When Big Pharma Gets in the Game

TV commercials for pharmaceuticals seem to be all over the airwaves these days -- and after talking about how beneficial a new product is, the commercials describe the medicine's side effects in painful detail.

Different from vitamins or supplements, traditional pharmaceuticals make bolder claims (curing or preventing disease) than supplements (enhancing or improving wellbeing.) While such bold claims and possible side effects may make insuring a new pharmaceutical medicine sound incredibly risky, pharmaceutical manufacturers tend to have an easier time gaining insurance coverage than vitamin or supplement manufacturers.That's because pharmaceuticals go through stringent testing and are subject to FDA regulation, leading underwriters to typically see them as less risky. Another reason is because doctors prescribe pharmaceuticals, while regular consumers, many of whom are often uneducated in basic pharmacology, prescribe themselves supplements, which could lead to abuse or mistreatment.

"I'm not sure consumers are the right decision makers," said Phillip Walls, chief clinical and compliance officer of myMatrixx in Tampa, Fla. "Even if I have a patient that has done their own research about alternative therapies, I'd still want them to check with nurse case managers or their treating physicians."

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But what happens when a pharmaceutical giant is also manufacturing vitamins and supplements? Those companies have well-established risk profiles and well-established relationships with brokers and carriers. Certainly, since insurers have less of an appetite for supplement risks vs. traditional pharmaceutical risks, the broker-client relationship could get strained when a large pharmaceutical company gets into the supplement world. That means the onus is on the broker to understand testing procedures and all potential side effects so they can be communicated to the insurer.

Underwriters seem more amenable to writing policies for supplements made by large pharmaceutical companies than smaller manufacturers because they can assume that they have rigorous testing standards for all types of products made at their facilities.

Even though supplements are unregulated, companies "don't have two sets of standards" meaning they'll manufacture "everything to full FDA manufacturing practices," said Mark Wood, president of LifeScienceRisk, a managing general underwriter of Ryan Specialty Group in Chicago.

-Jared Shelly

December 18, 2012

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