Fair Market Value: Legal, Theoretical and Practical Considerations
On May 8, 2012, the Food, Drug and Cosmetic Law Section of the New York State Bar Association and the Life Sciences Practice Group of the American Health Lawyers Association co-sponsored a program dedicated to fair market value considerations. In addition to this CLE course being the first such joint effort by the organizations, it also marked an initial effort to combine a networking/lunch (which was hosted by Porzio, Bromberg & Newman at the Manhattan offices of Drinker Biddle & Reath LLP) with a live presentation that was simultaneously transmitted as a webinar.
Michelle Axelrod, Esq., a principal of the law firm Porzio, Bromberg & Newman, P.C., started the program by exploring the legal landscape that impacts the life science industry’s fair market value analysis of a health care professional’s services. Touching upon both old and new legislation (e.g., the Patient Protection and Affordable Care Act, the Anti-Kickback Statute, False Claims Act, and the Stark Law), Ms. Axelrod provided the legislative parameters for a fair market value evaluation. In addition, she identified various guidance documents, industry codes, and cases which could and should influence companies’ fair market value determinations.
In light of this uncertain and constantly evolving landscape, many companies struggle to apply these legal mandates and industry standards to their companies’ differing business models. John Petrolino, Esq., Vice President, Legal and Pharma Compliance Officer of Savient Pharmaceuticals Inc., provided insight into some theoretical variables companies must consider when evaluating the appropriate fees for the healthcare professionals they engage. For instance, smaller companies may face bigger challenges when interacting with physician consultants, because smaller companies are competing for the same key opinion leaders, but have less market share. Likewise, a consultant’s geographic location and reputation, as well as inflation, could impact the cost of services. Regardless of the variables at play, Mr. Petrolino focused on the fact that the payments a company makes to healthcare providers and academic medical hospitals should be defensible, consistent and auditable.
Meanwhile, Mark DeWyngaert, Ph.D., Managing Director of Huron Life Sciences, gave some practical tips and approaches for developing and implementing a fair market value rate structure and process. For example, he suggested creating a segmentation scheme based upon a healthcare professional’s specialty and level of expertise as well as the service the healthcare professional is providing for the company. In addition, he advocated that all relevant stakeholders participate in the formulation of the fair market value rate structure and process thereby ensuring that the new process and structure take into account operational and business needs.
Finally, the program moderator, David Weinstock, Esq., Chair of the CLE Committee for the Food, Drug and Cosmetic Law Section and Vice Chair of the Life Sciences Practice Group, took pertinent questions from the audience and led the discussion that followed the three presentations.