Fair Market Value and KOL Tiering

Fair market value and KOL tiering

Helping life sciences companies develop fair market value (FMV) for consulting engagements with healthcare professionals (HCPs) as well as non-HCPs.

Baker Tilly’s life sciences consulting practice delivers proven methodologies, based on objective survey data, to develop FMV rates and related tiers for compensating HCPs and non-HCPs. Our solution is flexible and global, and our documented methodology is defensible to any inquiring regulatory body.

    HCP related FMV

    Global governing bodies have robust regulations and enforcement actions that address payments from manufacturers for consulting activities performed by healthcare professionals (HCPs) and non-HCPs (e.g., reimbursement specialists). The governments’ focus has been on the detection and prevention of bribes or corrupt payments to HCPs which could be seen as an inducement to prescribe product.

    Specifically in the U.S., the Anti-Kickback Statue (AKS) makes it a crime to pay, offer, solicit or receive remuneration, directly or indirectly, to induce referrals or services of Medicare or Medicaid business. Further action under the Patient Protection and Affordable Care Act (PPACA) has expanded the AKS’ intent and specified that violations of the AKS may also trigger liability under the False Claims Act.

    Globally, payments made outside of FMV can trigger a violation of the Foreign Corrupt Practices Act (U.S.), UK Bribery Act (U.K.), Clean Companies Act (Brazil) and Sapin II (France) among others. These violations have resulted in fines and damages in the hundreds of millions of dollars and, oftentimes, in disruptive Corporate Integrity Agreements (CIA) and Deferred Prosecution Agreements (DPA).

    To make matters worse, governing bodies have started taking a look at publically available spend transparency data and conducting analytics to identify transfers of value that exceed FMV.

    Non-HCP related FMV

    Global regulatory focus is not just on payments to HCPs. FMV enforcement has expanded to include non-HCP related activities. Baker Tilly provides FMV analysis and methodologies to address these areas as well, including:

    • Bona-fide services fees (BFSF) related to fee-for-service arrangements with channel partners
    • IIS/IIT grants
    • Clinical trial FMV

    KOL tiering

    It is appropriate to compensate certain individuals at a higher FMV rate than others based on an objective assessment of individual expertise. Categories of expertise to be evaluated can include, but may not be limited to:

    • Employment experience
    • Publications
    • Involvement in clinical trials
    • Speaking and advisory engagements
    • Association and journal affiliations

    Depending on the level of expertise in each category, an individual can be assigned as a National/International Thought Leader, Regional Thought Leader or Local Thought Leader. This process is important to the overall methodology and in mitigating risk as it ensures that FMV rates are correctly applied across the thought leadership tiers. For example, if a regional thought leader is assigned the FMV rate for a national/international thought leader, this could result in an overpayment of more than 100% depending on the specific specialty and country.

    Baker Tilly can help

    Ensuring payments to HCPs and other non-HCP related services are being made at FMV is one of the more powerful controls a company can do to mitigate risk associated with the Anti-Kickback Statute and False Claims Act. It is also good business practice and allows your company to have more insight into how you are spending your money. Baker Tilly’s team of Value Architects™ can help your organization put this in place and protect your company's value.