Healthcare Series: 03: 5 Steps To Consider Before Initiating Service Agreement Fees With Healthcare Professionals

1. Defining the Interaction

Healthcare Professionals (HCPs) are described as any member of the medical, dental, pharmacy, or nursing professions, or any other individual with a clinical or non-clinical function who in the course of his or her professional activities may prescribe, recommend, purchase, supply, sell or administer a pharmaceutical product.

The collaboration between HCPs and the pharmaceutical industry is intended to advance scientific and medical knowledge for the benefit of public health, making HCPs critical stakeholders in the delivery of the most effective treatments for patients. In line with this purpose, pharmaceutical companies commonly interact with HCPs through the sharing of scientific and clinical knowledge, support for medical research and education, invitations to participate in advisory boards in order to obtain advice and feedback through consultation, and finally, sponsorship at symposia and congresses.

In addition to the objectives above, pharmaceutical companies must adhere to strict transparency provisions in both global and local regulations, as well as industry association rules and directives, to enhance and maintain high levels of ethics and integrity in their relationships.

In an effort to avoid any conflicts of interest within these interactions and to sustain public faith and trust, the following points should always be taken into consideration by businesses for all activities with HCPs:

  • documenting and reporting all interactions as per all applicable laws, regulations, and respective codes of conduct,
  • ensuring that no company member acts in a way that could be seen as inappropriately affecting decisions to prescribe, use, or recommend the use of the company's products,
  • executing a written agreement before the performance of any services for which HCPs are engaged, and,
  • compensating HCPs who provide a service for, or on behalf of a company, with a fee that is consistent with fair market value (“FMV”).

2. The Agreement

As a general practice, consultancy agreements for the preparation of medical content, data, or business development strategies, and speaker agreements for scientific symposia or congresses for the delivery of speeches or presentations are the most frequent types of services for which HCPs are engaged.

When engaging services from HCPs there must be a legitimate need in terms of the services related to the HCPs’ expertise. Within this direction, the content and subject of the service should be clearly defined and described in detail in the contract. Finally, a written agreement must be concluded, and the appropriate financial records must be documented. Moreover, it is strongly advised, in terms of ensuring transparency, and for proof of the service received, that the text of a speech and/or the slide set of a presentation should be handed over to the commissioning company.

For the services rendered and time allotted by HCPs, a payment reflecting the FMV regarded as an "honorarium fee" is made by companies. The honorarium fee should be paid according to the terms of the contract upon the receipt of an invoice.

Adequate documents, such as invoices, evidence of FMV, approval processes, and due diligence reports should be retained to justify the legitimacy of payments or transfers of value.

3. A Fair Market Value Based Honorarium Fee

An honorarium fee is a payment made for professional services that is usually meant for a one-time activity and is subject to a significant level of regulatory and administrative scrutiny. An HCP’s allotted time should only be paid in the form of a fee reflecting the FMV of the services delivered.

There is no exact formula or single measure to determine FMV. A key step in determining FMV may be identifying and documenting an objective indicator of the value of the services by considering the importance of an HCP’s professional standing, knowledge, experience, published work and reputation in their respective therapeutic area.

While calculating an honorarium fee, regulatory agencies’ guidance, which provide specific approaches and methodologies, should be considered and analyzed to develop ranges for payment rates to be used as a guideline in the establishment of subsequent service fee agreements.

4. Selection and Payment Criteria Regarding Interactions with HCPs

A written agreement should reflect and document all services that will be provided by an HCP. Therefore, all the specifics of a speaking or consultancy engagement should be detailed in the contract. It should be noted that a contract cannot be signed for an unspecified service.

In the process of selecting the appropriate HCPs for the above-mentioned activities, certain objective criteria, such as an HCPs expertise in a therapeutic area, or their standing as an opinion leader should be ascertained by the relevant business departments and documented accordingly.

In this regard, analysis that demonstrates the bona fide purpose for the selection of an HCP and the legitimate need for their services should be concluded by respective business departments, and any determination should be evaluated with regard to the sense of justice, ethical values and the balance between perceived reality and objective reality. Whether payment could potentially induce product selection, initiate the inappropriate use of a product, or be construed as a “kickback” should also be taken into consideration.

Additionally, the process, purpose, need, service, and payment should be clearly documented accordingly by proving the necessity for the payment, whether the service has been carried out, and the measurable outcome of the related services alongside the FMV.

5. Payments and Reconciliation

The first and most important rule for pharmaceutical companies, it should be noted, is that payment cannot be made directly to an HCP’s personal bank account. Payment methods vary according to the institution to which an HCP is affiliated.

Secondly, as per the Law on Higher Education No. 2547 and the Public Servants Law No. 657, HCPs working in governmental institutions, hospitals, and university hospitals and/or academicians working full time in universities are covered by the regulations, and therefore, all their studies, time and work should be dedicated to the governmental or public services. In this context, HCPs are not entitled to provide any private services, including consultancy, or speaking services to pharmaceutical companies. For this reason, in order to provide any service by allocating their time, HCPs are required to obtain written permission from the respective head of the governmental institution, university hospital or dean of the faculty that they work for. The honorarium fee that is required for any such engagement should be paid to the revolving fund of the institution or hospital upon delivery of the service or on a date as requested.

Following the Supreme Court’s annulment decision on Provisional Article No. 64 of the Law on Higher Education No. 2547 was introduced with the Law on Universities and the Full Work Day of Medical Personnel and to Amend Various Acts No. 5947 (“Full-Time Law”), currently, the abovementioned rule does not apply to HCPs who held private clinics before 18 January 2014. In such cases an honorarium payment for services rendered by these HCPs can be made to the relevant private institution.

On the other hand, pursuant to the Technology Development Zones Implementation Regulation, which was introduced under the Technology Development Zones Law No. 4691, HCPs who work for governmental institutions, hospitals or universities can be assigned to the Technology Transfer Office which is stipulated under Additional Article No. 32 of the Law on Higher Education No. 2547. In this respect, there is no need for a pharmaceutical company to make payment to a university’s revolving fund for services rendered by HCPs who are employed in the Technology Transfer Office part-time. In such cases, acquiring documentary proof of the company an HCP is assigned to and its shareholder structure, as well as trade registry records, is strongly advised.

Finally, for HCPs working in private practice that do not have any direct or indirect relation to, or duty in a governmental institution, an honorarium payment can be made to the relevant private institution.