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By CYRIL TUOHY, managing editor of Risk & Insurance®

Two years ago, when an investigation by the Associated Press revealed that at least 41 million Americans had been exposed to antibiotics, anti-convulsants, mood stabilizers, stimulants, antihistamines and even sex hormones in their drinking water, the news left many experts, consumers and regulators wide-eyed.

In many instances, local water distribution authorities never even tested for drugs in the water supply. Here are some of the test results obtained by the AP:

-- In Philadelphia, testing discovered 56 pharmaceuticals or byproducts in treated drinking water, including medicines for pain, infection, high cholesterol, asthma, epilepsy, mental illness and heart problems.

Sixty-three pharmaceuticals or pharmacuetical byproducts were found in Philadelphia's watersheds, including anti-inflamatory drugs and the antibiotics amoxicillin, azithromycin, carbamazepine, diclofenac, prednisone and tetracycline.

-- Anti-epileptic and anti-anxiety medications were detected in a portion of the treated drinking water used by 18.5 million people in Southern California.

-- Researchers at the U.S. Geological Survey analyzed a Passaic Valley Water Commission drinking water treatment plant, which serves 850,000 people in Northern New Jersey and found a metabolized angina medicine and the mood-stabilizer carbamazepine in drinking water.

Tap water tests done by that commission also revealed the presence of caffeine, barbamazepine, codeine, cotinine, dehydronifedipine, diphenhydramine and sulfathiazole, substances belonging to the class of drugs in the antihistamine and antidepressant families.

-- Tests of drinking water supplies in Columbus, Ohio, revealed the presence of the antibiotics azithromycin, roxithromycin, tylosin, virginiamycin, as well as caffeine.

-- A sex hormone was detected in San Francisco's drinking water.

-- Many smaller water utilities don't test for the presence of drugs in their system. The AP contacted 52 small water providers--one in each state and two each in Missouri and Texas--that serve communities with populations around 25,000. All but one said their drinking water had not been screened for pharmaceuticals.

How trace amounts of prescription and over-the-counter medications end up in people is no great mystery. Consumers ingest pills and their bodies absorb most, but not all, of the medications. What's left passes and ends up in the municipal sewer system.

The wastewater is treated before it is discharged into reservoirs, rivers or lakes, according to the AP report. Some of the water is treated again at treatment plants and piped to consumers but most treatments do not remove all drug residue, which is how it shows up in tap water tests.

Drugs also end up in the sewer system after consumers toss them in the trash or flush them down the toilet, according to the EPA. There are no requirements regarding the disposal of drugs, other than labels advising consumers to "please dispose of (medications) properly."

While the AP's findings gave pause to some consumers and public health advocates, it hasn't much resonated with pharmaceutical risk managers, said Bruce Belzak, leader for Marsh's pharmaceutical team.

In the minds of many risk managers, Belzak said, pandemics, terrorism and supply chain issues rate higher than the risks discarded prescription drugs pose to drinking water supplies.

In an informal poll of risk managers at the annual gathering of the Risk and Insurance Management Society Inc. (RIMS) in Boston last month, the issue was barely mentioned, Belzak said.

No matter. The government isn't waiting for risk managers to make up their minds, and the U.S. Drug Enforcement Administration last year began to solicit public comment on how best to dispose of household drugs.

For the time being, Marsh's pharmaceutical clients remain in "a watchful, waiting investigative" phase, Belzak said.

Whether drug makers can even be held responsible for the health of individuals who fall ill by ingesting prescription drug residue through drinking water is still open to question, of course.

Suppose a plaintiff's attorney can show that a consumer was exposed to and harmed by compounds found in those drugs and that trace amounts of those drugs found their way into the victim through drinking water. Who bears the blame?

Could the maker of an antidepressant--Wellbutrin, for example, or the maker of an antibiotic--Sumycin or Panmycin, for example--be held liable?

If attorneys can trace harm back to a drug family or compound, but not to the drug brand itself, are individual pharmaceutical companies like Johnson & Johnson, Eli Lilly & Co., and Merck on the hook? Or are they all to blame?

As no state or federal court has issued an opinion on the matter, the issue hasn't come up--yet.

Even so, some of Marsh's clients are taking no chances and have quietly approached the global broker for advice on possible risk transfer options, just in case.

"Marsh has had conceptual discussions with insurance carriers and there is interest in providing risk transfer for life sciences companies seeking to address this issue," Belzak said.

Right now, Jim Vetter, managing director of Marsh's Environmental Practice, said the risk to pharmaceutical companies would have to be covered through an excess pollution legal liability policy.

"As of right now the markets are able to commit to a solution and put something in place," he said.

LIABILITY LIMITS

Limits for pharmaceutical companies for U.S. pollution liability policies, averaging about $8 million, range from $5 million to $10 million, according to Marsh's 2009 Life Science Benchmark Report. Some limits reach as high as $50 million depending on the number of sites and exposures.

Deductibles averaged about $92,000 per company, with a median deductible of $75,000. The average price per $1 million of limit was $4,004, with a median price per million of limit coming to $2,535, the report also noted.

In the wake of the AP's investigative report, regulatory bodies like the U.S. Environmental Protection Agency and the U.S. Food and Drug Administration announced they would start studying the effects of drugs in the drinking water supply on human health.

Federal regulators, however, pose less of a threat to pharmaceutical risk managers than the plaintiff's bar. "Suddenly this could accelerate through a private mechanism instead of through a government enforcement arm," Vetter said.

The "good news," Vetter also said, is that carriers are willing to entertain covering pharmaceutical companies for the risk to individuals from drug residues in the water supply.

It helps, too, that the market is awash in capacity and that prices over the past year have been softening, as in all property/casualty lines generally, but the window isn't going to last forever and carriers may be quick to pull back on their risk appetite, the Marsh brokers said.

Whether the policy pays for a claim or not is the least of the drug maker's headaches, Vetter said. It's the legal defense costs that will prove even more expensive.

With the aging U.S. population, people are taking more drugs and the recent reforms in healthcare coverage signed into law earlier this year by President Obama mean millions more Americans will be prescribed new drugs.

"It's not going to lessen," Belzak said. "The good news will be that people will legislate how to dispose of it."

June 1, 2010

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