SOURCE: Cutting Edge Information

Cutting Edge Information

April 15, 2010 12:15 ET

What Is the Real Definition of KOL Fair-Market Value?

Industry Leader Cutting Edge Information Investigates

RESEARCH TRIANGLE PARK, NC--(Marketwire - April 15, 2010) -  "Fair-market value" is a term used to describe compensation paid to key opinion leaders (KOL) by drug makers. Defining what's fair, however, is often a challenging exercise.

The 2003 guidelines set out by the Office of the Inspector General (OIG) permit a pharmaceutical company to pay a KOL for services -- but only at the fair-market value (FMV) rate.

Despite these stipulations, no official definition of fair-market value calculations exists, according to Cutting Edge Information (http://www.cuttingedgeinfo.com).

"This ambiguity forces the industry to create and maintain its own FMV payment schedule," said Yanis Saradjian, Director of Consulting at Cutting Edge Information. "The need for a transparent process has been enhanced by the recent passing of the Physician Sunshine Payment Act, a federal law requiring companies to publish payments to physicians for consulting work."

Many pharmaceutical companies have tried to develop benchmarks for thought leader compensation on their own and found either that they were unable to find consistent standards or that the standards developed did not accurately reflect KOL expectations.

Ideally, thought-leader fee schedules consider a 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," said Jason Richardson, President of Cutting Edge Information. "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 unhelpful and inaccurate in determining fair-market value."

Cutting Edge Information has benchmarked fee schedules for different thought-leader services across the industry in several therapeutic areas and for each type of physician, accounting for geographic influence and tenure -- giving the most complete picture of FMV compensation on the market.

The company published two reports on this topic:

  1. "Thought Leader Fair-Market Value: Compensation Benchmarks and Procedures" (http://www.cuttingedgeinfo.com/thought-leader-fmv/)
  1. "Key Opinion Leaders: Relationship Management and Segmentation Data" (http://www.cuttingedgeinfo.com/kol/)

Used together, the reports help companies ensure compliant FMV processes. In today's strict regulatory climate, the two reports teach companies how to identify and evaluate thought leaders -- as well as how to manage, structure and document their activities.

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