Navigating medical expenses and legal complexities
Clinical trial medical expenses have become a significant topic of discussion in the underwriting of clinical trial insurance. The genesis of clinical trial policies is rooted in the need to provide coverage for injuries to and medical expenses incurred by participants in clinical trials. These policies have a two-fold purpose: aiming to insure both the participants for their bodily injuries and expenses incurred as a result of participation in the trial and sponsors of the trials for their related liabilities.
Approximately 20 years ago, clinical trial insurers began to offer medical payments (“MedPay”) coverage. The primary goal of this coverage was to provide a means for insurers to compensate injured clinical trial participants quickly and efficiently, thereby avoiding potential lawsuits and legal complications. By offering MedPay coverage as a sub-limit within the human clinical trial liability limit, insurers could pay medical expenses directly to the injured participant, thereby making them whole, at least up to the applicable sub-limit, and reducing the risk that claims might escalate into lawsuits.
Over time, the landscape of clinical trial MedPay claims has evolved. Initially, the claims were relatively straightforward, involving minor medical expenses that could be easily reimbursed. However, in recent years, there has been a shift towards more complex claims, often involving hospitals seeking reimbursement from trial sponsors for medical expenses incurred by trial participants. This shift has introduced new challenges for insurers, as these claims do not always fit neatly within the traditional Medpay coverage framework.
The key issues faced by insurers in clinical trial medical expenses are multifaceted. One significant emerging challenge is the attempt by many hospitals to shift costs from health insurance companies to trial sponsors. This shift occurred because hospitals (clinical sites) often bypass the test subjects’ traditional first-party health insurance coverage, by seeking reimbursement directly from trial sponsors, potentially circumventing the Affordable Care Act (ACA)[1] and often at rates significantly higher than those typically negotiated by health insurers.
The high rates of reimbursement demanded by the hospitals often exceed what is considered reasonable and customary, leading to increased costs for sponsors and insurers. This situation can be exacerbated by the lack of specific coverage for these liabilities under standard product liability policies, which were not originally designed to handle the unique aspects of clinical trials (i.e., the site is a third-party seeking financial reimbursement as opposed to trial participant seeking reimbursement for expenses incurred due to injury related to the product that is the subject of the clinical trial).
Furthermore, sponsors face challenges in negotiating reasonable and customary rates for medical expenses as they lack the negotiation power that health insurers bring to the table. Hospitals and medical providers may leverage the necessity of certain treatments or the specialized nature of services provided during trials to justify higher charges, which are not always aligned with industry standards or covered fully by clinical trial insurance policies.
There is a critical need for sponsors to carefully review and understand their contracts with clinical trial sites and other involved parties. These contracts can include clauses that impose unexpected liabilities on sponsors, such as assuming costs for complications or side effects that are not covered under traditional insurance policies.
Due to their variability and complexity, it can be challenging to underwrite a policy to pay for the medical expenses generated by an institution during the conduct of a clinical trial. Each trial varies in terms of the procedures involved, the types of participants and the potential risks, making it difficult to predict and price insurance coverage accurately.
Addressing these issues requires a collaborative approach among insurers, insurance brokers, sponsors and healthcare providers to ensure that clinical trials can be conducted efficiently while managing the financial risks associated with medical expenses.
Insurers are exploring new solutions to address challenges in clinical trial medical expenses. One approach under consideration is the development of endorsements that provide services to negotiate medical expenses on behalf of sponsors. This involves engaging claims handling services to negotiate with hospitals and institutions to reduce fees to reasonable and customary rates. These services help manage the financial impact on sponsors by ensuring that medical expenses are kept within manageable limits.
Carefully reviewing and negotiating clinical trial agreements is a crucial step in any clinical trial. It helps to ensure that sponsors are not unexpectedly liable for exorbitant medical expenses that should be covered by health insurance. It also helps in understanding and mitigating potential financial exposures, ensuring that indemnification clauses are clear and that agreements align with regulatory requirements. Finally, it assists in setting reasonable and customary rates for medical expenses and prioritizing health insurance coverage, thereby avoiding unexpected costs and legal complications.
Sponsors can manage their exposure to medical expenses by confirming that their clinical trial agreements explicitly state that health insurance should be the primary payer for any medical expenses incurred by trial participants. This can be achieved by negotiating contract terms that prioritize health insurance reimbursement before any costs are passed on to the sponsor. Additionally, sponsors should carefully review and understand the indemnification language in their contracts to avoid unexpected liabilities. Engaging with counsel and leveraging risk management practices can also help in mitigating these exposures.
When negotiating indemnification language in clinical trial agreements, sponsors should pay close attention to the following key considerations:
Engaging in educational discussions with contract research organizations (CROs) and leveraging tools to review consent forms for compliance with protocols can also help in managing and negotiating these agreements effectively.
Clinical trial medical expense coverage has evolved significantly since its inception. Insurers continue to adapt to the changing landscape, seeking innovative solutions to address emerging challenges. The intent behind these policies remains focused on protecting both trial participants and sponsors, ensuring that clinical trials can proceed with the necessary financial safeguards in place.
WTW’s team of life sciences specialists welcome the opportunity to provide proactive service for trial sponsors navigating the complex issues discussed in the article. Please reach out to your WTW contact or the contacts listed below.
Learn more about Chubb’s Life Sciences Industry Practice.
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