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By DAN REYNOLDS, senior editor of Risk & Insurance®

A national epidemic of addiction to prescribed narcotics--and the crimes necessary to feed the addiction--is creating a surge in workers' compensation and property insurance claims. The need for a rapid, effective response from pharmacy and healthcare risk managers is urgent.

Mike Warren, a risk manager with Algona, Iowa-based Pharmacists Mutual Insurance Co., said that his company recorded a 26 percent increase in frequency and a 150 percent increase in the costs of pharmacy robbery and burglary claims between 2006 and 2009.

Vic Garman, a vice president for claims with the company, added that the most expensive types of claims filed by pharmacies in the wake of a robbery typically involve workers' compensation, contents exposure and a property exposure.

Robberies of this type are also becoming more violent, the executives said.

Most robberies don't last long in terms of the actual length of the event, according to Warren, but the emotional damage for pharmacy owners and workers can be lasting.

"We have situations where they lose key personnel, and they won't come back to work," Warren said.

Pharmacists Mutual works with more than 15,000 pharmacies, many of them smaller operations where the loss of a key employee due to emotional trauma from a robbery can be as devastating to the business as the material loss.

BEYOND THE SMASH AND GRAB

A broker who works with a national pharmacy chain said the national affliction of legal and illegal substance abuse is so much wider and creates even more risk management woes than even that very large field of prescription narcotics use and abuse.

"Smash and grabs," or armed robberies, by thieves looking for narcotics are one thing, said Donna Vible, the senior vice president with Willis of New Jersey who handles the Rite Aid account.

Rite Aid's risk management department, however, is trying to corral that and a much larger world of risk: young malfeasants buying nicotine patches or amphetamine-based, over-the-counter medications to get high.

In cases where a pharmacy fails to secure a given product and it is stolen or misused and a young person is poisoned or otherwise injured as a result, the claims can be significant.

"You see large claims when it involves children," Vible said.

Vible said Rite Aid's risk management program calls for customers to be identified and tracked if they keep coming back for medications too frequently, and managers have been instructed to forbid prescription drug sales and off-the-shelf sales for customers who return too frequently. The problem, Vible said, lies with the number of substances that young people will try to get high, like nicotine patches.

"Who could imagine that that could be used so inappropriately and that that could kill someone if you ingest that," Vible said. "And those types of claims happen. You don't hear about that that often, but kids find very creative ways."

Patricia Kotze, president of Downey, Calif.-based Diversified Risk Management Inc., which conducts undercover workplace investigations and other security services, said that she, too, has seen a spike in drug theft cases.

Investigations into long-term care facilities, for example, can be difficult because there is so much to lose when nurses, particularly highly educated ones, are caught. They stand to lose their job and their license if exposed, and their education level is high enough for them to be a worthy adversary.

"Depending on how skilled they are and whether they have someone inside that can help them with the information, they can alter the records and they can make some stuff disappear," Kotze said.

Pharmacy risk managers recommend installing camera systems, alarms and safes. Warren and Garman said their insurance company is making progress by communicating with customers quickly after a loss to avoid future losses. That communication and education effort also includes detailed reports from Pharmacy Mutual's claims department to its risk management department.

"As soon as our claims staff begin their investigation on any crime-related pharmacy incident, we create a communication channel to risk management where we are identifying key things through that loss notice up front, and getting that to Mike and his staff so that we can communicate early with our customer and provide them any sort of education about what they might be able to do to protect themselves in the future," Garman said.

February 14, 2011

Copyright 2011© LRP Publications