1 2 From Office to om Office to Off-Label: Off-Label: Managing Managing Ri Risk and sk and Pr Protecti otecting A ng Assets ssets
Pan Panelists lists Mo Moderated by: derated by: Emily Urban, Senior Vice President, Berkley Life Sciences Sp Speakers: eakers: Anne Nevard, Risk Management Executive Judith Waltz, Partner, Foley & Lardner LLP George Ward, Director of Risk Management, Corporate Compliance, Amylin Pharmaceuticals, Inc. 3 Anne Nevard, Risk Management Executive
Develop loping ng a Risk a Risk Manag Management ment & & Insuranc Insurance Program Program � Determine a Company’s Risk Tolerance � Implement Risk/Insurance Programs � Communicate Risk Philosophy 5 Determining ining C Company’s R s Risk T sk Toler leranc nce Growth Stag Gr owth Stages es Start St art U Up C Company any Mid-Si Mi Size C ze Company mpany Industry Lead Ind stry Leader er Ri Risk A sk Averse se So Some Ri Risk A sk Acce ceptance ce Not Risk Aver Not R Averse � Restricted Cash � Some Free Cash Flow � Reliance on cash � Purchase insurance � Insurance limits increase while flow/reserves/bank relationships. limits=value at risk/low deductibles increase � Large self-insurance programs deductibles Exposur Exposures Increme emental Expos tal Exposures Increme emental Expos tal Exposure � Localized/regional • Global expansion/mfg • Stock volatility � Patents • Product injuries/recall • Global/large M&As � Contractual obligations • Marketing & Sales • Public Scrutiny � Suppliers/contract mfg Behaviors/Reputation • Competition (generics) � Clinical Safety • Board/Management Decisions • Gov’t regulations Stakeholders Stakehold Additional Stak Add tional Stakeholders eholders Additional Stak Add tional Stakeholders eholders • Venture Capitalists • Shareholders • Counterparties/third parties • Employees • Local Environment • Global Environment • Patients (neighbors/community)
Risk Acceptance/Ri Risk Acce ptance/Risk Transfer k Transfer Reliance on Strong Loss Control Programs Catastrophic HIGH Disabling e l b a r u s n I Business Impact Significant Attritional LOW Frequency Impl Implement ementing ing Ri Risk sk Manag nagement/Insuranc ment/Insurance Programs Programs St Start Up Up Com Company any In Insu surance e usually pu lly purc rchased by sed by finance employee e employee Reliance on bro Reliance on brokers ers an and o d outside r resources Ri Risks sks • Document retention (for potential future claims) • Over/under insured (no loss history) • Misunderstanding of what is/is not insured • Mishandling of claims/limited or no loss control programs Risk Mitigation T Mitigation Techniques niques • Implement and record archive system for policies, renewal records, etc for potential future use (claim could be filed years later • Evaluate company’s risk tolerance and insure accordingly • Benchmark with like-size peers • Read policy and questions what you don’t understand • Ask internal legal staff to read policy • Establish and communicate claims handling procedures (broker will help you write) specific for your company • Contract risk management professional to conduct renewals and implement programs
Impl Implement ementing ing Ri Risk sk Manag nagement/Insuranc ment/Insurance Programs Programs Mi Mid-Si Size C ze Company mpany Insur Insurance nce usual usually purc purchased hased b by staf staff i insura surance prof nce professi essional onal Reliance on bro Reliance on brokers & o ers & outsid tside resour e resources f ces for guid r guidance, ance, marketi marketing, g, mod modeling ng Ris Risks • Lack of policies and procedures • Insurance professional not known within company, “silos” • Complex insurance applications signed by officers • Focus is on insurance, not risk management • Lack of uniform metrics across company Risk Mi Miti tiga gati tion on Tech Techni niqu ques es • Write policies and procedures for such things as obtaining clinical trial insurance, claims reporting (auto, workers comp., property, product, D&O, etc.), contract insurance language templates • Build cross-functional relationships. Conduct “Show and Tell” cross-functional meetings to communicate and implement policies and procedures. • Ensure all insurance applications are reviewed by legal prior to obtaining officer’s signature • Utilize risk modeling to evaluate insurance limits/deductibles and to assess supply chain, distribution, and other risks. Possible implementation of ERM study using outside resource Impleme Impl ementin ting Ris Risk Manag Management/Insu nt/Insuranc ance Prog Programs rams Industry Le Industr Leade ader Insur Insurance nce N Negot gotiat ated b by Ri Risk M sk Manage nagement nt/Ins nsura urance ce Prof Professi ssional onal Rel Reliance on b ance on brokers & o ers & outsi tside resources f e resources for mod r modeling, m ng, marketi rketing, g, ad advi vice ce Ri Risks sks • Budget restrictions • Risk Management not integrated across company • No assigned accountability for risk mitigation • Risk program not aligned with business objectives/strategic planning Risk Mitigation T Mitigation Techniques niques • Build case studies showing financial benefit for implementing programs and obtaining headcount • Create an internal risk committee • Quantify hazard, financial, operational and strategic risks, sophisticated modeling • Implement global ERM program • Present ERM findings showing potential impact on business objectives/planning 10
Communic mmunicating ng Risk Ph Risk Philosophy osophy -Top Do -Top Down Communication wn Communication • A letter from the “C Suite” -Educate em -Educate employ ployees ees • Internal contacts for risk management guidance • Reporting of incidences/claims • Internal/external behaviors • Social media use • Employees authorized to sign contracts 11 Implement Impl ementing ing Ri Risk sk Manag nagement/Insuranc ment/Insurance Programs Programs Take Aw Tak Aways ays • Risk tolerance varies, depending on company’s growth stage, loss history & cash • Focus on establishing policies and procedures during start-up phase • Build cross-functional relationships for an integrated approach • Quantify financial impact to justify implementing mitigation programs, building risk management/insurance teams. Launching company-wide initiatives • Have “C Suite” communicate corporate risk management philosophy 12
George M. Ward, Director of Risk Management and Compliance, Amylin Pharmaceuticals, Inc. Insu Insuranc rance e and Ri and Risk Manag sk Management nt Tec Techniqu ques es to Tr to Treat eat Risk sks Typical Risks to a Life Science Risk Company � – Regulatory Actions � FDA Actions/Alerts/Correspondence/Statements/Warning Letters � Public Company Risks - SEC and Shareholder Activism – Compliance with GXP Standards at your labs, clinics, and plants – Strategic Relationships � Contract Manufacturing Organizations � Clinical Research Organization � Outsourced R&D � Collaboration Partnerships � Supplier Performance – Supply Chain and Distribution Risks – Trend to Virtual Companies to save expenses
Risk o sk of P Potent ntial C ial Claims aims All of these can generate claims that might trigger Clinical Trial/Product Liability or D&O Insurance � Regulatory Actions can generate attorney advertising by “Bad Drug Injury Legal Center” or “Shareholder Rights � Organization” Funnel consumers, customers and shareholders to law firms who solicit cases via the internet – Risk Management Implications are the risk of product liability claims or management liability claims – against directors and officers or securities claims against the entity Product Liability Causes of Action – Strict Liability – Failure to Warn � Negligence in advising consumers or healthcare providers � Fraud – failed to advise despite knowledge of an issue or suppression of facts � Negligent Misrepresentation � Consumer Legal Remedies Act � – Off-Label Promotion or representing approved for a use when not – Promotion of products as safe and effective when not , etc. D&O Causes of Actions – Sec 10b5-1 (Insider Trading) � Sec 11 (Disgorgement of ill gotten gains) � Reg FD (Disclosure of risks to investors, at the same time!) � Insu Insuranc rance Tec e Techniqu niques to Tran es to Transf sfer the er the Risk sk Why buy insurance? � Transfer the risk � Claims are expensive! � – Product /Clinical Trial Liability Claims – D&O Claims Individual Claims � Mass tort or shareholder claims � Legal Costs, eDiscovery Costs � Liberalization of Statute of Limitation Rules � Plaintiff Attorney Networks – the finders, the minders and the grinders � Soft Market – lots of capital – the perfume of the premium can overcome the � odor of the exposure Insurer can be a source of information to control and manage the risks �
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