A Prescription that Works for Pharmacy Risks
Once upon a time insurers would jump at the chance to provide a neighborhood pharmacy with a Business Owners Policy that included professional liability coverage by endorsement. But as the extent of this sector’s professional liability exposures have become apparent, many carriers have come to view the class as unattractive. Beazley’s approach is different. Working closely with pharmacies and their brokers to identify pharmacies’ exposures and ensure that appropriate risk management procedures are in place, we continue to provide competitive coverage while minimizing claims.
All pharmacies, from the largest national chains down to Main Street mom-and-pop shops, have substantial professional liability risks. Opportunities for human error are abundant. Since many medicines look alike, a prescription container may be mislabeled, or the wrong capsules may be grabbed off a shelf. Improperly securing medicine (not using child-proof caps, for example) can put a pharmacist at risk. And it can happen to any pharmacy - from a cashier accidentally handing over the wrong bottle to a customer resulting in a mild reaction, to a pharmacist erring in transcribing a prescription for 21 polo horses resulting in a fatal overdose.
Compounding the exposure
Compounding drugs involves combining, mixing, or reconstituting existing pharmaceuticals to meet the unique needs of a patient. It may mean suspending and flavoring an antibiotic to make it child-friendly, or altering the dosage of medication capsules to accommodate a doctor’s prescription. Compounding elevates exposures. Consider the recent case of blindness or near-blindness in dozens of individuals following allegations of improper mixing during the compounding process.
While specific pharmaceuticals are regulated by the US Food and Drug Administration, compounded drugs are not -though changes are on the horizon. Following the Congressional passage of the Drug Quality and Security Act in 2013, the FDA has been working towards developing voluntary regulations on compounding and traceability of prescription drugs. In June 2021, the FDA released draft guidance documents to help ensure that prescription drugs are identified and traced properly as they move through the supply chain, with the goal of finalizing and implementing this guidance by November 2023.1
Smaller pharmacies are especially vulnerable to many professional liability claims since they are less likely than their larger counterparts to have extensive procedural checks and balances in place. Moreover, the state-of-the-art IT systems that help pharmacists separate similar-looking drugs or spot potentially adverse drug interactions may be beyond their budgets.
Outside the professional liability realm, pharmacies are at high risk for slip and fall claims given the substantial number of customers visiting their premises every day. Many local pharmacies have also found a lucrative avenue in leasing medical equipment. They rent everything from hospital beds and walkers, to oxygen machines and nebulizers, which increases the likelihood of being drawn into potential products liability claims beyond the pharmaceuticals being dispensed.
Privacy liability exposure is also pronounced in this sector. Pharmacies have access to a host of personal information on customers, including sensitive healthcare information on prescribed medications printed on each prescription.
At Beazley, we provide retail pharmacies with professional liability insurance that protects them properly for the long term. On our small business team our target market is pharmacies writing up to 150,000 prescriptions annually, with revenues up to $25 million. (Our miscellaneous medical team also offers coverage for larger retail pharmacies, including bulk compounding pharmacies.)
We combine miscellaneous medical professional liability insurance with general liability insurance and other coverages that experience has shown are essential for this sector. Our coverage also extends to products liability and privacy and network security liability exposures.
What do we look for in underwriting this risk?
The experience of the pharmacists and the longevity of a particular pharmacy in the community is important. Our underwriters also want to know what systems are in place to help identify look-alike drugs, avoiding mix-ups, as well as to pinpoint potentially dangerous drug interactions.
Underwriters also ask about a pharmacy’s practices and procedures. For example, what safeguards are used to ensure accuracy and authenticity of prescriptions handwritten by physicians? Where does the pharmacy source its drugs? (Suppliers outside the US – and so not FDA-regulated – are a red flag.) How much compounding does the pharmacy do on premises, and is it sterile or non-sterile? You can also expect underwriters to inquire about how customers’ personal information is secured in the pharmacy’s systems.
Emerging exposures - opioids
According to the CDC/NCHS, nearly 50,000 individuals in the United States died from opioid-involved overdoses in 2019. 2 And opioid related deaths in the United States did not stop during COVID-19. In fact, deaths related to opioids have worsened since the pandemic began, with the latest AMA report outlining it best by stating ‘The nation’s COVID pandemic made the nation’s drug overdose epidemic worse. 3 With opioid addiction cases on the rise, expect opioid-focused litigation to continue and worsen in the United States as many courts begin to reopen. Pharmacies are and will continue to be front-and-center in many of these cases, with a federal jury finding several of the largest pharmacy chains in the country liable for contributing to the opioid epidemic in the US as of November 2021. 4 Proceedings have primarily focused on their alleged contributions to a public health crisis and what could have been done at the time to help minimize or prevent it. While the focus to date has been on larger chains, the outcomes on those cases will directly impact pharmacies of all sizes which are handling or distributing opioids.
Beazley has provided a creative solution to address opioid-related claims where we are able to cover lawsuits from individual plaintiffs while still protecting pharmacies from more traditional suits related to dispending and compounding non-opioid pharmaceuticals or distributing medical related products.
Emerging exposures – COVID-19
Pharmacies have always played a pivotal role in healthcare and have become increasingly crucial during the pandemic. It is common for patients to see their pharmacist more frequently than their primary care physician. States were already passing laws that further enabled pharmacists to prescribe, provide immunization services for influenza, and order lab tests. COVID-19 has turbocharged these efforts. Pharmacies were first in line to administer the vaccines when they were granted EUA or approval by the FDA. In November of 2020 the Federal Retail Pharmacy Program for COVID-19 Vaccination enabled 21 national pharmacy partners and independent pharmacy networks nationwide to quickly administer doses of the vaccine. This agreement covered about 3 in 5 pharmacies in all 50 States and U.S. territories.5
And pharmacies continue to evolve their service models in an environment full of uncertainty – from increasing their capacity to deliver via mail or vehicle, to meeting patient needs via telehealth platforms. At Beazley we were already insuring pharmacies for these expanded exposures prior to the pandemic and today we continue to address ever-changing needs in this healthcare leading market.
US pharmacies are estimated to transact $338 billion worth of business in 2021, up roughly 13.4% from just 2016.6 With major pharmacies taking action to align themselves with the public as true healthcare companies, to and opioid epidemic and global pandemic, medical exposures are likely to become more prevalent -- and proper protection will be even more valuable to this sector.
- Drug Overdose Deaths | Drug Overdose | CDC Injury Center
About the author:
Nick joined Beazley in January of 2016, strengthening the healthcare presence in California. He currently works as an underwriter on the Miscellaneous Medical and Virtual Care products, and serves as product leader for the BioSecure (life sciences) product for the Private Enterprise team. Prior to Beazley, Nick worked at NAS Insurance Services where he underwrote several healthcare products, with a focus on miscellaneous medical. He was born and raised in Torrance, California and obtained his BS in Management Science at UC San Diego. Outside of work, Nick enjoys traveling, basketball, and exploring the outdoors.