By: Andy Bender, Mario Prohasky & Dakota Gallivan
As companies continue to grapple with the need to introduce greater transparency and consistency in their global FMV processes, they are faced with a number of challenges related to marrying their global FMV requirements with the business needs of local affiliates. Transparency reporting requires companies to report how much they have spent on HCPs and HCOs, not only in the United States, but also in Europe, Japan, Australia and increasingly more countries in the world. Reporting payments made to HCPs raises many issues, one of these is how much was paid for the service, and is this payment at Fair Market Value (FMV)? This requirement has left some companies searching for a global FMV methodology that is consistent, repeatable and transparent while still in line with what are generally accepted fair fees for the services provided. The challenge is to find a consistent methodology that can be applied in many countries with local payment practices across the world.
Pharmaceutical and Medical Device companies developing FMV or fees for services internationally face multiple challenges. The first is to find the right sources to establish an hourly rate for the services provided in order to establish the rate, or fee for service schedules in each country. The second is developing a methodology that can be consistently applied in the multitude of countries that the company operates in. The third challenge is to implement and manage the FMV process globally, dealing with challenges of adoption, periodic updates of rates, methodologies and management of exceptions.
FMV Rate Development
The United States has a richness of HCP compensation data available. There are a number of surveys available which can be leveraged to establish hourly rates to form the basis for fee for service determinations. Attempting to find similar robust data and replicate the process outside the U.S. proves more challenging. Europe is still relatively easy. The Western European market has solid market information on HCP compensation available. The analysis is somewhat simplified in that there are fewer variations in income between specialties or therapeutic areas compared to the US. The challenge is to synthesize the information from several different sources for each country.
Still more difficult, is looking outside of the US and Western Europe and trying to collect HCP income and non-cash compensation information. Larger countries, and developing markets like India, Brazil and China typically have some information available, but data can be several years old, and therefore, needs to be corrected for inflation. One of the added complications in those markets is that it is often particularly difficult to gather and document HCP private practice income data. Bridging this data gap is essential because HCPs often generate significant portions of their income in private practice, receiving substantially higher rates than in the public sector. Smaller and less developed markets might not have any such information available. Conducting research on incomes for HCPs in countries in the Middle East, such as Jordan, Iran and Egypt can yield little or no substantive information. Additional data gathering and economic analysis will need to be deployed to develop rates in those markets.
The next challenge is to develop a consistent methodology globally. It’s of paramount importance to obtain an understanding of what the current methodologies and payment practices are in the various affiliates or countries. This typically requires interviews with the responsible parties in each of the affiliates developing FMV fees for services. Obtaining a true understanding of current fees and practices is a necessary step towards ultimately achieving global buy-in and adoption of a standardized process. More on this later in the article.
Establishing a consistent global methodology should be based on balancing the necessity for a harmonized global process while accounting for local market differences. In this context, creating alignment on the key practical components of the methodology such as type of services covered (speaking, consulting, speaker training etc.) or work effort assumptions (duration of event, preparation time, travel time etc.) can be particularly challenging. For example, developing a consistent approach to compensating for travel time can be difficult in a region such as Eastern Europe due to the geographic differences between larger countries, such as Russia and Ukraine, compared to smaller countries like Hungary and Macedonia.
Taking into account the nuances of the local regulatory environment can also be challenging within the context of a global implementation. Oftentimes, legal or industry codes have specific stipulations with regards to what types of activities HCPs can be compensated for, as well as the maximum payments permissible in a given country. Yet another critical step is to demonstrate that the new methodology does not yield vastly different FMV rates, and if it does, there must be a process in place to mitigate differences. A successful global methodology should retain the flexibility to be able to address such local requirements effectively.
Introducing new methodologies, fee schedules, and applying them effectively, can be a challenge for any life sciences or medical device organization, regardless of scale. The first major hurdle in this effort is the harmonization of policies and SOPs globally. Afterwards, training and creating buy-in at the affiliate level is required. Finally, there are specific rate implementation issues, such as regional block rates and cross border engagements that are often difficult to address.
Developing a set of policies and SOPs that universally define how the business should contract with HCPs, and overlaying this with relevant local and international laws and conventions in every affiliate country can prove a herculean task for any global compliance department. Once an optimized set of general contracting principles is established, geographic nuance must be integrated into local affiliate SOPs and policies. Whether deterring graft in China, complying with HCP payment caps in Korea, or accounting for hospital fees in FMV payments in Turkey, individual country complexity must be examined and fit into the overall global compliance regime. This effort may require the extensive adaptation of global SOPs at the local affiliate level, and global leadership to help make decisions when local payment practices are in conflict with the global methodology.
Enabling the local implementation of global FMV practices through training is a key challenge that companies also need to address. This is best accomplished through the utilization of multiple training opportunities. First, buy-in of local leadership is essential. Investing time cultivating these leaders into “FMV Champions” will result in smoother implementation and the wider acceptance of new processes. Secondly, the training of the maximum number of affiliate personnel is also essential for creating buy-in. Devoting training time and resources to myriad global affiliates can be time consuming. Thus, it is important for training practices and methods to maximize impact based on resource constraints.
Once operating with cogent policies and SOPs, coupled with ample training, an affiliate is primed for tackling what are often legacy FMV grids and fee schedules. For example, many organizations pay HCPs using rates developed in regional blocks. Frequently, Africa, or sub-Saharan Africa is considered a block, and one set of rates are applied in exactly the same way, irrespective of the local economy and compensation rates. Though convenient, this method fails to take into account local economic conditions or the potentially marked differences in the education and experience levels of physicians across large swaths of geography.
Compensating HCPs for cross border engagements is yet another example of the many implementation issues global companies operating international affiliates may encounter. If a company wanted to invite a number of physicians to conduct an advisory board or congress in Dubai, and the invitees were from various countries around the Middle East and Africa, how would they be compensated? Finding an equitable solution from a business and compliance perspective, accounting for travel, and ensuring that all parties are compensated fairly for their time can pose difficulties well beyond just the determining hourly rates.
Ultimately, an enterprise-wide holistic approach is the starting point, though development of a credible global FMV program requires a multifaceted approach and examination of each country and each market individually. The process behind the rate development and implementation in Latvia will prove different from the one in Kuwait or Thailand. Just as the implementation in Germany will likely be accomplished very differently than the affiliate training program in Argentina or rate realignment in Africa. As a company evolves and begins to develop a compliant FMV program using a consistent flexible global methodology, accurate country specific rates coupled with affiliate buy-in, it will be well positioned to meet global transparency requirements. All of this can be accomplished with limited impact on local country business practices so that the process for determining FMV rates is not perceived as a burden to the business, but rather as sound compliance and business practice.