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Risk in Context

Risks Abound as the Race for a Zika Vaccine Heats Up

Posted by Doug Carey March 11, 2016

The outbreak of mosquito-borne Zika virus continues to raise concerns, ranging from the highly personal — families facing the prospect of a child being born with birth defects — to the potential impact on global commerce — including the upcoming Summer Olympics. At its most recent emergency meeting on Zika, the World Health Organization (WHO) called for “intensified” research and development in such areas as diagnostics, vaccines, and therapeutics.

For life sciences companies, fast-tracking the development of drugs for pandemic health crises creates a host of risks, including product safety and performance, ethics, and governance. But the potential benefits include not only financial ones, but also the goodwill from being on the cutting-edge in their field.

Quick Cure, Complicated Risks

In the US, the process of fast-tracking drug approval from the Food and Drug Administration (FDA) aims, among other things, to help expedite the development and review of drugs to treat serious conditions. Under special circumstances, drugs can also be approved for “compassionate use,” allowing people who are seriously ill to use a drug that has not gone through a full approval process.

Product performance and safety issues that may arise include:

  • Liability: Expediting the approval of a drug for emergency and/or compassionate use without full clinical testing may bring unknown and potentially harmful side effects.
  • Business interruption and supply chain: Once a vaccine is identified, drug companies may not have the manufacturing capacity to meet demand. Reliance on new supply chain channels may lead to business interruption issues that could delay manufacturing, impact contractual commitments, and cause critical drug shortages.
  • Directors and officers liability: Should a drug company gain regulatory support for a potential breakthrough therapy, such developments could lead to a sudden increase in a company’s stock price. When combined with potentially high-risk research and development as well as unfolding heath issues related to a pandemic event, companies could face a backlash from shareholders if events turn unfavorable.

Managing the Risks

Four steps that can help life sciences companies manage the potential risks of fast-tracking drugs such as a Zika vaccine are to:

  1. Work closely with insurers on your research efforts and planned approvals process in order to implement timely product liability coverage. To underwrite the product, insurers may need a thorough understanding of the science and research involved, patient population, and plans to commercialize.
  2. Consider medical ethics challenges to determine whether the benefits of drug development outweigh the risks.
  3. Manage shareholders’ expectations. Drug development can bring a sudden rise in market valuation, and with it susceptibility to volatility due to the unforeseen nature of pandemics.
  4. Provide transparency on drug development activities, interaction with regulatory agencies, and cautionary notices of risks.

Keep in mind that working closely with insurance advisors and being transparent with underwriters can go a long way to helping ensure the right coverage is in place.

Related to:  Life Sciences

Doug Carey