Drug Chain Raising Insurance Requirements for Supplement Brands

December 17, 2010

According to Poms & Associates (Los Angeles), an insurance brokerage firm focused on dietary supplement companies, drugstore chain Walgreens has recently begun enforcing higher liability insurance requirements for dietary supplement marketers.

According to Poms & Associates (Los Angeles), an insurance brokerage firm focused on dietary supplement companies, drugstore chain Walgreens has recently begun enforcing higher liability insurance requirements for dietary supplement marketers.

The new rules, effective approximately three months ago, require companies that want to sell supplements to Walgreens to possess $20 million worth of liability insurance-and, in some cases, up to $50 million in insurance.

“Most of the large drug chains are currently satisfied with $5 million of insurance from supplement companies. For years, Walgreens generally accepted that amount, although their own requirements were actually much higher. Now, they have decided to enforce the requirements with a ‘no exceptions’ policy,” says Greg Doherty, Poms & Associates’ dietary supplement practice leader.

“This is going to cost companies a lot of money, and in some cases, may be the tipping point between selling and not selling to Walgreens,” he adds.

Doherty quotes a Walgreens executive he spoke with who said that companies hoping to ignore the request “will be sadly disappointed, as it is not going to disappear.”

Whether or not other drug chain stores follow suit remains to be seen, Doherty said. “There is speculation that the other large drug and box store chains will follow suit and raise their requirements, but as of now, there is no evidence of that happening.”

In response to Walgreens’s new rules, Poms & Associates has developed an insurance facility that it says will raise companies from $5 million to $20 million with a single policy. The firm says that insurers will understand that the new policy stems not because of perceived increased risk but merely to meet the new Walgreens rules-a fact that “will keep the premium cost down,” the company says.

“Getting a company from $5 million to $50 million will be a challenge, as multiple insurers will have to underwrite ‘excess policies’ to achieve the desired limit,” said Doherty. “But it is certainly a doable task, and we are prepared to assist Walgreens supplement suppliers in their effort to comply.”