Pharma Insurance: A Mechanism for Risk Mitigation

Abstract

Insurance plays a vital role in risk mitigation of pharma supply chain. It’s a mechanism where losses sustained by few are stretched among many those are exposed to kind of similar risk. Unfortunately, insurance is not availed by the intermediaries in pharma supply chain which eventually leads to heavy losses in the regular supplies of the drugs. The pharmaceutical industry in India has secured the third position globally in terms of its volume and adds approximately 10% to the global pharmaceutical production. According to the reports published by the Department of Pharmaceuticals, the Indian Pharma Industry is pegged at INR 810 Bn which is inclusive of domestic sales and exports. India is an international hub for high-quality medicines at an affordable price with a rich vendor base. As logistics and supply chain plays an important role and contributes immensely to the overall growth of pharma sector, risk mitigation becomes inevitable. Poor supply chain in pharma leads to various fatalities due to mishandling of the product, pilferage, poor packing, damage during transit, accidents and other nature hazards leading towards expiry of drugs. Low level of supply chain integrity, absence of contingency planning, inadequacy in resources and infrastructure, lack of support in terms of regulation, adoption of sub-optimal standards in technology are included in it. Currently, there are myriad inefficiencies spotted in both assets i.e., physical requirement like storage and transport as well as enablers i.e., efficiency improving system, technology and process all along the pharmaceutical supply chain. Inspite of all this, the pharma companies opine that there is no adequate insurance taken by the wholesalers and the distributors in the front end distribution of critical drugs. Thus, the study is intended to analyze the product liability exposure arising during pharma supply chain and the quantum of insurance required to mitigate the same.