A Framework for Fair Market Value
in HCP Engagements
Payments to healthcare professionals for speaking and consulting services provided to pharmaceutical and medical device companies must be made at fair market value (FMV). This requirement is explicit across the major US regulatory frameworks - including the Anti-Kickback Statute - and is embedded in the codes of conduct of the principal industry associations, including PhRMA, AdvaMed, EFPIA, and MedTech Europe. In many international markets, industry codes have acquired effective legal standing even where no specific FMV statute exists, with courts and regulators treating them as the applicable standard for what constitutes a legitimate, non-corrupt payment. The result is a requirement that is, in practical terms, global in scope.
FMV as a Valuation Concept
Determining FMV for HCP services is fundamentally a valuation exercise. The most defensible valuation framework combines two established valuation methods: a market-based rate for expertise and a time-based assessment of the work to be performed. Together, these provide the basis for evaluating whether total compensation is fair and reasonable. Central to that analysis is the quality of the market data used to establish the rate.
Fair market value asks a specific question: what would a willing buyer pay a willing seller for a given service, in a transaction between unrelated parties, where neither is under compulsion and both have full knowledge of the relevant facts? That definition is not a compliance invention. It is a longstanding principle of economic valuation, and it carries real analytical content. It describes a transaction that is arm's-length, informed, and voluntary.
The price that emerges from such a transaction is the market price. In this sense, FMV reflects what the market would pay in a true arm’s-length transaction. A well-designed FMV framework seeks to identify what the relevant market actually reflects, and to apply that reflection consistently.
Developing FMV Rates
FMV Requires an Arm’s-Length Standard in HCP Engagements
The arm's-length requirement is the conceptual heart of FMV. It is also the element that makes FMV genuinely difficult in the HCP engagement context. In a standard arm's-length transaction, the buyer and seller are unrelated. They have independent interests. Neither has any reason to inflate the price beyond what the service is worth to them, and neither is in a position to extract more than the market will bear. The resulting price reflects genuine supply and demand.
In pharmaceutical, biotech, and medical device engagements, the relationship between a company and the HCPs it engages for speaking and consulting is structurally different. These are not unrelated parties in the traditional sense. The physicians and other healthcare professionals a company works with may also prescribe its products, refer patients, or influence clinical decisions in ways that have commercial relevance to the company. The relationship is ongoing and multidimensional, with mutual interests that extend well beyond any individual speaking or consulting arrangement.
This does not make HCP engagements inappropriate. They are commonplace, legitimate, and specifically recognized in regulatory guidance as defensible when structured correctly. But it does mean that the arm's-length principle cannot simply be assumed. It has to be actively supported through the structure of the FMV framework itself.
FMV Requires Defining the Relevant Market
Data drawn from within the physician-industry relationship - such as what companies have historically paid, what the industry broadly tends to pay, or what HCPs tend to request - reflects a market shaped by the same relationship whose arm's-length character is in question.
A more defensible foundation is derived from the compensation HCPs earn in clinical and academic settings, where market dynamics are independent of the physician-industry relationship. Those markets are structurally independent of the pharmaceutical and device industry. The parties negotiating in these markets have no conflicting commercial interests, and the resulting compensation data reflects something much closer to a genuine arm's-length price.
FMV Is Based on Time and Expertise, Not Value to the Company
FMV compensates an HCP for their time and expertise - not for the value a company derives from the engagement. Consider two consulting engagements of equal duration, both involving the same physician. One is an advisory board focused on reviewing promotional materials. The other is a strategic session informing research priorities. From the company's perspective, the second engagement may feel considerably more valuable. But from a FMV standpoint, what the company is purchasing in both cases is the same thing: a day of that physician's time and expertise. The FMV of that time does not change based on how the company intends to use the service.
Tiered FMV Rates Must Reflect Differences in Expertise
Tiering directly determines the application of higher FMV rates. Expertise is a legitimate and important differentiator in FMV. The clinical compensation market itself reflects meaningful variation based on specialty, subspecialty, experience, and level of recognized standing within a field. An HCP who is nationally recognized in their therapeutic area commands a different market rate than a community practitioner in the same specialty, and that difference is grounded in genuine supply-and-demand dynamics. A well-structured FMV framework captures this variation, providing differentiated rates that reflect different levels of expertise, supported by the same clinical market data that grounds the overall rate structure.
This makes it critical for companies to have a robust and defensible process for evaluating physician expertise, as tiering directly determines the application of higher FMV rates. Criteria such as familiarity with the company's products, involvement in company-sponsored research, or activity in research areas aligned with the company's commercial interests may be relevant to which HCP a company chooses to engage. However, these factors do not measure expertise in the FMV sense. They measure utility to the company - which is precisely what FMV is designed to exclude from the rate-setting calculation.
Undetected Overpayment Risk
Underpayment generates a natural feedback loop, while overpayment does not. Overpayment creates regulatory exposure, while underpayment creates business risk. When a company has structurally low FMV rates, business teams quickly find that HCPs require higher contracting rates or decline speaking and consulting opportunities. When this occurs, compliance can readily validate whether rates are too low and, if necessary, obtain updated FMV data.
The greater risk, however, is that when FMV rates are structurally too high, there is no comparable signal to indicate a problem. Business teams are satisfied, engagements are readily filled, and HCPs do not push back on rates.
Without a strong and defensible FMV framework, it becomes difficult to distinguish between a compliant program and one operating outside of FMV.
Business Need as a Condition of FMV
Even when a company has defensible FMV rates, and a well-documented, defensible process for tiering HCP expertise, payments for services may not be fair market value if they are not supported by a well-documented, legitimate business need for the HCP’s services. Without a legitimate business need, the arrangement can be viewed as a vehicle for transferring value to a physician. In that case, the law generally assumes there must have been an illegitimate reason for doing so. This substantially raises the bar for companies defending such allegations, even when the cause is as simple as poor process design rather than improper intent.
Conclusion
Establishing fair market value for HCP speaking and consulting arrangements requires deliberate choices about what data to use, what that data actually measures, and whether the resulting rates hold up against the arm's-length standard that sits at the core of the concept. When those choices are made rigorously - grounding rates in clinical market data that is genuinely independent of the physician-industry relationship, compensating for time and expertise rather than perceived value to the company, and applying differentiated rates that reflect objective measures of professional expertise - the resulting framework can be both defensible and durable.
The less visible risk lies in the structural asymmetry between overpayment and underpayment. This means that a flawed framework can operate undetected, precisely because the business signals that would otherwise prompt a correction are absent. In that environment, confidence in the framework itself becomes the only reliable check.
That is ultimately what a well-designed FMV approach provides: not just a defensible answer to a regulatory question, but an informed basis for understanding whether compensation decisions across speaking and consulting engagements are, in fact, what they are represented to be. Companies need confidence that their:
FMV rates reflect market values,
HCP tiering reflects real expertise associated with premium FMV rates, and
Business need documentation reflects a legitimate need and clear expectations of the required HCP effort.