The government does not provide any guidance on how firms should calculate FMV. This leaves government prosecutors with considerable
latitude in developing theories about excessive payments. They may argue, for instance, that pharmaceutical companies use
the fees for these advisory and speaking services to influence doctors' treatment decisions and prescribing behavior.
Events by Type: 1998-2004
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Prosecutors could view high consultant fees as encouraging a "quid pro quo" relationship between medical professionals and
pharmaceutical companies. Historical prescription data identifies a company's highest-prescribing physicians, who are in some
cases the most sought-after consultants. But from the point of view of a prosecutor free to theorize, they may also be likely
candidates for bribes or kickbacks.
Rather than end up on the defensive, facing OIG's requirements armed only with good intentions and vague recollections of
payment decisions, companies need to develop a consistent and transparent methodology for determining FMV for services provided
by healthcare professionals.
The challenge is coming up with that theory. To begin the process, a pharmaceutical company might look to the IRS, which has
defined FMV as "the price of a service between a willing buyer and a willing seller, neither being under any compulsion to
buy or sell and both having a reasonable knowledge of the relevant facts." While this definition appears simple, it does not
go far toward determining a pharmaceutical company's proper fee for consulting doctors.
OIG published seven elements of an effective compliance program
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There are other methods. One intuitive method that doesn't work: conducting a survey of the historical rates paid to doctors
by pharmaceutical companies. Unfortunately, such survey results may not provide real market rates, since the overall industry
standard of payments for consulting and speaking engagements may have been inflated over the past several years. More important,
relying solely on a broad survey of historical payments may not have the granularity appropriate to an individual company's
compensation decisions. If a company needs to hire a recognized expert, it may have to pay a premium. Finally, it is difficult
to compare payments when there are so many factors, such as specialty, tenure, type of services, and level of involvement.
A better way to look at FMV: Use unbiased market information. Combining external data from national physician-compensation
surveys with internal information from an individual pharmaceutical company can generate a rate schedule for the time and
expertise of doctors. There are three phases in the process of calculating this schedule. The result is a defensible, procedural
definition of FMV that a company can present as an alternative to a FMV theory presented by a federal prosecutor.
I. Defining hourly base rates
OIG requires payments to meet five conditions
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Several research companies and medical associations survey the labor market, so it is possible to compile several surveys
and generate an integrated view of annual physician compensation by location and specialty. The analysis of compensation surveys
can provide a range of annual or hourly base-compensation rates that includes an upper value, a lower value, and a central
tendency value, such as mean or median. Once an initial base rate has been determined, additional adjustments may be required
to reflect differences between salaried employment and independent consulting (e.g., fringe benefits). Including these adjustments
provides an all-inclusive annual and hourly compensation rate for doctors.
II. Determining activity base rates
Here the focus shifts to obtaining internal company information. Analyzing interviews, internal surveys, physician questionnaires,
and other data reveals the scope of current and future business requirements. The internal analysis specifically identifies
activities performed by doctors and the time and effort required to accomplish them.
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