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Thought Leader Fair Market Value Compensation Benchmarks and Procedures
Thought Leader Fair Market Value Compensation Benchmarks and Procedures
Thought leader management teams face many new challenges in today’s environment. Academic institutions have implemented new regulations limiting or, in some cases, forbidding their faculty’s relationships with drug manufacturers.
Navi Mumbai,
Maharashtra,
India
(prbd.net)
02/11/2010
Thought Leader FMV: Compensation and Procedures
Thought leader management teams face many new challenges in today’s environment. Academic institutions have implemented new regulations limiting or, in some cases, forbidding their faculty’s relationships with drug manufacturers. Individual states continue to call for more transparency of the industry’s payments to physicians. And industry trade groups, such as PhRMA, and medical associations, such as the ACCME, have revised their guidelines to limit drug makers’ involvement in physician activities.
These and other changes have left companies targeting a smaller pool of key opinion leaders. Calls for greater transparency have forever changed how pharmaceutical and biotechnology companies compensate thought leaders. With increased transparency, however, comes a new set of challenges. Given this trend, thought leader management teams now focus on their processes to determine fair-market value compensation, knowing that a documented process is as important as the actual fees paid to physicians.
Cutting Edge Information’s newest fair-market value report provides clear procedures for calculating fair-market value compensation. Thought Leader Fair-Market Value: Compensation Benchmarks and Procedures is backed by more than 85 top pharmaceutical, biotechnology and medical device companies’ and third-party provider data. Furthermore, the study’s analysis provides relevant case studies and best practices to guide any team that works with thought leaders.
Cutting Edge Information has emerged as a leader in providing fair-market value research. Thought Leader Fair-Market Value: Compensation Benchmarks and Procedures is the most comprehensive, high-quality syndicated study available today. The data in this report covers 17 different thought leader and medical professional categories, 19 therapeutic areas, as well as benchmarks for small, mid-size, large and medical device companies. Start improving your thought leader development processes now with this brand new study!
Methodology
Calculating Fair-Market Value
In the advisory relationship between physicians and pharmaceutical companies, the government claims to see “high potential for fraud and abuse.” The 2003 guidelines established by the Office of the Inspector General (OIG) stipulate that prior to receiving compensation, thought leaders must provide a legitimately necessary service under a documented written agreement with the pharmaceutical company. If these preconditions are in place, a physician may be paid for services provided, but only at the fair-market value rate. Yet, with no official definition by which pharmaceutical companies can safely calculate fair-market value, the industry is currently struggling to establish a best-practice approach.
Pharmaceutical executives have looked to other official sources for a legal definition of fair-market value. Some companies have cited the IRS definition, for example, which defines fair-market value 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.” This theoretical definition does not, however, provide pharmaceutical companies with a method to calculate fair-market value.
Traditionally, companies have relied on historical data regarding payments to physician thought leaders for their services. However, these data poorly reflect a complex structure of different types of physicians and various therapeutic areas and fail to account for varying levels of experience, specialty and influence. Historical data may also fail to catalog different payments for different services, such as delivering a speech, writing a manuscript or chairing an advisory panel.
As a benchmarking intelligence firm, Cutting Edge Information is committed to researching pharmaceutical companies’ actual fee schedules for thought leader payments, taking into account the physician’s therapeutic area, years of experience, provider status and geographic level of influence. Just as physicians’ salaries vary based upon field of expertise, so do their consulting fees. Because all of these factors affect physicians’ base hourly rates in addition to their advisory or speaking fees, comparing historical payments without controlling for these factors proves an unhelpful and inaccurate method of determining fair-market value.
Rather than relying on historical payments or theoretical descriptions of fair-market value, Cutting Edge Information is moving toward a cohesive method of determining fair-market value based on each applicable factor. Benchmarking fee schedules for different thought-leader services across the industry in each therapeutic area, for each type of physician, accounting for geographic influence and tenure gives a more complete picture of fair-market value upon which pharmaceutical companies can base their compensation.
Data Collection
Analysts developed the information upon which this study is based through both primary and secondary sources. Cutting Edge Information’s process for collecting and analyzing information encompasses two distinct tools: quantitative surveys and qualitative interviews. Both tools are necessary for understanding not only the hard metrics included in this study, but also the reasoning behind the metrics. Cutting Edge Information aims to answer why some companies spend more than others.
Analysts began developing the quantitative survey tool by working closely with pharmaceutical industry executives. These executives proved to be invaluable resources, guiding the survey design team to ask more specific questions than in Cutting Edge Information’s 2006 survey on thought leader fair-market value. By taking the initial survey from the 2006 study, analysts were able to build upon its solid foundation and expand it to include more detailed and refined data segments.
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