still running?”

Kelly was a standout miler on her high school and university track teams, known for her strong finishing kick.

“No,” she responded, exhaling a cloud of raspberry-flavored vapor as she lowered her still-glowing e-cigarette.

“I haven’t been able to run much lately, not without an inhaler, anyway. Developed asthma a few years ago.”

In 2015, when this group was graduating, “vaping” was the latest and greatest trend. It delivered the soothing effects of nicotine without the carcinogens of tobacco smoke, tasted much better, and there were no age restriction laws.

The litigants claim their health issues stem directly from the dubious concoction of chemicals in the e-liquid his company imported from China and sold in their branded vape pens.

E-cigarette advocates predicted that vaping would dramatically decrease the rates of lung cancer and other smoking-related diseases. But 25 years later, the effects of the e-liquid’s various chemicals and concentrated nicotine are clear. Rates of lung cancer, which had been decreasing steadily in the U.S., are rising again, along with heart disease and other types of cancer.

That same night, the CEO of a national e-cigarette distributor is staring at a subpoena. His company is being sued by the families of a few hundred of his most loyal customers who have developed respiratory and heart problems.

In fact, a recent longitudinal study of “vapers” by the Centers for Disease Control and Prevention found strong positive correlations between high use of e-cigarettes and incidence of heart disease and cancers of the respiratory system.

The litigants claim their health issues stem directly from the dubious concoction of chemicals in the e-liquid his company imported from China and sold in their branded vape pens.

Tests of several batches of the liquid by the FDA revealed inconsistent concentrations of nicotine, propylene glycol, and other flavor additives and preservatives. The levels of nicotine found in the vapor were also inconsistent with the label.

The class-action litigants were seeking punitive damages totaling $20 billion, half of which would be used to create a medical treatment fund. The number is staggering, but not out of line with some of the lawsuits that emerged against “Big Tobacco” companies in the late 1990s, the highest of which sought damages of $23.6 billion. Other smaller distributors had already been knocked out by smaller settlements, still in the millions.

The CEO had already talked to his broker. The contractual protection they had in place pinned product liability to the manufacturer, based in Shanghai, but did not address risks of long-term health effects. That liability was all theirs.

ANALYSIS: In 2015, the retail vaping industry is forecast to reach $3.5 billion, more than twice the $1.7 billion estimated for 2013, according a Wells Fargo Securities report on tobacco trends in the U.S.

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E-cigarettes, which deliver a nicotine hit without tobacco combustion — and the carcinogens that come with it — attract customers from the traditional cigarette market looking for a healthier or safer alternative to their smoking habit, and from the youth market, drawn to the sleek styling and fun flavors of vaporizers, as well as the claim that they are far less dangerous than combustible cigs.

According to the CDC’s National Youth Tobacco Survey, “the number of never-smoking youth who used e-cigarettes increased from 79,000 in 2011 to more than 263,000 in 2013.”

According to “Monitoring the Future,” a study from the University of Michigan analyzing drug and tobacco trends among teens, there were twice as many e-cig users than smokers of combustible cigarettes among eighth, 10th and 12th graders. Sixty-two percent of eighth graders surveyed said that cigarettes are very harmful to health, while only 15 percent reported feeling that way about e-cigarettes.

And there is basis for these beliefs. Studies of e-vapors show that the amounts of toxic chemicals they contain are negligible, compared to traditional cigarettes, and their concentrations are nearly equal to those already present in the air we breathe. Many public health advocates laud e-cigs as a long-term tool to reduce smoking rates and the respiratory illnesses that come with it.

“There’s no question that e-cigarettes are much safer,” said Michael Siegel, a professor at Boston University’s School of Public Health.

Mark Wood President and CEO of LifeScienceRisk

Mark Wood
President and CEO of LifeScienceRisk

“The risks are minimal, compared to tobacco smoking.”

But the danger in any new product lies in the unknown. Vapors produced from e-liquids may not be as harmful as smoke, but the composition of those liquids varies widely.

“A lot of these devices are made in countries that struggle with quality issues in the manufacturing process,” said Mark Wood, president and CEO of LifeScienceRisk, a subsidiary of RSG Underwriting Managers.

“When using foreign contract manufacturers, you don’t always know who exactly is making the product.”

Inconsistent manufacturing leads to variability in nicotine levels. Byproducts of the manufacturing process, flavoring and other preservatives also potentially introduce other carcinogens into the mix. But the final composition is largely unknown.

Adverse health effects of those unknown chemical mixtures could range from allergic reactions to cancer.

The heating element of e-cigarettes also poses a threat. If it gets too hot, it can “trigger a thermal breakdown” of the materials used to make the e-cig, creating carbonyls like formaldehyde and acetaldehyde. These compounds are delivered in nano-sized particles directly into the airways, where they trigger inflammation that can lead to the development of chronic conditions.

Little clinical research has been conducted on the safety of these vapors, and the long-term health effects may not be seen for another 20-30 years.

“From the FDA’s point of view, they’re waiting to see if e-cigarettes can reduce the number of smoking deaths. They want to see the whole picture before they take a firm stance on the issue,” said Markus Kalin, head of casualty risk engineering at XL Group.

Another problem is the lack of age restrictions, coupled with flavorings like cherry vanilla and blue raspberry, which make these products highly appealing to those under 18.

In a customer base that has never or rarely smoked traditional cigarettes, long-term use of e-cigarettes could increase, rather than reduce, the likelihood of health issues.

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“The purpose of e-cigarettes is to get people off smoking in a safer way. They are not absolutely safe,” Siegel said.

Current high-school vapers could be in their 40s or 50s before any ill effects emerge. It may not be lung cancer or emphysema, but perhaps higher rates of asthma, bronchitis, cystic fibrosis or other inflammatory pulmonary diseases.

And distributors of vaping products could be held liable, in much the same way tobacco companies faced massive lawsuits after smoking was definitively linked to lung cancer.

The fact that most e-cigarette manufacturers are based in China also “puts distributors and retailers in the U.S. at higher risk,” said Randy Nornes, executive vice president at Aon Risk Solutions.

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“If you’re the only link between a non-U.S. manufacturer and the customer, you’re an obvious target for plaintiffs.”

Wood said that distributors “can subrogate that claim against a contract manufacturer or supplier, but it’s more difficult to do that against an entity in a different country subject to different laws.”

Given the huge settlements with tobacco companies, plaintiffs’ attorneys will be more than willing to take on the e-cigarette industry.

“They look for market opportunities,” Nornes said, “anything that potentially has harm in it and involves a lot of people.”

Vaping distributors could face product liability suits for improper labeling of e-liquid cartridges or false advertising concerning its health benefits. Kalin of XL Group said parents of e-cigarette users could pursue advertising litigation against distributors for failure to protect young people.

“But the next stage will be, if you start to see health issues emerge and more studies trickling out, and younger people developing diseases like lung cancer, that will be the catalyst for mass tort,” Nornes said.

E-cigarette distributors and retailers need proactive risk management, experts said.

“You really have to understand your supply chain,” said Aaron Ammar, risk manager at XL Group. “Make sure you have appropriate age restrictions and proper labeling about potential health effects. Where are the component parts coming from? Do you understand it?”

“I’m sure they’re all doing contractual risk management, to make sure risk stays with the manufacturer,” Nornes said.

“The second issue is making sure the manufacturer has adequate levels of insurance in the event you get sued for distributing someone else’s product. That’s where issues will creep in, because you’re relying on a third party’s insurance.”

BlackBar

Complete coverage of 2015’s Most Dangerous Emerging Risks:

Corporate Privacy: Nowhere to Hide. Rapid advances in technology are ushering in an era of hyper-transparency.

04012015_04B_implant_devices_150px_mainImplantable Devices: Medical Devices Open to Cyber Threats. The threat of hacking implantable defibrillators and other devices is growing.

04012015_03_concussions_150px_mainAthletic Head Injuries: An Increasing Liability. Liability for brain injury and disease isn’t limited to professional sports organizations.

04012015_04_vaping_150px_mainVaping: Smoking Gun. As e-cigarette usage rises, danger lies in the lack of regulations and unknown long-term health effects.

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Aquifer: Nothing in the Bank. Once we deplete our aquifers, there is nothing helping us get through extended droughts.

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Most Dangerous Emerging Risks: A Look Back. Each year since 2011, we identified and reported on the Most Dangerous Emerging Risks. Here’s how we did on some of them.

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at ksiegel@lrp.com.
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Generic Drug Regulations

Rule Change

Generic drug manufacturers may face increased premiums and higher risk management costs due to a proposed FDA rule. 
By: | February 19, 2015 • 7 min read
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A far-reaching new rule proposed by the Food and Drug Administration has the nation’s generic drug manufacturers in a stir.

The proposed rule would require makers of generic drugs to update their warning labels for the first time.

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Historically, generics manufacturers were shielded from liability, because they were required to use only the warning label language used by the branded drug maker from which the generic was derived.

If the rule becomes law, it will lead to significant insurance changes, including higher premiums, more clinical tests, more lawsuits and greater staffing, as well as heightened attention to risk management issues.

“I think it’s going to be even more important for the generic drug companies to differentiate themselves because there’s going to be much more scrutiny on them from an underwriting perspective.” —  Darlene Villoresi, managing director, Marsh life sciences practice

“I will say that anything like this that creates uncertainty in the litigation climate can have a negative effect on premiums, rates and availability of insurance coverage,” said Jim Walters, Philadelphia-based managing director of the life sciences and chemicals practice at Aon Risk Solutions.

“That historically is what has happened when uncertainty reaches the litigation climate,” Walters added.

Having to do their own clinical studies to support label changes will create a tremendous amount of expense for the generics industry, Walters said.

Alison J. Renner, CEO, A.J. Renner & Associates

Alison J. Renner, CEO, A.J. Renner & Associates

Alison J. Renner, CEO of Chicago-based A.J. Renner & Associates, a wholesale pharmaceutical specialty broker with a strong suit in generics, said that generics manufacturers will need to be aggressive about adverse event reporting of their own products, as well as conduct extensive independent review of reported events and information from the FDA and all other sources available to them.

In addition to legal concerns, said Renner, it is more than likely that certain high-risk products that are currently “insurable” due mainly to the current legal climate will become generally excluded.

“They will need to demonstrate to underwriters that they have best-in-class procedures,” said Renner of the generic drug makers.

“Being able to demonstrate near perfection in labeling will also form a cornerstone of defense of product liability actions going forward.”

John Parente, Boston-based assistant vice president of life sciences at Berkshire Hathaway Specialty Insurance, said the generic manufacturers’ fears center on how they will make labels consistent for each product.

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“When you have multiple generic pharmaceutical manufacturing companies producing Tylenol, with the generic name acetaminophen, you could have many different labels warning of multiple or different side effects versus having one consistent label that the medical community can look at and agree upon,” Parente said.

The FDA and supporters of the proposed rule say that the rule change will pressure generic drug makers to be more proactive in discovering when drugs are harming patients and to provide accurate labeling for those drugs.

Generics Save Billions

Generic drugs, which account for more than 80 percent of all drugs manufactured in the U.S., were brought into existence by the 1984 Hatch-Waxman Act, which ensures the safety and affordability of generic drugs by requiring manufacturers to duplicate the effectiveness and labels of FDA-approved brand-name drugs.

One of the most attractive things about generic drugs is their relative cost. A generic industry trade organization points to the huge savings generated by generics.

VIDEO: Even with the current FDA regulations, some are worried about the safety of generic drugs. This CBS report looks at an Indian company that falsified data as part of regulatory approval process.

“The world’s leading health care analytics firm, IMS Institute for Healthcare Information, found that generics saved $239 billion in the U.S. in 2013 (a 14 percent increase in savings from 2012) and more than $1.6 trillion over the recent decade,” according to the Washington, D.C.-based Generic Pharmaceutical Association.

The association is threatening to sue the FDA if the agency finalizes its labeling regulation in its present form.

Critics of the proposed new rule argue that it would increase drug costs by $4 billion a year and lead to a confusing array of labels for the same drug.

But Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research, said the proposed rule would create parity among application holders and “would speed the dissemination of new safety information about generic drugs to health professionals and patients.”

The FDA’s controversial new rule was expected to be finalized last December, but will not be published until the fall of 2015, an agency spokeswoman said.

If adopted, the FDA rule would put in doubt two landmark U.S. Supreme Court decisions that currently protect generics manufacturers from most liability lawsuits.

In PLIVA vs. Mensing, a woman who took a generic drug had a horrible reaction to it. In June, 2011 the Supreme Court ruled that the generic manufacturer, under federal law could not alter the label, therefore it was not liable.

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In a similar case, Mutual Pharmaceutical Co. vs. Bartlett, the Supreme Court held in June 2013 that federal law pre-empted a state law that would have required the generic manufacturer to make a safer drug, either by altering the drug’s composition or through changes in its labeling.

One well-regarded industry observer noted that the erosion of the Mensing and Bartlett defenses could increase claim expenses and potential judgments, which would likely impact the availability and affordability of generics product liability policies.

“In the event the rule went through as proposed, the degree and scope of the increased litigation might not only impact the cost of insurance but also the amount of capacity available,” the expert said.

Risk Management Needed

Kati Ballantyne, assistant vice president and life science underwriting manager, Chubb Group of Insurance Cos

Kati Ballantyne, assistant vice president and life science underwriting manager, Chubb Group of Insurance Cos

Kati Ballantyne, Whitehouse Station, N.J.-based assistant vice president and life science underwriting manager for Chubb Group of Insurance Cos., said that if the rule goes through as proposed, generic drug companies will face material changes in labeling and may consider adopting practices similar to those used by the innovator drug companies to help ensure that they’re doing all they can to identify potential patient issues that belong on the label.

“The changes may come at a cost for generic drug companies and could potentially have a downstream impact on the ultimate consumers,” Ballantyne noted.

Ballantyne added that if the rule is adopted, some best practices in risk management that would be critical include effectively managing adverse events, identifying trends in adverse events, and executing rapid escalation plans for external and internal early reporting to the FDA of adverse event trends that may warrant a label change.

“In addition, generic drug companies will need to make manufacturing adjustments to ensure the timeliness of changing labels,” Ballantyne said.

Allison Zieve, general counsel and director of the litigation group for the Washington, D.C.-based advocacy group Public Citizen, said, “The way the regulating scheme is set up, the drug manufacturers have the primary responsibility for ensuring the adequacy of the labeling. That makes sense because the FDA doesn’t have the resources to monitor the thousands of drugs on the market.

“Most of the labeling changes are based on adverse-event reports submitted to the FDA, and the FDA makes those reports available to any manufacturer,” she said.

If the FDA rule goes through as proposed, there are a couple of important impacts, said Darlene Villoresi, Morristown, N.J.-based managing director with Marsh’s life sciences practice.

“One is all about differentiation,” she said.

Underwriting Scrutiny

“I think it’s going to be even more important for the generic drug companies to differentiate themselves because there’s going to be much more scrutiny on them from an underwriting perspective.

“They’re going to get many more questions about underwriting data more in line with the branded drugs.”

Right now, she said, they’re protected from failure-to-warn claims so the underwriters don’t focus as much on pharmacovigilance.

If the proposed rule is adopted as planned, or in some form close to its current structure, Villoresi also envisions an impact on pricing.

There will be more pressure on generic companies to implement new programs to detect early warning signs for adverse events, and that’s going to cost money, she said.

“And underwriters will evaluate how successful they are in their plans, including how well they’re tracking their adverse events, their safety signals, how well they are identifying safety trends in the products that are out there,” Villoresi said.

In the risk management realm, Chubb’s Ballantyne said that the key to successful management of the FDA proposal is the implementation of best practices by the generic drug companies going forward.

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“Since the FDA proposal first became known about a year and a half ago, we’ve been working with our customers in anticipation of the change to help them achieve best practices,” Ballantyne said.

“We’ve utilized our loss control expertise in the area of post-market surveillance and anticipate that our resources in this area will grow in value to those drug companies if the proposal goes through,” she said.

Aon Risk Solutions’ Walters said his team’s advice for generic drug manufacturers is to beef up their staffs and urge them to have the necessary tools to monitor adverse events and trends more effectively.

“There are lots of third parties that can help with monitoring adverse events, and we would look to advise our generic manufacturer clients with help from companies like these,” Walters said.

Steve Yahn is a freelance writer based in Croton-on-Hudson, NY. He has more than 40 years of financial reporting and editing experience. He can be reached at riskletters@lrp.com.
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Sponsored Content by Helios

Mitigating Fraud, Waste, and Abuse of Opioid Medications

Proactive screening for fraud, waste and abuse situations is the best way to minimize their effects on opioid management.
By: | May 8, 2015 • 5 min read
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There’s a fine line between instances of fraud, waste, and abuse. One of the key differences is intent and knowledge. Fraud is knowingly and willfully defrauding a health care benefit program for personal gain or profit. Each of the parties to a claim has opportunity and motive to commit fraud. For example, an injured worker might fill a prescription for pain medication only to sell it to a third party for profit. A prescriber might knowingly write prescriptions for certain pain medications in order to receive a “kickback” by the manufacturer.

Waste is overuse of services and misuse of resources resulting in unnecessary costs, whereas abuse is practices that are inconsistent with professional standards of care, leading to avoidable costs. In both situations, the wrongdoer may not realize the effects of their actions. Examples of waste include under-utilization of generics, either because of an injured worker’s request for brand name medication, or the prescriber writing for such. Examples of abusive behavior are an injured worker requesting refills too soon, and a prescriber billing for services that were not medically necessary.

Actions that Interfere with Opioid Management

Early intervention of potential fraud, waste, and abuse situations is the best way to mitigate its effects. By considering the total pharmacotherapy program of an injured worker, prescribing behaviors of physicians, and pharmacy dispensing patterns, opportunities to intervene, control, and correct behaviors that are counterproductive to treatment and increase costs become possible. Certain behaviors in each community are indicative of potential fraud, waste, and abuse situations. Through their identification, early intervention can begin.

Injured workers

  • Prescriber/Pharmacy Shopping – By going to different prescribers or pharmacies, an injured worker can acquire multiple prescriptions for opioids. They may be able to obtain “legitimate” prescriptions, as well as find those physicians who aren’t so diligent in their prescribing practices.
  • Utilizing Pill Mills – Pain clinics or pill mills are typically cash-only facilities that bypass physical exams, medical records, and x-rays and prescribe pain medications to anyone—no questions asked.
  • Beating the Urine Test – Injured workers can beat the urine drug test by using any of the multiple commercial products available in an attempt to mask results, or declaring religious/moral grounds as a refusal for taking the test. They may also take certain products known to deliver a false positive in order to show compliance. For example, using the over-the-counter Vicks® inhaler will show positive for amphetamines in an in-office test.
  • Renting Pills – When prescribers demand an injured worker submit to pill counts (random or not), he or she must bring in their prescription bottles. Rent-a-pill operations allow an injured worker to pay a fee to rent the pills needed for this upcoming office visit.
  • Forging or Altering Prescriptions –Today’s technology makes it easy to create and edit prescription pads. The phone number of the prescriber can be easily replaced with that of a friend for verification purposes. Injured workers can also take sheets from a prescription pad while at the physician’s office.

Physicians

  • Over-Prescribing of Controlled Substances – By prescribing high amounts and dosages of opioids, a physician quickly becomes a go-to physician for injured workers seeking opioids.
  • Physician dispensing and compounded medication – By dispensing opioids from their office, a physician may benefit from the revenue generated by these medications, and may be prone to prescribe more of these medications for that reason. Additionally, a physician who prescribes compounded medications before a commercially available product is tried may have a financial relationship with a compounding pharmacy.
  • Historical Non-Compliance – Physicians who have exhibited potentially high-risk behavior in the past (e.g., sanctions, outlier prescribing patterns compared to their peers, reluctance or refusal to engage in peer-to-peer outreach) are likely to continue aberrant behavior.
  • Unnecessary Brand Utilization – Writing prescriptions for brand medication when a generic is available may be an indicator of potential fraud, waste, or abuse.
  • Unnecessary Diagnostic Procedures or Surgeries – A physician may require or recommend tests or procedures that are not typical or necessary for the treatment of the injury, which can be wasteful.
  • Billing for Services Not Provided – Since the injured worker is not financially responsible for his or her treatment, a physician may mistakenly, or knowingly, bill a payer for services not provided.

Pharmacies

  • Compounded Medications – Compounded medications are often very costly, more so than other treatments. A pharmacy that dispenses compounded medications may have a financial arrangement with a prescriber.
  • Historical Non-Compliance – Like physicians, pharmacies with a history of non-compliance raise a red flag. In states with Prescription Drug Monitoring Programs (PDMPs), pharmacies who fail to consult this database prior to dispensing may be turning a blind eye to injured workers filling multiple prescriptions from multiple physicians.
  • Excessive Dispensing of Controlled Substances – Dispensing of a high number of controlled substances could be a sign of aberrant behavior, either on behalf of the pharmacy itself or that injured workers have found this pharmacy to be lenient in its processes.

SponsoredContent_Helios

Clinical Tools for Opioid Management

Once identified, acting on the potential situations of fraud, waste, and abuse should leverage all key stakeholders. Intervention approaches include notifying claims professionals, sending letters to prescribing physicians, performing urine drug testing, reviewing full medical records with peer-to-peer outreach, and referring to payer special investigative unit (SIU) resources. A program that integrates clinical strategies to identify aberrant behavior, alert stakeholders of potential issues, act through intervention, and monitor progress with the injured worker, prescriber, and pharmacy communities can prevent and resolve fraud, waste, and abuse situations.

Proactive Opioid Management Mitigates Fraud, Waste, and Abuse

Opioids can be used safely when properly monitored and controlled. By taking proactive measures to reduce fraud, waste, and abuse of opioids, payers improve injured worker safety and obtain more control over medication expenses. A Pharmacy Benefit Manager (PBM) can offer payers an effective opioid utilization strategy to identify, alert, intervene upon, and monitor potential aberrant behavior, providing a path to brighter outcomes for all.

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



Helios brings the focus of workers’ compensation and auto no-fault Pharmacy Benefit Management, Ancillary, and Settlement Solutions back to where it belongs—the injured person. This comes with a passion and intensity on delivering value beyond just the transactional savings for which we excel. To learn how our creative and innovative tools, expertise, and industry leadership can help your business shine, visit www.HeliosComp.com.
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