Top Ten Tips to Follow When Entering Into Financial Relationships With Health Care Professionals

Financial arrangements between health care professionals (in particular, physicians) and providers of health care services (e.g., hospitals, nursing homes, pharmacies, and home care companies) have been closely examined by federal and state regulators for decades. However, it is only within the last 10 years that the government has begun to scrutinize the financial arrangements [1] between life sciences companies and health care professionals who are in a position to recommend the companies' products.

Set forth below are the top 10 tips that life sciences companies should follow as they enter into financial arrangements with health care professionals.


  1. Develop a Comprehensive List of Financial Arrangements. There are numerous types of financial arrangements that a life sciences company might enter into with health care professionals — such as research agreements, royalty agreements, medical director agreements, or consulting agreements. Moreover, financial arrangements are not always in the shape of a formal  written agreement for the provision of services. In fact, sponsoring a CME program or paying for a physician's meal constitutes an item or service of value and is subject to certain limitations. Therefore, a company should develop a list of all categories of financial arrangements that it might enter into with health care professionals. It is helpful to work with a multi-disciplinary team from your company (e.g., research, regulatory, sales/marketing, reimbursement, finance, compliance, and legal personnel) to develop such a list.


  1. Adopt an Approval Process. Companies should adopt a process by which all financial arrangements with health care professionals are approved or are consistent with a pre-established and approved company policy. Although not all financial arrangements need to undergo the same kind of review and approval, there should be some process established that ensures that only the appropriate legal and compliance professionals are involved in the decision-making process. For example, many companies exclude individuals from sales and marketing in the final decision-making process.


  1. Determine and Document Fair Market Value. Although it is not essential that a company engage an independent third party to conduct fair market value assessments for each individual agreement, the company should establish a method by which it determines the fair market value rate being paid to the health care professional for any professional services being rendered. For instance, while some companies have established a standard hourly rate, others have different tiers of hourly rates based upon the type of health care professional (e.g., physician versus nurse), specialty, years of experience, geographic location, etc. At the same time, to the extent an agreement with a health care professional is dependent upon the provision of his or her services, the company should ensure that the services are legitimate and necessary. The company also should obtain documentation as evidence that the health care professional actually performed the services.


  1. Inventory Existing Financial Arrangements. In addition to adopting a process to approve future financial arrangements with health care professionals, the company should inventory all existing financial arrangements and conduct a review to ensure that they do not otherwise violate the applicable federal and state laws.


  1. Develop a Financial Arrangements Database. Upon the completion of an inventory of all existing financial arrangements, the company should develop a database that compiles the relevant information.  This database should be kept up-to-date as new arrangements are entered into and previous arrangements expire. There are a number of vendors who sell software products that catalogue and track these financial arrangements. However, irrespective of the system or technology used, some method should be developed to easily track these arrangements. This has become the government's expectation when entering into corporate integrity agreements. A number of companies are also appreciating the benefits of such a tool when conducting auditing and monitoring activities.


  1. Conduct Training on the "Dos and Don'ts" of Interactions.   The general rules of what sales and marketing personnel can do are very different in the health care industry. Although it may be perfectly acceptable for a sales representative in other industries to "wine and dine" clients, these same activities are likely to be considered inappropriate in health care. Therefore, while training is an essential element of all compliance programs, the company should expend additional resources to train (and continuously retrain) its sales and marketing personnel on what they can and cannot do when interacting with health care professionals.


  1. Audit and Monitor Financial Arrangements. In addition to regularly monitoring relationships and activities, companies should develop a schedule and methodically audit financial arrangements with health care professionals. The audit team should benchmark audit results and perform reviews based upon prior results and any trends identified in departments, product teams, and the broader industry that may not be compliant. When issues are identified, the majority of stakeholders appreciate that issues can occur in any company from time to time. The bigger question is how well the company identifies and implements appropriate corrective actions.


  1. Appreciate the Significance of Codes of Ethics. A number of trade associations serving different categories of life sciences companies (e.g., the Pharmaceutical and Research Manufacturers Association, the Advanced Medical Technology Association, and the Biotechnology Industry Organization) have suggested that their members adopt policies regarding interactions with health care professionals. These policy statements (in some situations referred to as Codes of Ethics) specify the types of items that companies can offer to health care professionals and the kinds of interactions that are believed to be inappropriate (e.g., a prohibition on giving non-educational, branded promotional items to physicians, regardless of value). Although adoption of these policies is considered "voluntary" by the trade associations, a life sciences company should understand that many government officials are of the opinion that they are the "gold standard" and that a company that does not follow these principles is knowingly engaged in improper conduct.


  1. Address Transparency Obligations. In addition to legislation having been introduced in the U.S. Congress that requires drug, biologic, and device manufacturers to report all payments that are made to physicians having an aggregate value of $100 or more a year, a number of states have already adopted similar requirements. For example, Massachusetts not only prohibits manufacturers from providing certain items and services to health care professionals, but also requires that all manufacturers submit an annual report disclosing the nature, purpose, and value of any fee, payment, subsidy, or other item with a value of at least $50. 


  1. Monitor the Dynamic Regulatory Landscape. Legal and policy initiatives are constantly changing at both the federal and state levels. In addition, health reform has the potential to significantly change how health care is delivered in our country. Enforcement priorities and new legal theories are also developing almost daily.  Trade associations also issue and revise their industry guidance. Therefore, a life sciences company should consider this dynamic regulatory landscape when entering into financial arrangements with health care professionals.


    [1] Recent corporate integrity agreements with medical device firms refer to a broad category of "arrangements" including both "contractual arrangements" and "non-contractual arrangements" with "any actual or potential source of health care business or referrals of health care business" or "any actual or potential recipient of health care business or referrals."