facturers. We have the manufacturers here too. Then I think we can get into some discussions to see what can be worked out, what is the proper role which would be assumed by the insurance industry, the drug industry, and the Government. We are also pleased to have with us the distinguished Assistant Secretary for Health, Dr. Cooper, and members of his staff. Dr. Cooper, if you and your staff would join the subcommittee up here, because this would be, I think, the best place. You can help, perhaps, in making sure the necessary questions are asked. We would be glad to have you sit here. If all of the other witnesses-and I am sorry to have to ask you to do this, but we do not have too much space-could take up your chairs and walk to the table. If we could get the insurance companies on this end-well, say this whole table. I think it will take the full big table and one table on the end. The drug companies sit on your left, or my right. Now, may we also ask you to help us with identities, if you will write your name on one of these cards, and put it directly in front of you. We have as witnesses today a panel of insurance providers, William O. Bailey, president of Aetna Life & Casualty. Mr. Bailey? Mr. BAILEY. I am here. Mr. ROGERS. Mr. Bailey, we welcome you. Is there anyone with you that you would like to introduce to the committee? Mr. BAILEY. I have associates in the room. Mr. ROGERS. All right, fine. Brian Jarman, senior vice president, American Home/National Union of the American International Group. Mr. JARMAN. Here, Mr. Chairman. Mr. ROGERS. We welcome you, Mr. Jarman, and I believe you are accompanied by Patrick Foley, general counsel. Henry U. Harder, president of Chubb & Son, Inc. Mr. HARDER. Here, sir, along with Mr. Newell Alford, our general counsel. Mr. ROGERS. Mr. Alford, we welcome you, along with Mr. Harder. Thank you. Mr. James Koehnen? Mr. KOEHNEN. Here, sir. I have my associate, Mr. Mark Patton, vice president of the company. Mr. ROGERS. Mr. Patton, we welcome you both. B. P. Russell, chairman and chief executive, Crum & Forster Insurance Co. Mr. RUSSELL. Right here, sir. Mr. ROGERS. We welcome you, Mr. Russell. Joseph F. Murphy, executive vice president, Continental Insurance Co. Mr. MURPHY. Right here, sir, and I have Mr. George Keyes, our general counsel, with me. Mr. ROGERS. Mr. Keyes. Thank you, Mr. Murphy, and we welcome you gentlemen. Mr. Henry P. Lenz, executive vice president, Home Insurance Co. Mr. LENZ. Right here, sir. I do not have Mr. Ken Richman with me, as the witness list indicates. I have Henry Katz, our general counsel. Mr. ROGERS. Thank you. Mr. Lenz, Mr. Katz, we welcome you. Frank L. Farwell, chairman of the board and chief executive officer, Liberty Mutual Insurance Co. Mr. FARWELL. Mr. Chairman, I have with me my colleague, John W. Carleton. Mr. ROGERS. Mr. Farwell and Mr. Carleton, we welcome you. Robert Culp, vice president for business insurance, Nationwide Insurance Co. Mr. CULP. Here, sir. Mr. ROGERS. We welcome you, sir. Ross Cowan, senior vice president and Leroy Simon, vice president of Prudential Reinsurance, Prudential Insurance Co. Mr. SIMON. I am Leroy Simon and my title is senior vice president and Mr. Cowan is behind me and is vice president of Reinsurance. Mr. ROGERS. I am sorry we changed you around there. We apologize, although that might suit Mr. Cowan. Richard Foss, vice president, Casualty Insurance, Northbrook Insurance Co. Mr. Foss. I am accompanied by Bruce Clements, counsel. Now we have a panel of manufacturers. Have I left out any from the insurance? The panel of manufacturers: John L. Huck, senior vice president, Merck & Co., Inc. Mr. Huck. Mr. Chairman, I have with me Mr. Richard F. Kingham, counsel. Mr. ROGERS. Mr. Kingham and Mr. Huck, we welcome you. Frank Markoe, Jr., executive vice president and general counsel. Mr. MARKOE. Mr. Chairman, I have our Washington counsel, Mr. Thomas Finney, with me. Mr. ROGERS. Mr. Finney, we welcome you, along with Mr. Huck. Ivan Husovsky, president of Merrell National Laboratories. Mr. HUSOVSKY. Right here, Mr. Chairman. I have our counsel, Mr. Roger Clark from the firm of Rogers and Wells with me. Mr. ROGERS. We welcome you both. Charles Hagan who is the general counsel of American Home Products Corp. Mr. HAGAN. Mr. Chairman, I have Richard Bogash, president of Wyeth Laboratories Division with me, and Thomas Finney also represents us. Mr. ROGERS. We welcome all of you gentlemen, and thank you for being here. I must say, too, I apologize that we do not have more microphones, so in order to be heard when a question may be addressed to a particular person, if you would cooperate with us in passing the mike along. I think it would be well for us first to simply go down the line to ask the role played by each company, insurance company. If the company could identify itself as a company, telling us what drug company it currently deals with and the status of insurance that exist between your company and that of the drug company. We could start-I presume it would be easiest simply to start down this line and come right around. STATEMENTS OF JAMES KOEHNEN, PRESIDENT, AND MARK R. Mr. PATTON. I am Mark Patton, American Reinsurance Co. Mr. ROGERS. Yes. Mr. PATTON. We are currently involved on a direct excess basis. We participate on Richardson-Merrell with a $1 million, part of $25 million, excess of $50 million layer; and on American Home Products, we are involved in two layers: $1 million part of $25 million, excess of $75 million, and $1 million part of $10 million, excess of $40 million. On Warner-Lambert, we are involved in three layers: $1 million part of $10 million, excess of $90 million; $1 million part of $10 million, excess of $25 million; and $1 million part of $5 million, excess of $55 million. On Merck, we are involved in one layer only, $1 million part of $25 million, excess of $50 million. We do not have the vaccine covered at this point. Mr. ROGERS. In other words, you have no vaccine coverage? Mr. ROGERS. For swine. Do you have other vaccine coverage? Mr. PATTON. No other exclusions of vaccine. Mr. ROGERS. So you are covering vaccines other than swine flu. Mr. PATTON. Correct. Mr. ROGERS. When did the exclusion come? Mr. PATTON. It would be difficult to give you the exact dates on it, since I do not have it recorded here, but I presume most of these have come up as of July or June of this year as a renewal item. It was probably attached at that point. Mr. ROGERS. Thank you. Mr. RUSSELL. My name is Russell, Crum & Forster insurance companies, and we are only involved on some excess layers, Mr. Rogers. I know that we have some excess coverage for Warner-Lambert and for Richardson-Merrell. I do not have the numbers with me. But we do have a cancellation notice out effective July 1 as to this program, and we do not have any other cancellation out, and the reason is the massive, you know, the big numbers of people involved in this thing. Mr. ROGERS. So you do have your excess coverage for those two companies for other vaccine programs Mr. RUSSELL. That is right. Mr. ROGERS. But a cancellation notice has gone out as to the swine filu? Mr. RUSSELL. That is right. Mr. ROGERS. Thank you. All right. The next company, please? Mr. MURPHY. Mr. Chairman, my name is Joe Murphy, of the Continental Insurance Companies. Since January 1, 1975, our companies have afforded all of the primary casualty coverage for Warner-Lambert which, as you know, includes Parke-Davis, a subsidiary. Parke-Davis is one of the four designated manufacturers for the swine flu vaccine. Now, our casualty coverage includes workman's compensation, general liability-including products liability-and automobile coverage. Our products liability, which extends to the manufacture of swine flu vaccine, is of modest limits: $2 million any one calendar year, and these limits have remained unchanged since we have been on the risk since January 1, 1975. We have no present intention of changing terms. The products liability does, or will cover, the swine flu vaccine that Parke-Davis is preparing. We have introduced no exclusion with respect to this matter. Our premium charges are, however, subject to retroactive determinations within a certain percentage. Now, generally, we are not a market for excess coverage of any kind, and so far as I know, have no substantial involvement in excess coverage for any other drug manufacturer. Basically, we are a primary company. Mr. ROGERS. Thank you very much, Mr. Murphy. Mr. KOEHNEN. My name is Jim Koehnen. I am president of American Reinsurance Co., and my friend here has already detailed the coverage in which we have participated on the direct basis, but as a reinsurance company we could conceivably also participate in ways we don't know. We do not wish to do so. I do not know if you understand what a reinsurance company is. It insures other insurance companies. I do not know what I can add to that other than we have no intention at this point to include coverage for swine flu. Mr. ROGERS. I think as we go along, too, it might be well to identify if you are the lead_company. Mr. KOEHNAN. In our first case, sir, we would not be considered a lead company. Mr. ROGERS. Mr. Murphy? Mr. MURPHY. Yes, sir? Mr. ROGERS. Would you be a lead company? Mr. MURPHY. We are a primary company. Mr. ROGERS. So you do it entirely? Mr. MURPHY. We are a primary company and we furnish not only coverage subject to a retroadjustment, but also the primarly services of handling the claims and lawsuits. Mr. ROGERS. All right, I see. Mr. LENZ. Lenz, Henry Lenz, Home Insurance Co. My company is involved with all four drug manufacturers on an excess basis only. We do not have any primary outstanding on anyone. Mr. ROGERS. Does your excess coverage go to the swine flu? Mr. LENZ. No, the excess contracts were subject to renewal negotiations as of July 1 of this year, and at that time the swine flu vaccine was excluded from our excess contracts. Mr. ROGERS. And this was for all four drug companies? Mr. LENZ. Yes, sir. Mr. ROGERS. All right. Mr. MAGUIRE. Mr. Chairman, I wonder if I might ask a question at that point, or should we hold questions for later? Mr. ROGERS. Well, I think-ask a question now, if you want. Mr. MAGUIRE. I had a question for Mr. Lenz and also for one of the earlier gentlemen who referred to the fact that the exclusion of the swine flu came at the point of contract renegotiation. I believe a July date was mentioned in both cases. Am I to infer from that during the period of time that the swine flu question was under discussion, between February and April and then between April and June after this Congress had passed legislation establishing the program, that there were no indications given by you |