This session, "Creating a Global FMV Process" was presented at the 10th Annual Pharmaceutical Compliance Congress, hosted by CBI

1. Lessons Learned From
Implementation
January 29, 2013
Colleen M. Roberts
VP, Associate GC and CCO Rosemary E. Weghorst
Director

2. Table of Contents
The Current Environment – FMV in a Global Context 2
Important Factors to Consider When Implementing Global FMV 9
Global FMV Process: Barriers to Implementation and Lessons Learned 15
Questions 19
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3. The Current Environment
FMV in a Global Context

4. Global FMV
The Business Case for FMV
• Regulators are focused on bribery and • Impact on Business
undue influence – Exclusion from Public Contracts
• Anti-Corruption Legislation – Reputational Damage
– FCPA – Damage to Market Valuations
– UK Anti-Bribery Act – Loss Strategic Business Opportunities
– French “Sunshine Act”
• Increased Enforcement Efforts
– Corporate Risk
– Individual Risk
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5. Fair Market Value
References to FMV in Regulations
Source: http://www.ifpma.org/about-ifpma/members/associations.html
Regulation/Code Country Reference to FMV
EFPIA HCP Code Europe The compensation for the services is reasonable and reflects the fair market value of the services provided.
IFPMA Code of
International The compensation for the services must be reasonable and reflect the fair market value of the services provided.
Practice
Article 49: The remuneration for the services is reasonably in line with the fair market value of the services provided.
Code of Deontology Belgium
Consultancy contracts made may not be used as justification for remunerating patient organizations
RDPAC Code of Section 7.4 Fees for Services: The compensation for the services must be reasonable and reflect the fair market value of the
China
Practice 2012 services provided.
Section 36 – Use of Consultants: The compensation payable for the services is reasonable, reflecting the fair market price of
PIF Code of Ethics Finland
such services.
Section 18: Contractual Collaboration with Healthcare Professionals: The remuneration must be exclusively monetary and
FSA Code of must be proportionate to the service rendered. When judging the appropriateness of the intended remuneration, the
Germany
Conduct physician’s fee schedule may serve as a reference guide. To take into account the physician’s time expended, appropriate
hourly rates may also be arranged.
Code of Ethics for
Article 13 – Use and Remuneration of Services: The compensation for the services is reasonable and reflects the fair market
Pharmaceutical
Hungary value of the services provided. Payment is only made against invoice and performed by bank transfer. In this regard, token
Communication
consultancy arrangements should not be used to justify compensating Healthcare Professionals.
(MAGYOSZ)
OPPI Code of
7.4 Engagement of Services from Healthcare Professionals: The compensation for the services must be reasonable and
Pharmaceutical India
reflect the fair market value of the services provided.
Practices 2012
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6. Fair Market Value
References to FMV in Regulations
Source: http://www.ifpma.org/about-ifpma/members/associations.html
Regulation/Code Country Reference to FMV
17. Use of Consultants: The compensation for the services must be reasonable and reflect the fair market
IPHA Code of Marketing Practices for
Ireland value of the services provided. In this regard, token consultancy arrangements must not be used to justify
the Pharmaceutical Industry
compensating healthcare professionals.
Code of Professional Conduct 4.6 Relations between Pharmaceutical Companies and Patient Associations: The compensation for the
Italy
Farmindustria Services must be reasonable and not exceed the fair market value of the Services provided.
7.3 The Use of Health Professionals as Consultants: The compensation for the services is reasonable and
Rules Governing Drug Information Norway reflects the fair market value of the services provided. In this regard, token consultancy arrangements should
not be used to justify compensating healthcare professionals.
Code of Practice for the Marketing of 10.5.2 Disguised Promotion: Remuneration provided must be reasonable and of fair market value to the work
South Africa
Prescription Medicines in South Africa performed.
Code of Conduct of the 47.2.7 Contracted Services: The compensation for the services is reasonable and does not exceed the fair
Switzerland
Pharmaceutical Industry market value of the services provided.
7.4 Fees for Services: The compensation for the services must be reasonable and reflect the fair market
IRPMA Code of Practice 2012 Taiwan
value of the services provided.
Article 16 – Interactions with Consultants: the compensation for the services is reasonable and reflects the fair
AFID Code of Good Promotional
Turkey market value of the services provided. In this regard, token consultancy arrangements should not be used to
Practice
justify compensating healthcare professionals.
Clause 20 – The Use of Consultants: The compensation for the services must be reasonable and reflect the
ABPI Code of Practice for the
UK fair market value of the services provided. In this regard, token consultancy arrangements must not be used
Pharmaceutical Industry
to justify compensating health professionals and appropriate administrative staff.
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7. Fair Market Value
The Changing Legal Landscape
• US Sunshine Act (2013)
– Requires all HCP payments to be disclosed
– Data publically available
• Anti-Kickback Statute (1987)
– Increasing fines and criminal charges from the OIG for perceived bribery of HCPs
• Foreign Corrupt Practices Act (FCPA) (1977)
– Bribery of foreign officials to “gain unfair commercial advantage”
– HCPs who work in countries with public health systems considered foreign officials/government employees
• UK Bribery Act (2010)
– Applies to UK citizens
– Companies that do business in the UK can be held liable
• French Sunshine Act (FSA) (2012)
– Companies much disclose any contracts with HCP’s in R&D and consultancy agreements
• Other country specific rules and guidance
– Trade associations with their own rules surrounding the engagement of HCPs
– Australia, Belgium, Netherlands, Japan, Slovakia, etc.
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8. FCPA Investigation Impact
The Pharmaceutical Industry Under Scrutiny
Table 1 Recent Judgments
Year Industry Issue Countries Fine / Settlement
Improper payments to foreign government officials to Russia, China, Brazil,
2012 Drug Manufacturer - Major $29 million
win business Poland
Bulgaria, China,
Illegal payments to foreign officials to obtain regulatory Croatia, Czech
2012 Drug Manufacturer - Major $45 million
approvals, sales, and increased prescriptions Republic, Italy,
Kazakhstan, Russia
Paid routine bribes to officials to obtain lucrative sale
2012 Medical Device Company Mexico $5.2 million
contract with government hospitals
Bribed public doctors for nearly a decade to win Argentina, Brazil,
2012 Medical Device Company $22 million
business China
US and German subsidiaries bribed public doctors in
2012 Medical Device Company Greece $22 million
Greece for more than a decade to win business
Bribing public doctors in several European countries to
Greece, Poland,
2011 Drug Manufacturer – Major win contracts and paid kickbacks to Iraq to illegally $70 million
Romania, Iraq
obtain business
Paid kickbacks in connection with sale of humanitarian
2009 Drug Manufacturer – Major Iraq > $10 million
goods to Iraq under the UN Oil for Food Program
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9. Codes of National Industry Associations
Disclosure Requirements
Australia – Medicines Australia Code of Conduct, effective January 11, 2013:
The new Code of Conduct will require Medicines Australia member companies to report in aggregate amounts:
• All payments made to HCPs for advisory boards and consultancy arrangements
• All sponsorships of HCPs to attend medical conference and educational events
• All payments made to speakers at educational events
• All sponsorships of all individual consumer organizations for each financial year, including the value of non-
monetary support.
Japan – Japan Pharmaceutical Manufacturers Association (“JPMA”):
• Establish a transparency policy to govern activities in accordance with transparency guidelines.
• Disclose payments to medical institutions and healthcare professionals by uploading data on their websites.
• Five categories of payments to be disclosed:
– Research and development-related costs
– Grants/donations
– Honoraria (speaking, writing, and consulting)
– Information exchange costs (i.e., speaker programs)
– Meals and hospitalities provided to healthcare professionals
• Companies obtain the consent of healthcare professionals in order to disclose the aforementioned
information. If healthcare professionals refuse to provide consent, companies must stop working with them.
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10. Codes of National Industry Associations
Disclosure Requirements
Netherlands – Code of Pharmaceutical Advertising (CGR)
• Under the Dutch code, companies must disclose two different types of financial relationships with
healthcare professionals:
– Service agreements (consulting, advisory, speaker; non-speaker research)
– Sponsorship agreements of meetings between a company and associations of
professionals/institutions that directly or indirectly improve healthcare to patients or promote medical
science
Slovakia – Code of Ethics of the Pharmaceutical Industry in Slovakia (Feb 2012), companies must
disclose:
• Value of advertising and marketing expenses and non-monetary benefits provided directly or indirectly to
healthcare professionals. The Ministry must then publish a report of that information on its website.
United Kingdom – Association of the British Pharmaceutical Industry (“ABPI”) – Companies must
disclose:
• Provision of medical goods and services in the form of donations, grants, and benefits in-kind to certain
institutions, organizations, or associations
• Meetings, hospitality, and sponsorship
• The use of consultants
• Relationships with patient organizations
• Total amount paid in a calendar year in respect of all recipients and the total number of recipients
• The total number of attendances at meetings sponsored in the year must also be given.
• Registration fees for UK health professionals and administrative staff when paid by overseas affiliates, head
offices in the UK, and UK-based European offices
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11. Codes of National Industry Associations
Disclosure Requirements
France – French Sunshine Act, December 29, 2011:
• Pharmaceutical companies must disclose the existence of agreements with and all in-kind benefits or in-
cash benefits that are provided directly or indirectly to:
– Healthcare professionals, health facilities, and students for relevant occupations
– Associations of healthcare professionals and associations of students for relevant occupations
– User associations of the health system (public or private), foundations, learned societies, and
consulting companies or organizations in the health sector
– Legal entities contributing to the initial training of healthcare professionals
– Publishing companies: press, radio, television, and on-line media
– Editors of prescription and dispensing software
• Agreements Types – a broad range that includes:
– Research and development contracts
– Consultancy agreements
– Invitations to healthcare professionals to attend scientific or medical events
• The French Sunshine Act includes various criminal sanctions, including monetary fines, for violations.
Furthermore, companies may be prohibited from continuing to manufacture products if they violate the law.
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12. Important Factors to Consider When
Implementing Global Fair Market Value

13. Components that Drive the Valuation Process
Key Market Factors
Overall Socio-Economic Environment Healthcare Professional Compensation
• Business environment and competitive • Variability in pay across specialties
pressures • Variability in pay for qualifications/stature
• GDP and Purchasing Price Parity • Normalizing against annual hours worked
• Variability in pay and hours per country
• Inflation – frequency/speed of market changes
in compensation
Nature of Activities/Services
• Unique market challenges – local country
• Typical structure of agreements and
practices
components
Healthcare Systems • Variability in pay for event type
• Country’s healthcare system – public vs. private • Travel time – location of event
• Average healthcare spend
• Physician density within each country
• National and international healthcare regulations
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14. Socio-Economic Factors
PPP Comparison of General Practitioner’s Pay
Compensation values vary widely by country even when normalized with PPP, due to
the different socio-economic factors in each country.
General Practitioner’s Pay, in U.S. $1,000 P.P.P’s
AVERAGE
Mexico
Hungary
Czech Republic
Belgium
Portugal
Sweden
Source: OECD Health Data
Finland
Australia
France
Canada
Denmark
Switzerland
Netherlands
U.K.
United States
$0 $50 $100 $150 $200
U.S. $1,000 P.P.P’s
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15. Socio-Economic Factors
Annual Hours Worked Per Worker
OECD (Organisation for Economic Co-operation and Development) data shows that
countries exhibit variability in annual hours worked. This will affect the fair market value
of each physician’s hourly rate based on their home country.
Country Annual Hours Country Annual Hours Country Annual Hours
Australia 1693 Greece 2032 New Zealand 1762
Austria 1600 Hungary 1980 Norway 1426
Belgium 1577 Iceland 1732 Poland 1937
Canada 1702 Ireland 1543 Portugal 1711
Chile 2047 Israel 1890 Slovak Republic 1793
Czech Republic 1774 Italy 1774 Slovenia 1662
Denmark 1522 Japan 1728 Spain 1690
Estonia 1924 Korea 2090 Sweden 1644
Finland 1684 Luxemburg 1601 Turkey 1877
France 1476 Mexico 2250 United Kingdom 1625
Germany 1413 Netherlands 1379 United States 1787
Source: http://stats.oecd.org/Index.aspx?DatasetCode=ANHRS
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16. Considerations When Implementing
Key Internal Factors
Culture Communication
• Country expectations Proactive discussions
• Language differences
Understanding of drivers
• Deference to authority
• Collaborative ability Opportunity for feedback/buy-in
Incorporating appropriate stakeholders
Business Structure
• Centralized vs. de-centralized compliance HCP Structures
• Payment source Current payment structure
• Regional/Country structure
• International committees/Task forces Cross-border relationships and activities
• Cross-border relationships and activities Expectations related to travel and
compensation
History
• Previous attempts at centralized process
• Decision-making authority
• Relationships with key influencers
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17. The Current Status of Company FMV
Levels of FMV Framework Sophistication
Stage Description
• No particular strategy, approach, or tracking
No System
mechanisms
• Group similar activities
Rate Card • Payments based on historical payments for similar
transactions
• Inventory and group transactions
• FMV analysis, models, and tools
FMV Process
• Validate with external data, where available
• Payments tracked and monitored
• Multi-national need for governance at global, regional,
country, and company levels
Global FMV Framework
• Standardized processes and methods
• Oversight, testing, and monitoring
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18. Global FMV Process
Barriers to Implementation and
Lessons Learned

19. International FMV Challenges
Creating a Plan Up Front
Understand drivers of FMV
– Law/Regulations (Stark II, Anti-kickback, Sunshine, FCPA)
– International Disclosure Requirements (UK, France, Slovakia)
– National/International Codes of Conduct
Understand the impact of internal structure and historical issues
– Past payment history and arrangements
– Decision-making structure
Incorporate key stakeholders up front
– Communicate needs and requirements of FMV
– Make stakeholders and influencers part of the process
– Consider functional teams that cross regions/countries/departments
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20. International FMV Challenges
Driving the Process
Know data sources and methodology
– Utilize objective third-party payment data
– Consider components that affect FMV service rates:
Rate structure: hourly rate, activity rate, day rate, multi-day rate
Payment for travel time: none, partial, capped
Parameters for travel time: mileages, borders, time spent
Number of HCP “Tiers”/KOL parameters
Exception process/exception rates
Create an ongoing communication plan during process
– Ensure appropriate countries/regions are incorporated
– Ensure appropriate levels-of-effort are incorporated for HCP services
– Ensure appropriate specialties and HCP tiers are incorporated
– Review payment amounts and structures (e.g., multi-day and multi-activity rates)
– Determine level of standardization within the organization
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21. Implementing an FMV Strategy
Rolling Out Tools and Ongoing Support
Determine tools for users
Rate Cards
Calculators (FMV, KOL)
Process Documents
Training Materials
Determine procedural documents
FMV Methodology/Background
FMV Policy/Procedures
Exceptions Process/Methodology
Determine ongoing support
Additional Specialties
Additional Counties
Frequency of Updates
Sources for Questions and Information
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22. Questions?

23. For Further Information
Today’s Presenters
Colleen M. Roberts Rosemary E. Weghorst
VP, Associate General Counsel Director
& Chief Compliance Officer
Fresenius Kabi USA, LLC Huron Life Sciences
1501 East Woodfield Road, Suite 300 East Six Concourse Parkway, Suite 1550
Schaumburg, Illinois 60173 Atlanta, GA 30328
T: 847-706-2090 T: 678-672-6011
C: 773-620-2984 C: 859-802-0136
colleen.roberts@fresenius-kabi.com rweghorst@huronconsultinggroup.com
www.fresenius-kabi.us www.huronconsultinggroup.com
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