Compliant Speaker Programs: How Life Sciences Companies Can Mitigate Risk
Pharmaceutical, medical device, and biotechnology companies (collectively life sciences companies or “LSCs”) utilize outside ‘experts’ (“Healthcare Professionals” and “Key Opinion Leaders”, collectively “HCPs/KOLs”) to provide a wide variety of activities. HCPs/KOLs are often engaged by product marketing/sales groups known as “thought leader liaisons” or “TLLs”, and by medical affairs departments referred to as “medical science liaisons” or “MSLs”. These clinical experts are often critical to an LSC’s success. Some of the activities they perform include, speaking, product training, advisory board participation, strategic market planning, assistance with regulatory submissions, ensuring the effective utilization of products, and serving as scientific resources to the medical community. Similarly, specialized researchers are often engaged to write scientific papers, contribute their expertise to facilitate R&D activities, and provide technical support.
A significant number of HCPs/KOLs engaged by LSCs, whether as TLLs or MSLs, are focused on educating “Prescribers” (e.g., physicians, advanced practice providers, nurses, pharmacists, and others) about new drugs, devices, and treatments for identified disease states. Product manufacturers and distributors (i.e., LSCs) generally engage the services of highly qualified and experienced healthcare professionals (i.e., HCPs/KOLs) who are also Prescribers, to provide educational content to their peers. These educational presentations often range in size from small local dinner meetings to large national and international conferences where the HCP’s/KOL’s status, expertise, and level of influence are critically important in securing the attention of their peers. Therefore, regardless of the size of educational events, LSC’s must identify and engage HCPs/KOLs with the requisite level of expertise, status, and experience.
Speaker Programs
LSC sponsored speaker programs have proven to be of great value to Prescribers to learn about new medicines, devices, and treatments. Whether delivered online, at a conference, in a hospital, or at a local dinner, speaker programs offer relevant content in a convenient format. Notwithstanding, there has been some misconduct related to speaker programs as detailed in the Office of Inspector General’s (“OIG”) November 16, 2020, Special Fraud Alert: Speaker Programs.[1] For the purposes of this Special Fraud Alert, speaker programs are defined as “company-sponsored events at which a physician or other healthcare professional (collectively, HCP) makes a speech or presentation to other HCPs about a drug or device product or a disease state on behalf of the company.” The OIG indicated these presentations, which often involve payment of an honorarium to the speaker and remuneration (e.g., free meals, attendance fees, etc.) to the attendees, present certain fraud and abuse risks pertaining to the Anti-Kickback Statute (AKS).[2] Pursuant to their investigations, the OIG indicated that one purpose of these programs is to compensate speakers and attendees as an inducement/reward for referrals. Therefore, while providing opportunities to improve patient care by educating Prescribers about new treatments, risks, and appropriate uses, speaker programs also present their own risk and potential for abuse.
The benefits and potential risks of providing speaker programs present multiple challenges for LSC’s as they navigate regulatory complexities while disseminating important information and satisfying key stakeholders. For example, medical affairs and marketing/sales groups often identify the specific HCPs/KOLs they want to engage for certain speaker programs. Furthermore, compliance departments are often provided with a short lead time before an HCP/KOL is needed for a presentation. This leaves little time for LSC compliance departments to ensure speaker content approval, vet the speaker, determine the FMV of compensation, verify appropriateness of audience, evaluate all transfers of value, and complete the other activities necessary to ensure delivery of successful and compliant speaker programs.
The value of speaker programs as educational tools for drug and device companies has been proven; however, opportunities for regulatory missteps permeate the process. For example, LSC sales representatives often receive significant bonuses based on the volume of sales their assigned Prescribers generate. In the case of the pharmaceutical industry this means that the number of prescriptions written for a particular drug determines the bonus earned by a sales representative. Whereas, in the medical device industry, bonuses might be contingent on the volume of a specific device or instrument used in related surgical procedures (e.g., knee, hip, shoulder implants, pacemakers, clamps, etc.). While not itself an offense, payment of bonuses to sales representatives based on the number of devices used or prescriptions written by the Prescribers they manage offers an incentive to sales representatives to have their Prescribers use higher volumes of a specific device or write more prescriptions. This is often accomplished by enlisting high-utilizing Prescribers as speakers. Even though it may not be the intention of the LSC to violate federal and state regulations, violations do occur. If only high prescribers are provided with speaking opportunities, then it may appear as if they are being paid for referrals.
Speaker Program Safeguards
There are certain safeguards that can be implemented by LSCs and their compliance departments to minimize risk. These include:
- Speaker Engagement and Compensation: Since speakers are often Prescribers, risk reduction can be accomplished by (i) monitoring selection/eligibility criteria to ensure that speakers are not limited to high prescribers, (ii) determining that the arrangement is commercially reasonable. This means that every speaking opportunity for Prescribers must make business sense,[3] and (iii) ensuring that any transfer of value (e.g., hourly compensation) between the LSC and the Prescriber /speaker is within fair market value (i.e., FMV).
- Speaker Frequency: In order to minimize risk, speaker frequency should be tracked/documented and regularly evaluated. If, for example, high Prescribers are provided with significantly more opportunities to speak than similarly qualified HCPs/KOLs, there would need to be some strong justification in the documentation to justify the difference in speaking frequency.
- Audience Attendance: Tracking the attendees at each speaking event and ensuring that the audience is appropriate for the topic is also important for minimizing risk. Attendees should not attend more than one presentation on the same topic, especially if they receive a transfer of value (e.g., dinner, drinks, compensation). Tracking attendees, their profession/specialization, and the presentations they attend should be part of a compliance department’s standard operating procedure. Other policies and procedures should address non-qualified guests (e.g., Prescriber spouses) or inappropriate attendees (e.g., LSC employees), who should not be in attendance or counted toward the size of the audience. For example, it would not be a good fact pattern if “Dr. Jones” continually provided the same presentation (with no new data/information) multiple times to the same audience. That problem would be further compounded if Dr. Jones’ audience was the LSC’s own employees.
- Bonus Structures: As previously indicated, the structure of bonus plans for sales representatives may itself generate non-compliant activities for increasing the number of prescriptions for drugs or devices. Behavior theory suggests that the application of reinforcement will increase a desired behavior; therefore, linking Prescriber’s referrals to sales representative bonuses may result in illicit activities. For example, speaker programs have proven to be quite an effective vehicle for channeling kickbacks to high prescribers. In fact, the Office of Inspector General’s (OIG) Compliance Program Guidance for Pharmaceutical Manufacturers[4] specifically states that LSCs should evaluate their compensation arrangements with sales representatives. According to the guidance:
Manufacturers should be aware that a compensation arrangement with a sales agent that fits in a safe harbor can still be evidence of a manufacturer’s improper intent when evaluating the legality of the manufacturer’s relationships with persons in a position to influence business for the manufacturer. For example, if a manufacturer provides sales employees with extraordinary incentive bonuses and expense accounts, there may well be an inference to be drawn that the manufacturer intentionally motivated the sales force to induce sales through lavish entertainment or other remuneration.[5]
Speaker Bureaus
The effort and resources required to effectively manage compliant speaker programs can be quite onerous. Therefore, it is not surprising that a significant number of speaker bureaus (“Speaker Bureaus”) have emerged in the U.S. and globally. These companies supplement the LSC’s workforce by off-loading some or all speaker program activities performed by compliance departments.[6] Unfortunately however, opportunities for violations of the AKS in the form of kickbacks, or incentives given to high Prescribers still exist, including speaker payments that (i) are compensated at a rate higher than FMV, (ii) require little work, but are compensated for significant preparation time, and (iii) are delivered to inappropriate audiences (e.g., very few attendees other than LSC employees, or qualified attendees who have been to the same presentation multiple times, etc.).
It is also important to note that outsourcing speaker/educational programs to a Speaker Bureau does not absolve the LSC of responsibility for ensuring all regulatory requirements are met. According to the Food and Drug Administration (FDA), the content of speaker programs is the sole responsibility of the LSC. Furthermore, if a speaker program violates federal, state, or international laws, including the Anti-Kickback Statute (AKS),[7] the Physician Self-Referral Law (“Stark Law” or “Stark”),[8] the False Claims Act (FCA),[9] the Foreign Corrupt Practices Act,[10] the U.K. Bribery Act,[11] or any country’s laws, the LSC, and not the Speaker Bureau, will be held liable for damages, penalties, and/or potential exclusion from doing business in a particular country. Therefore, it is important for LSCs to monitor their speaker programs even if they outsource the operational activities to a Speaker Bureau.
This is especially important for anyone involved in securing the services of an HCP/KOL in a highly competitive environment.[12] Compensation decisions need to be applied consistently and the determination of FMV must be supported by facts. This means there must be a valid and reliable methodology to quantify an HCP’s/KOL’s experience and expertise in order to accurately determine the FMV of compensation. There also must be an established methodology to monitor speaker sessions, track audiences, and verify there is no connection between speakers and the number of prescriptions they write. Often, when a speaker program is outsourced to a Speaker Bureau, it is difficult for the LSC to monitor each activity to ensure regulatory compliance. However, regular monitoring, well-defined processes, and a range of checks and balances need to be implemented and performed by the LSC to ensure their speaker programs remain compliant, regardless if they are managed by a third party. It is not sufficient for a LSC to outsource its speaker program to a Speaker Bureau and trust that all compliance requirements will be met. The LSC is ultimately responsible for regulatory compliance, not the Speaker Bureau!
Speaker Bureau Considerations
Despite their value to LSCs, outsourced speaker programs (i.e., Speaker Bureaus) can provide certain challenges to the LSC in terms of regulatory compliance. For example, experts in a particular disease state who are knowledgeable about a specific company’s products, are good speakers, and can hold the attention of an audience, are often difficult to locate. Once a Speaker Bureau finds and engages a speaker who meets the required criteria, Speaker Bureaus tends to continue to engage those speakers on a long-term basis. In many cases, there may only be a small number of clinicians/researchers available with the required expertise and experience. Therefore, Speaker Bureaus with access to these experts have a vested interest in keeping them content (e.g., sufficiently booked for speaking opportunities and compensated at a high level), as competition for their services can be intense.
In order to secure enough speaking opportunities for these individuals, Speaker Bureaus often maintain relationships with multiple LSCs providing products for similar markets. As a result, these Speaker Bureaus are in an excellent position to negotiate HCP/KOL compensation, since they know what other LSCs pay. Furthermore, maintaining access to HCPs/KOLs with rare high demand specialties requires that Speaker Bureaus secure the highest possible compensation for their services. In the current competitive market, highly qualified and skilled speakers know they are in great demand and have been successful in encouraging Speaker Bureaus to allow them to set their own compensation. The problem is that when either the speakers or the Speaker Bureaus set the honoraria/compensation, it may exceed FMV. As indicated previously, the LSC and not the Speaker Bureau is culpable for any violation of the AKS. Therefore, the LSC is responsible for ensuring that all in-house or outsourced speaker programs operate within a compliant framework.
Perhaps, even more concerning is the reality that the continual increases in compensation may not be reflected in the Open Payments database because the number of hours an HCP/KOL provides to an LSC for a given activity is not identified, only the total payment. Therefore, the use of the Open Payments data does not provide the information needed to accurately determine the FMV of compensation. This is an important point since some LSCs and compliance professionals operate under the inaccurate assumption that the Open Payments database provides definitive information necessary to determine FMV compensation. However, when there is no denominator (hours spent performing a task or activity) in the equation, an hourly compensation rate cannot accurately be determined. Notwithstanding, Open Payments data can be utilized together with established industry surveys and other sources of information to facilitate the determination of FMV compensation.
Since the government has not provided guidance on how to determine FMV, there are many different methodologies in use. If these methodologies are valid, reliable, and able to stratify HCPs/KOLs into relatively homogeneous tiers based on experience and expertise, then they are likely to be defensible. The issue associated with speaker compensation focuses on regulatory compliance with respect to the methodology used to determine compensation for Prescribers with experience and expertise that places them in the top decile of their peers.[13] When Provider compensation surveys only provide data to the 90th percentile, how much of an adjustment should be made for those HCPs/KOLs with credentials that exceed those at the 90th percentile? This is the type of question that should be left to a valuation professional who can apply significant experience and expertise to the task. By providing opinions of fair market value and commercial reasonableness for Prescribers engaged by LSCs, valuation professionals can facilitate compliant compensation arrangements between LSCs/Speaker Bureaus and speakers. Furthermore, valuation professionals can also work with LSCs and Speaker Bureaus to establish and implement compliant processes, guidelines, and procedures. These activities will all serve to mitigate the risk of non-compliance.
Conclusion
This paper explores the reasons speaker programs are so valuable to life sciences companies, as well as some of the pitfalls to be considered. Managing speaker programs, whether for medical liaison programs or sales and marketing groups, can be a daunting task for compliance departments. Speaker qualifications based on experience and expertise must be determined using a consistent methodology for every speaker, speaker audiences must be qualified for the presentation and their attendance must be tracked, relationships between speakers and use of company products must be monitored, speaker compensation must be commercially reasonable and within fair market value, and the frequency of speaking engagements for each speaker must be tracked and documented. The level of effort required to maintain a compliant speaker program has given rise to outsourced Speaker Bureaus that can assume all or just a portion of speaker program responsibilities. Notwithstanding, regardless of the level of responsibility assumed by the Speaker Bureau, the LSC is still culpable for all compliance related missteps and violations.
Speaker Bureaus have proven themselves to be very valuable to LSCs in locating quality speakers and managing complex logistical issues. LSC compliance departments, which are often understaffed, have bandwidth to perform other needed tasks and activities when they can outsource some or all of the responsibilities that accompany speaker programs. However, not all Speaker Bureaus are equal in following compliance related rules and regulations when engaging HCPs/KOLs and managing speaker programs. Therefore, the LSC must take an active role by remaining vigilant while monitoring the activities of their Speaker Bureau(s). There are also opportunities for Speaker Bureaus to assist LSCs in remaining compliant by (1) taking an active role in educating speakers about the importance of FMV; (2) engaging valuation professionals to provide a valid and reliable methodology for determining the FMV of compensation for HCPs and KOLs used as speakers; (3) tracking speaker audiences and ensuring they are appropriate for the topic; (4) working closely with LSC compliance departments, and (5) taking an active role in maintaining compliant speaker programs.
For more information, please contact Director Ann Brandt at ABrandt@AskPHC.com.
[1] Department of Health and Human Services, Office of Inspector General, Special Fraud Alert: Speaker Programs, November 16, 2020. https://oig.hhs.gov/documents/special-fraud-alerts/865/SpecialFraudAlertSpeakerPrograms.pdf
[2] The Anti-Kickback Statute makes it a criminal offense to “knowingly and willfully solicit, receive, offer, or pay any remuneration to induce or reward, among other things, referrals for, or orders of, items or services reimbursable by a Federal healthcare program.” 1128B(b)(1)–(2) of the Social Security Act; 42 U.S.C. § 1320a-7b(b)(1)–(2).
[3] Absent a bona fide business need, the arrangement may not be commercially reasonable.
[4] Available at https://oig.hhs.gov/fraud/docs/complianceguidance/042803pharmacymfgnonfr.pdf
[5] Id. at 36-37
[6] Those activities include, but are not limited to, speaker identification/contracting, verification of credentials, program marketing, attendee verification/tracking, ensuring availability of qualified substitute speakers, validating program content, tracking program spend, and supporting the LSC in complying with regulatory reporting requirements.
[7] 42 U.S.C. § 1320a-7b.
[8] 42 U.S.C. § 1395nn.
[9] 31 U.S.C. §§ 3729 – 3733.
[10] 62 Fed. Reg. 64093 (Dec. 3, 1997).
[11] 42 C.F.R. § 1001.952.
[12] Multiple LSCs and Speaker Bureaus may all be vying for the same HCPs/KOLs, which can result in a bidding war, driving compensation over FMV.
[13] The major industry standard surveys report compensation data up to the 90th percentile. Since Prescribers engaged by LSCs often represent the most qualified individuals in a particular field or specialty, adjustments are often made to available compensation data to determine FMV compensation for such individuals. We have observed adjustment factors utilized to determine FMV compensation vary widely, and that some may be very difficult to defend.