Loss of manufacturing capability as a result of regulatory non-compliance can have a significant impact on biopharma or medical device manufacturers.
The Food and Drug Administration (FDA) and other regulators around the world are scrutinising life science companies more closely than ever to ensure Good Manufacturing Processes (GMP) are being followed.
Regulatory inspections can result in a suspension of manufacturing, either voluntarily by the company or enforced by a regulator.
The ever-increasing complexity of companies’ supply chains only adds to their potential exposure.
More companies are relying on third parties to supply key elements of their products or to provide manufacturing capacity to supplement or even replace what they provide in-house.
The impact of regulatory inspections can be far reaching:
- Regulatory non-compliance can lead to a form 483 also called ‘inspectional observations’, warning letters, withdrawal of marketing authorisation and ultimately enforced suspension of manufacturing by the regulatory agency.
- Suspension at a key supplier or contract manufacturer can lead to suspension of product manufacture and loss of sales if no alternative is available.
- Regulatory suspensions can be lengthy and the approval process to restart production is often complex.
Non damage business interruption insurance (NDBI)
Insurance can respond to the events listed below which are a direct result of significant manufacturing deficiencies or irregularities, withdrawal of regulatory approval or license suspension, or a voluntary decision to suspend operations due to GMP violations (which may lead to a subsequent recall).
Covered loss can include loss of gross margin and direct expenses, such as remediation costs, extra expenses such as destruction costs, regulatory investigation costs, recall cost and direct loss of market share.
The policy is site specific and the insured chooses to insure its own and/or supplier facilities (‘mission critical locations’).
Defined Regulatory Authorities (DRA) covered as standard are USA, Canada, EU countries, UK, Switzerland, Norway, Israel, Japan, Australia and New Zealand.
Key coverage events include:
- Total or partial suspension of manufacture by or on behalf of the insured as a direct result of:
- An order by a DRA to suspend manufacture, or
- Voluntary suspension of manufacture by the insured or supplier to pre-empt a DRA order to suspend manufacture as a direct result of irregularities in the manufacturing process.
- Covered sites can be the insured’s own sites and/or those belonging to supplier.
- Coverage can be applied to scheduled sites.
In addition, coverage can be negotiated to include:
- Import ban in respect of products manufactured at sites situated in non-DRA countries following action by a DRA.
- Off-specification, faulty or contaminated materials received from a supplier discovered prior to incorporation into the manufacturing process.
- Loss of royalty income or liquidated damages not received as the result of DRA or pre-emptive action.
It is a regulatory requirement for us to consider our local licensing requirements prior to establishing any contractual agreement with our clients.
