PM360 DECEMBER 2010

PHYSICIAN CONSULTANTS

CRITICAL CHOICES FOR ADVISORY BOARDS

While physician consultants provide companies with key insights into the clinical landscape, their services and fees have come under increasing scrutiny by regulatory enforcement agencies.

By Stephen E. Rothenberg, JD, and Michael N. Abrams, MA.

Physician advisory boards are used to provide medical products companies with real-time, expert insight, and feedback on clinical and marketing issues to inform business decision making. Such insights can be critical to understanding the clinical landscape and marketplace, identifying unmet needs, and building the value case for products in development. Unfortunately, engagement of physicians by medical products companies to serve on advisory boards and in consulting and speaking roles has also come under increasing scrutiny by regulatory enforcement agencies concerned about conflicts of interest.

Prompted by a limited number of high-profile cases, regulatory enforcement agencies have made it a priority to ensure that physicians who are so engaged are not just receiving covert payment for using or influencing the purchase of a company’s products. Backing up word with deed, OIG enforcement of anti-kickback statutes has set new records over the past 18 months. To compound the challenge, the specific actions expected by enforcement agencies evolve with each new settlement.

Maintaining a “clinical window” into the marketplace provides critical information for decision making. At the same time, financial relationships with physicians are under the microscope, and the costs of running afoul of regulatory requirements can be substantial. Consequently, it’s more important than ever that medical products companies stay on top of the situation and refine their approach to ensure that advisory boards are both effective and compliant. In order to do this, companies need to develop a comprehensive framework for engaging physician consultants and ensuring that advisory boards provide demonstrable value.

RECENT DEVELOPMENTS

A number of corporate integrity agreements (CIAs) over the past year have included requirements aimed at ensuring company-physician financial relationships are transparent and involve bona fide services. Some agreements require companies to disclose payments to healthcare providers, reflecting this trend toward greater transparency and disclosure requirements. These CIAs also include provisions addressing activities such as education and training, product design and development, and advisory board participation.

Healthcare reform also addressed enforcement and transparency issues. Included in the Patient Protection and Affordable Care Act (PPACA) is language which lowers the “intent” standard in the Anti-Kickback Statute (AKS) so that “a person need not have actual knowledge of this section or specific intent to commit a violation of this section.” In effect, this change makes it easier for prosecutors to impose liability on management if an improper motive for convening an advisory board (and paying doctors) is found. In addition, the PPACA included new reporting and disclosure obligations (“Sunshine Act”) regarding payments made by medical products companies to physicians, which go into effect in 2012. Besides penalties for non-compliance, there is at least some anecdotal evidence that doctors are reluctant to work with medical products companies if their names will be posted on a company website. Going forward, companies may find it increasingly difficult to engage physicians to participate on advisory boards, especially if they become concerned that such activity puts their reputation or even their professional standing at risk.

Concerns about conflicts of interest are not new. AdvaMed and PhRMA updated their respective codes of ethics on interactions with healthcare providers in 2009. Both codes cover what should be considered baseline requirements for medical products companies that hire physicians to participate on their advisory boards. These requirements include having a written agreement, ensuring there is a documented need for the service, selecting consultants based on qualifications related to the service, paying fair market value (FMV) compensation and providing reimbursement for reasonable expenses, and holding meetings in an appropriate venue. The AdvaMed code also provides that sales or marketing may provide input or recommendations for physician consultants but should not be directly involved or influence the hiring decision.

REQUIREMENTS FOR EFFECTIVE AND COMPLIANT ADVISORY BOARDS

Companies must be able to demonstrate that their advisory boards provide bona fide or valuable services. Given the important role that physician advisory boards can play, reexamining the framework used by companies to convene advisory boards and engage physicians is an opportunity to ensure that such boards are effective and compliant. A defensible framework for engaging physician consultants (that also helps ensure the effectiveness of consulting engagements) includes processes and methods for:

• Identifying the business need

• Ensuring appropriate identification and selection of consultants
• Specifying the services to be performed and paying reasonable or fair market value (FMV) fees for services
• Confirming receipt of and using the deliverables from an advisory board This framework enables companies to ensure compliance and effectively meet their business needs for advisory boards.

BUSINESS NEED

A key component to make this framework effective — and not just defensible—involves the process for carefully examining why an advisory board is being convened. For example, many companies will routinely convene advisory boards on an annual basis. While boards can provide valuable insight into trends, research activity relevant to a company’s products, or market insights, companies face risks if the specific business need, purpose, and objective of an advisory board aren’t clear.

Questioning the need for an advisory board involves looking at whether the output from the board will have an impact on what the company is doing or planning for a product—which helps ensure that the board delivers value. In planning for a board, look at how the work an advisory board will do will help further a strategic objective of the organization for the product or issue being examined. For example, a board might examine whether the available research sufficiently supports a product’s value proposition for a particular group (e.g., physicians).

Besides being able to demonstrate that the advisory board will provide bona fide services, clearly defined business needs can be used to identify the types of individuals who have the experience and information needed for a particular board. As part of the business need determination, there should be a clear basis or rationale for the number of board participants and meetings held.

A clearly defined purpose and goal for the advisory board also will be useful when working with the chairperson to create the agenda for board meetings. The agenda also can be used to specify the services to be performed by individual board members, which is an important part of creating value by having expectations that the board will produce useful output.

A strong agenda with a clear purpose and objectives has both compliance and business benefits. Advisory boards with a clear bona fide or legitimate purpose will withstand outside examination. It also helps reassure physicians who are reluctant to have their names posted on a company’s website feel more comfortable about exposing themselves to scrutiny if it’s clear that the board will be doing serious work.

Demonstrating legitimate business need is also considered a critical part of justifying payments, and payment amounts, to healthcare professionals who serve in any consulting capacity to show the payments are for bona fide services and not a reward or inducement.

CONSULTANT SELECTION

Another important part of an effective framework for convening advisory boards is ensuring processes are in place to select advisory board participants in an appropriate manner. The selection of consultants to participate on advisory boards should be based on qualifications necessary to perform the service, general medical expertise and reputation, or knowledge and experience regarding a particular therapeutic area. While selecting potential consultants based on qualifications relevant to the service activity sounds obvious, a systematic selection process based on the match between requirements and qualifications is often taken for granted. A further consideration is ensuring that sales and marketing does not have a direct hand in selecting board participants. Creating such a firewall is a best practice to ensure compliance.

One method of accomplish this is to use a cross-functional selection committee to make decisions about advisory board participants. A committee might include a clinical or regulatory affairs director or representative and a compliance representative. The committee should include at least one person with the expertise necessary to evaluate the scientific or medical qualifications of the prospective board participants.

The selection process must also take into account consulting engagements a physician may have with other groups in the company or with other companies.Policies should be developed to ensure that conflicts of interest are avoided. For example, companies need to decide whether members of advisory boards can also be engaged as clinical investigators, or whether candidates who participate on competitors’ advisory boards should be excluded.

In choosing consultants, companies must ensure their selection process does not even appear to consider the potential volume or value of business generated by a consulting candidate.

FAIR MARKET VALUE FEES

It is important to specify the tasks and responsibilities of advisory board consultants in written agreements, and to pay consultants fees that represent fair market value for the work being performed. As discussed above, by identifying a clear business need and purpose for an advisory board, the services needed by board members will be clear. Agreements should specify the services to be performed (e.g., advisory board members must review the agenda and prepare for meetings through appropriate literature review or other methods specified by the Chair, actively participate in the meeting, etc). The description of activities may include an estimated amount of time (used as part of establishing the reasonableness of compensation). The agreement should also state the deliverable the company will receive from the consultant, such as a summary of the consultant’s recommendations or conclusions based on their participation in the advisory board.

DELIVERABLES CONFIRMATION

The final part of an effective framework for convening advisory boards is being able to demonstrate how consultant deliverables are used. If an advisory board is providing evaluation and recommendations on product concepts, it’s important to be able to identify the internal “customers” of the board’s deliverables and the way in which they were used. This process should also include a post-hoc effectiveness review of the advisory board that can be examined to improve planning and requirements for future board events. From a compliance standpoint, it also provides a final demonstration of the legitimacy or bona fide services provided by the board.

CONCLUSION

Advisory boards play an important and useful role for medical products companies, but in the current environment companies need to have procedures and methods for ensuring that they provide demonstrable value. By using a comprehensive framework to engage physicians as advisory board consultants, companies not only ensure compliance but can increase—and demonstrate—the value advisory boards provide.

Stephen E. Rothenberg, JD is a Business Analyst, and Michael N. Abrams, MA, is Managing Partner at Numerof & Associates Inc. (NAI). NAI is a strategic management consulting firm focused on organizations in dynamic, rapidly changing industries. We bring a unique cross-disciplinary approach to a broad range of engagements designed to sharpen strategic focus, increase revenues, reduce costs, and enhance customer value. For more information, visit our website at www.nai-consulting.com, email us at info@nai-consulting.com, or call 314-997-1587.