On Dec. 22, 2007, a bill signed by President Bush a year earlier became law. It established a mandatory reporting system of serious adverse events (SAE) for dietary supplements sold and consumed in the United States. Among other requirements, it mandated the company whose name appears on the label maintain records related to each report for six years from the time the report is first received.
However, only those adverse events that are "serious" must be reported. The definition of "serious" is clear and includes, but is not limited to, death, a life-threatening experience and in-patient hospitalization.
But has anyone examined the implications of not disclosing SAE reports to their product liability insurance carrier? No, and the consequences of not doing so could be dire.
Virtually every application for product liability insurance for dietary supplement companies has a question identical or very similar to this: “Is the applicant aware of any fact, circumstance or situation which one might reasonably expect could give rise to a claim that would fall within the scope of the insurance being requested?” Companies subject to the new SAE reporting requirements must ponder this question carefully before responding either "yes" or "no." If a company is maintaining the required SAE records, can the company in good faith answer "no" to the question? Hardly.
And what are the consequences of answering the question incorrectly? Quite simply, if a lawsuit arises out of a previously documented SAE incident, the insurance company will surely deny the claim once it discovers (and it will) the SAE was documented in the company's files. The insurance company will allege fraud for inducing it to issue a policy based on concealed information. It will not only deny the claim, but most likely will seek to rescind the policy in its entirety.
Thus, the new SAE reporting requirements have introduced a new necessity to disclose such events to a product liability insurance company when applying for the coverage, or risk claim denial when a claim is made.
The GMP (good manufacturing practice) inspection process holds similar peril. It’s common knowledge the number of FDA inspections for GMP compliance have risen dramatically. According to FDA data, only seven GMP inspections occurred in 2008, which increased to 34 in 2009 and to 84 in 2010. As of Sept. 13, there have been 145 inspections in 2011. Many of these inspections have resulted in warning letters to companies citing various violations and calling for a prompt reply outlining remedial steps to be taken. These letters are a matter of public record and can be viewed on FDA's website. With the number of inspections and enforcement actions in general on a rapid rise, it stands to reason that more companies will be receiving a warning letter of some gravity in the future.
