Pvt risk firms gain clinical precision

Private insurers take the lead in covering clinical trials.

If there is one area where private insurers are outstripping their public sector peers, it is in providing insurance cover for clinical trials.

The reason for this is that foreign partners have experience in the domain and can impart necessary expertise to private insurers.

According to a McKinsey study, multinational pharma companies are expected to invest around $1-1.5 billion (Rs 5,000 crore) in Indiicehousea for clinical trials by 2010.

At present, the clinical trial market, which is just about 2-3 years old, is estimated at $200 million (about Rs 900 crore) and is growing at 25 per cent.

Interestingly, the public sector insurance companies are yet to tap its potential even as the private players have already made inroads into this segment.

Private sector insurance major ICICI Lombard has given 15 insurance covers from 30 proposals it received till date.

Meanwhile, Bajaj Allianz has covered trials of 5-6 pharmaceutical companies. K Krishnamurthy, head - underwriting, Bajaj Allianz, said it was its overseas partner who offered expertise in insuring this emerging segment.

Of the four state-owned public insurers, United India Insurance and Oriental Insurance are exploring the option while Kolkata-based National Insurance has given cover for two pharmaceutical companies so far.

A senior official from Unitaced India Insurance says that providing insurance for clinical trials requires expertise in pricing the policy. This depends on details of the drug being developed and the risks associated with it.

"Ranbaxy, Dr Reddy's and a few others too had approached us for insurance cover. We are studying the data on the risks of these proposals," he said.

According to Ramneek Goyal, product manager - casualty business, ICICI Lombard, such a cover involved indemnifying the pharmaceutical companies against side-effects leading to injury or death of participants during the trial period of a new drug.

The premium on these policies depend on the risk attached and the pharma firm's appetite to cover the risk. Clinical trial cover has to be renewed every year like in the case general insurance policies.

Overseas pharmaceutical companies prefer to test their new drugs in India, as the cost is substantially lower compared with those in advanced nations such as the US and Europe.

Unlike western countries, India has not made insuring the clinical trials mandatory, said Goyal. Participants of the trials are required to take an insurance cover here. However, the law does not say that a cover is compulsory for the companies that conduct the trial.

"Most of these policies are taken by multinational drug firms and they often insist such covers from India also. Moreover, the premium is mostly reinsurance-driven and so a global perspective is always helpful. So far, there has been no claims from the segment," Krishnamurthy said.

At present, Dr Reddy's does have an insurance cover for its clinical trials. The company, however, declined to give details on the number of clinical trials undertaken by it in India.

V Ramasaamy, chairman and managing director, National Insurance, said if pharmaceutical companies felt they could bear the financial risk arising from this initiative, they might not opt for cover.

So far, there has been no bad experience in terms of claims. This has prompted private players to take larger steps in this front while their state-owned counterparts are treading the area with great caution, he said.