When things go wrong in the pharmaceutical sector, they tend to go very wrong. As recent Tylenol litigation shows, allegations can arise years after the initial development and sale of a pharmaceutical product, and companies that produce prescription and non-prescription drugs are at significant risk for class action lawsuits. To manage pharmaceutical risks, businesses need to maintain adequate life sciences insurance.

Lessons from the Recent Tylenol Litigation

Tylenol has been a staple of many homes for years. Now it’s also the focus of class-action litigation claiming a link to autism.

Tylenol is a popular brand name for acetaminophen or paracetamol. According to Harvard Health Publishing, hundreds of over-the-counter products include acetaminophen. These products have generally been considered safe for pregnant women, and approximately 65% of women in the U.S. say they have taken acetaminophen during pregnancy to relieve headaches or back pain.

However, DrugWatch says a potential link between Tylenol and autism has been known since 2008. Then a 2019 study from John Hopkins University researchers found that mothers who use acetaminophen during pregnancy are at a significantly higher risk of having a child with autism or ADHD. Multiple other studies have linked acetaminophen use in pregnancy to neurodevelopmental problems. Most recently, a study published by iScience examined the impact of paracetamol on early human brain development and concluded that the drug may play a casual role in impaired neurodevelopment.

According to the Lawsuit Information Center, a class-action lawsuit has been filed in New York alleging a link between Tylenol and autism and ADHD. This multidistrict litigation class-action lawsuit will house all federal lawsuits, and as of October 17, 2023, there are 382 pending cases included, with new cases being added.

The Cost of Class Action Lawsuits

Class action lawsuits alleging pharmaceutical misrepresentation or negligence can be costly.

According to the National Trial Lawyers, Johnson and Johnson agreed to pay $6.3 million to settle a class-action lawsuit alleging that the company falsely advertised Infants’ Tylenol as uniquely formulated for infants when it was the same as Children’s Tylenol. In another case involving allegation of deceptive marketing, the National Law Review says the maker of a nutritional supplement has agreed to pay $53 million.

A lawsuit claiming substantial harm to children could be much more expensive. Perhaps the best-known example is Thalidomide, which was used for morning sickness before being linked to severe birth defects. The BBC says this led to many lawsuits over the years, including a lawsuit in Australia and New Zealand that settled for $81 million in 2013.

The rise of third-party litigation funding could increase the total costs of litigation further. According to the Insurance Information Institute, third-party litigation funding can result in litigation that takes longer and costs more. It can also drive social inflation (the increase in claims costs beyond normal inflation).

New Pharmaceutical Developments

While even drugs that have been around and trusted for years can lead to litigation, new pharmaceuticals may be even more vulnerable to litigation. According to the Congressional Budget Office, the number of new drugs approved each year has increased over the last decade. Between 2010 and 2019, the FDA approved 38 drugs on average per year, which is 60% higher than the average number of approvals between 2000 and 2009.

Does Your Life Sciences Organization Have the Right Coverage?

Given the high stakes and significant litigation risk, pharmaceutical and biotech companies need adequate insurance that includes product liability and product recall insurance. However, obtaining sufficient coverage may be more difficult in the current insurance market. According to the Council of Insurance Agents & Brokers, commercial premiums have increased for 23 consecutive quarters. As insurers try to reduce exposure to litigation trends, policyholders may also see lower limits and more exclusions.

Review your coverage:

• Are your limits high enough? Social inflation means medical liability lawsuits may be more expensive than you anticipated. This is a good time to check your limits.
• What are the exclusions? Policy language has evolved to adapt to changing exposures. Be sure you know what your policy covers.
• Do you have insurance gaps? Product liability is only one of the many risks life sciences companies face. A broker can review your entire insurance portfolio to identify gaps in your insurance. They may also find that you’re paying for coverage you don’t need.

Need Guidance?

Wilson, Washburn & Forster is a boutique independent insurance agency, in business since 1961. We have expertise and connections in life sciences insurance and risk management. Our experience, claims handling, service, and community commitment is unrivaled.

Contact us today at 786-454-8384 for a complimentary analysis of your current insurance program by an insurance specialist in this field.