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By GREGORY DL MORRIS, an independent business journalist with more than 20 years' experience covering finance, industry and commerce worldwide.

Like the classic story of sightless men trying to describe an elephant based on only the part of the creature they can feel, the current outbreak of meningitis in the United States still defies definition in risk-management and response terms.

As has been extensively covered in the general press, compounding pharmacies are primarily regulated by states. The industry has lobbied hard and successfully to fend off oversight from the federal Food & Drug Administration. Originally small operations making custom formulations for individual patients and small groups, compounding pharmacies have grown to supply a larger portion of the general drug supply chain.

The current incident is the largest recent case of drug contamination, but one of several over the past few years. There have been instances of blindings, human deaths and even a stable of horses dying from contaminated drugs.

Amid all the suffering and fear, there is also frustration because the crisis seems designed to elude definition and poses a challenge to the identification and assessment of emerging risks. That is not just by public officials and health care professionals but also by underwriters, brokers and insureds.

A quick review by Risk & Insurance® found that the meningitis outbreak was being addressed as a pharmaceutical crisis by some companies, as a regulatory and compliance issue by other firms, and as a supply-chain problem in other places.

"Emerging health risks are the most complex, and also the most personal," said Gary Lynch, managing director at Marsh responsible for risk intelligence and supply-chain resiliency solutions.

"We get input all the time at many levels, from social media to the deepest layers of researchers and hospitals," he said. "The first challenge is always to separate the signal from the noise. Once we do hear a signal, we work externally to validate the facts and assess the risk, but also begin the decision-making process internally on how to set up and manage our response."

Lynch explained that all of the major health risks, from the H1N1 flu and the news earlier this year of highly resistant tuberculosis to the current meningitis outbreak bring up risk-management challenges in four areas.

"First, is the health implications, the big medical stuff. Second, is the economic impact. Not just of care and control, but things like, is there going to be a run on surgical masks, as we saw with H1N1.

"Third," he said, "is jurisdictional. How are claims going to be handled? Is it a public health or workers' comp issue? And fourth, is social. How are people going to react? What are governments and regulators going to do?"

Once Marsh has gotten some answers to those basic questions, Lynch said, the broker will start to issue some general information, via social media and email messages as well as client alerts and even full white papers. It will also begin to work individually with clients to assess their specific exposures and coverages.

"Sometimes, client calls are our first information that something is going on," said Lynch. "But once we have some information to disseminate, that often brings in a lot more information."

He reiterated that the response to emerging health risks is not just medical. "There is so much focus on the health issues themselves, people tend to overlook the economic issues."

Don Hurter, senior vice president, medical management services for AIG Property Casualty (formerly Chartis) said that the effects on the health care industry could extend beyond even the current outbreak.

"We count compounding and physician dispensing as key risks in the workers' comp field because of the costs, which are about four times as high, but also because of the health risks. In many cases, compounded or physician-dispensed drugs do not have the underlying national drug code number, and that is a safety concern because you can't determine interactions, efficacy or potential conflicts," said Hurter.

AIG Property Casualty works with PMSI, an independent entity in pharmaceutical oversight.

While contaminated substances are a serious and immediate threat to life and health, even uncontaminated compounds are a less-obvious but still very real risk, said Hurter.

"Not having that NDC [number] is an overall safety concern," he said.

Here again, the patchwork of state oversight complicates matters. "Some states, like New York and Texas, do not permit physician dispensing," Hurter notes. "Some states do, and in other cases the rules are not clear. In all cases, we ask for the NDC, and if we spot a concern, we arrange provider-to-provider discussions to address the situation. We also try to bring physician dispensers into our pharmaceutical benefit management network."

October 23, 2012

Copyright 2012© LRP Publications