Clinical Trials Insurance

What is a clinical trial?

Author: Medmarc Insurance Group

A clinical trial is a controlled study, conducted on either animals or humans, which is intended to evaluate either a new product or a new use for an existing product. A controlled study is one in which several groups of similar participants are evaluated under conditions that vary in only one way. In the simplest circumstances, the variable is the use of either the subject product or a placebo. By using similar participants under similar conditions, any significant difference in outcome between the groups reasonably can be attributed to the participants’ exposure to the subject product, whereas a lack of difference in outcomes would indicate that the subject product is statistically ineffective. Additionally, most studies are double-blind, meaning that neither the investigator nor the participant knows which group – active or control – the participant is in. This prevents bias in care on the part of the investigator and allows the data to be evaluated in a manner that controls for any placebo effect.

Clinical trials are initiated by a sponsor, which is responsible for designing and carrying out all aspects of the trial. The sponsor may, but is not required to, physically conduct the trials; it can also identify hospital, academic, or contract research organizations to carry out the trial as designed. Regardless, the sponsor remains ultimately responsible for trial preparation, such as filing necessary applications with the FDA and seeking approval from an Institutional Review Board (IRB), both of which will be discussed in greater detail below, and trial oversight during the investigational period.

Clinical trials are used to produce data throughout the development of a new product. There are traditionally three phases of clinical trials in humans, which are generally preceded by animal studies. The phases are best explained as they apply to drug products, per 21 CFR § 312.21:

Phase 1 Clinical TrialsSmall scale study, generally of 20-80 participants, in which the product is
evaluated to determine the overall safety of the drug, including human toxicity
and metabolism of the drug, as well as side effects at different dosage levels.
It can provide early insight into efficacy, but this is not the focus of a
Phase 1 trial.Learn MorePhase 2 Clinical TrialsPhase 2 studies are controlled and blinded, as they are intended to evaluate
the efficacy of the drug product for a particular indication in a given
population. Phase 2 studies are closely monitored and, while larger than Phase
1, still consist of no more than a few hundred subjects.Learn MorePhase 3 Clinical TrialsPhase 3 studies are both controlled and uncontrolled. They are intended to
build upon the information gained in the previous two phases, gathering the
information that is used in the physician risk/benefit analysis, as well as providing
the foundation for the information that needs to be disclosed in the labeling
and warnings. Phase 3 studies are conducted on a large scale, usually involving
several hundred to several thousand subjects.Learn MorePhase 4 Clinical Trials (Not Classified)There are also studies
referred to as “Phase 4,” for which the objective can be to evaluate the long
term effects or the comparative cost-effectiveness of the product. Phase 4
studies are generally conducted after the product has been approved by the FDA
and entered the market.Learn More

When are clinical trials required?

Investigational Applications 

Prior to beginning a clinical trial, the sponsor must file an application with the FDA asking permission to use the product in a trial setting. The Investigational New Drug Application (IND) and Investigational Device Exemption (IDE) are intended to demonstrate to the FDA that the participants will be safe and that their rights will be protected. Additionally, the IND and IDE must reassure the FDA that the data produced in the trial will be of sufficient quality to allow for a fair evaluation of the safety and efficacy of the new product. The applications can be submitted for trials in any one or more of the four developmental phases, which are described above. The FDA provides a great deal of information regarding its preferred application formatting and the details, like trial protocols and animal toxicity data, it requires in order to evaluate the application in both its regulations and official guidance documents.

Institutional Review Boards

Institutional Review
Boards (IRBs) are ethics committees, generally associated with academic or medical institutions, although they can be associated with for-profit organizations. Each IRB must be comprised of at least five members of varying backgrounds – men and women, scientists and non-scientists, at least one member not associated with the institution – and with sufficient collective expertise to determine whether a proposed study protocol constitutes ethical research with regard to the intended participant population, with sufficient participant protections, including an acceptable Informed Consent document. The IRB makes its determination based upon the trial protocol (including recruitment procedures), the informed consent documentation, safety information, investigator qualifications, and compensation to participants.

Informed Consent

One of the most important tools in protecting participant interests is the Informed Consent requirement. The trial sponsors must present a sufficiently complete picture of the potential risks and benefits, as well as a clear assessment of the protocol and what can be expected during the trial, so that the participant can make an intelligent choice as to whether he or she wishes to participate. However, the drafting of the Informed Consent requires careful crafting. It must be drafted in a way that protects the sponsor and investigator from liability through full disclosure, but it cannot scare off all potential participants. A study is useless if it cannot recruit participants on a scale that will result in the data required for the end product’s application to the FDA. The Informed Consent must be approved by the IRB, so there is generally some negotiation between the sponsor and the IRB regarding the language.

Investigators’ Financial Disclosures

One way in which potential trial data is safeguarded is by ensuring that any financial connections between the investigators and the sponsors are disclosed. This includes the compensation paid to the investigators; any significant equity interest of the investigators in the sponsor, such as ownership, interest, or stock options; significant payments to the investigators or investigational institutions; and any proprietary interest in the product under investigation. The financial ties of investigators to a sponsor or its product are of such significance that the Pharmaceutical Research and Manufacturers of America (PhRMA) states in its “Principles on Conduct of Clinical Trials” that:

  • Payments or
    compensation of any sort should not be tied to the outcome of clinical trials.
  • Clinical investigators
    or their immediate family members should not have a direct ownership interest
    in the specific … product being studied.
  • Clinical investigators
    and institutions should not be compensated in company stock or stock options
    for work performed on individual clinical trials.

What can a clinical trial sponsor expect to do?

Once a manufacturer determines, in order to bring its product to market, that it will need to file an application with the FDA, and that the application must be supported by clinical data, then it becomes a sponsor. The next steps are complicated, but there is a clear path, which includes the following milestones:

  • Design the clinical
    trial, with the product under investigation determining the objectives.
  • Find a qualified
    investigator and clinical site in which to conduct the trial.
  • File the appropriate
    investigative application with the FDA.
  • Obtain IRB and any
    other necessary approvals.
  • Draft a clinical trial
    agreement between the sponsor and investigator, outlining the expectations,
    indemnifications, confidentiality of data, and ownership interests in any
    intellectual property, etc.
  • Draft and seek
    approval for the Informed Consent.
  • Conduct the trial.
  • Keep the investigative
    applications up to date, report any adverse events, and assess and monitor
    study data.


Conducting clinical trials can seem overwhelming because it is an intricate and elaborate process and one that can represent some of the most significant expenditures a company may face. However, clinical trials are the definition of a situation in which it pays to do it right the first time. You are building the foundation for your product with the data gained – not just for approval in the short term, but also for the information you will use to generate the labeling and warnings provided to the consumer. If your trial data is inaccurate or insufficient, it will not just delay your entry to the market. It could also come back to haunt you in the form of a products liability suit. A well-designed and conducted trial seems a much smaller price to pay in that light.

Clinical Trials Insurance

Clinical Trials insurance coverage is sometimes automatically included in a Products & Completed Operations Insurance Policy. However, due to the complexity and specific risks involved in each stage of a clinical trial, these types of policies may be written on a stand-alone basis by specialty insurance carriers. Clinical Trials Insurance can be provided for private/public, for profit/not-for-profit firms as well as for Clinical Research Organizations. Coverage can be tailored to a broad spectrum of risks including; pharmaceutical drugs, therapeutic, medical & diagnostic devices; including implantable and invasive. Clinical Trials Insurance provide protection to the sponsors and organizations of clinical trials. Coverage includes drug and medical device testing and legal liability to pay compensation in the event of an injury to a trial participant. Additional coverages included under a Clinical Trials insurance policy are coverage for death, all permanent and/or temporary impairment of health conditions, relevant financial consequential losses which are the direct consequence of the trial and which can be traced to the liability of all people operating for the performance of the trial.