Healthcare entities frequently enter into consulting relationships with physician thought leaders, also known as key opinion leaders (“KOLs”). These KOLs are engaged to provide their expertise in various supportive tasks, including writing abstracts and manuscripts, giving promotional or scientific speeches, supporting an investigational drug’s clinical development, supporting a brand’s promotion, and participating in or leading an advisory board. Each of these tasks can be utilized to further the legitimate business purposes of a healthcare entity, and often requires physician compensation via a consulting agreement. Understanding the proper way to set up these agreements is important. Challenges include: determining if fees are consistent with fair market value and commercially reasonable, understanding if the physicians are required to document time and services prior to receiving payment, and confirming there is no overlap of payments between the physician consulting compensation and other compensation arrangements, as well as many other issues.
There have been several initiatives by the government and industry to increase transparency and disclosure regarding payments to physicians for services provided to these companies. These include the Physician Payment Sunshine Provision (“PPSP”) which require manufacturers and group purchasing organizations in the life sciences industry to report to Centers for Medicare & Medicaid Services (“CMS”) virtually any transfer of value or payment to physicians and/or academic medical centers (“AMC”). This and other initiatives are expected to continue, while the need for physician involvement to provide consulting services remains important. Based on regulatory guidance, fees should be derived based on a sound methodology reflecting the terms of the arrangement and relevant value drivers. Value drivers for life sciences services include 1) market reimbursement if the services are clinical in nature, 2) expertise required, including specialty and experience, 3) recognition of the provider, with higher rates supportable for national recognized versus regionally recognized providers, and 4) the time required for these services as most arrangements are based on hours worked.