Physicians and clinical trials

Clinical trials are conducted under a growing constellation of state and federal regulations aimed at preventing conflicts of interest in the relationship between pharmaceutical companies and physicians.

The trend is clear: The federal government is cracking down hard on physicians and pharmaceutical companies that engage in activities perceived to break anti-kickback laws. The regulators do not take kindly to arrangements that remunerate physicians for activities that have little or no legitimate value beyond prescribing specific drugs. Since 2001, the federal government has recovered well over $4 billion from drug companies.

This can present real problems when physicians and the institutions where they work engage in clinical trial work for drug companies. Those services must be reimbursed at what HHS' Office of the Inspector General calls fair market value, or FMV.

A 2003 report from the OIG set some guidelines for payments from sponsors to investigators for research services. The report said these payments needed to be “legitimate, reasonable and necessary.” Defining and defending these has been the burden of both investigators and sponsors ever since.

A number of factors influence a fair market value assessment, including federal anti-kickback statutes, the False Claims Act, Stark Act, Sunshine Act and the Food, Drug and Cosmetic Act.

Many sponsors are turning to national databases to help identify FMV. These databases have shortcomings, including the inability to discriminate the level of effort associated with procedures or tasks, or the quality of the work. In other words, the database averages the negotiated contracts of sites that have been very successful at patient recruitment as well as sites that never enrolled a single study subject.

Additionally, sponsors and contract research organizations are increasingly relying on internal FMV committees to evaluate budgets from investigators. This has slowed the budgeting process and, as a result, the study startup time.

It is important for investigators to understand that the per-participant fees are not part of the overall budget. That is, the fee a sponsor pays for each study participant is intended to cover costs of visits, tests and other clinical care involved and related to the study—whatever is not already covered by Medicare or other payers.

Typical charges that must meet FMV include site administrative or study startup fees, study coordinator or research nurse's time to staff monitoring visits or site audits by FDA, case report completion or documenting events in the medical record.

Some of these line items have caused tension between sponsors and investigators, as some sponsors have suggested these activities are part of “the cost of doing business.” In fact, they are activities specifically directed at managing the clinical trial.

Other costs directly related to the clinical trial may include biologic or other waste disposal, medication storage or pharmacy charges, accounting fees for billing and managing the trial budget.

Additionally, there are startup costs that include communicating with the IRB, conducting a payer analysis, site selection visits, reviewing consent forms, attending investigator meetings, developing the budget and the contract, and so on.

While the purpose of FMV is to ensure compliance with federal and state regulations, some research sites run the risk of underestimating their budgets for fear of pushback from sponsors or CROs. The fact is that research sites that do not accurately budget their clinical trials risk losing money for their efforts.

These are a few important tips for investigators and their staff in addressing fair market value in their clinical trial budgets.

First, document everything. The best way to develop a clinical trial budget is to understand how you and your staff spend time working on a trial. By understanding and documenting how many hours you spend reviewing a protocol and responding to questions from the IRB, you will be able to defend those line items on a budget.

For an investigator's staff, basing hourly rates on employees' annual salary and benefits can be straightforward.

Documenting time and estimating hourly rates for the investigator and each staff member has a secondary purpose. These templates allow for easier budgeting. This may be a good time for physicians to look to the legal profession as an example of tracking “billable time.”

Second, do not rely on Medicare or other payer averages. Many healthcare insurance payments to clinicians are based on reduced rates that were negotiated as part of the contract. These often leave physician practices working at very thin margins or even at a loss.

Third, develop and demonstrate a consistent methodology in determining the FMV of services. By having an FMV policy in writing, a study site can demonstrate transparency and a clear methodology for establishing clinical trial budgets. Valuation approaches can be based on market research, or on the cost to the research site for specific activities.

Generally, research sites are discouraged from using historical rates or “opportunity costs” (what would you be doing if you weren't doing this?). Independent FMV consultants can provide this service.

While the nuances of the guidance may be evolving, clinical researchers can feel confident in developing and defending their research budgets if they use a consistent and transparent framework that establishes fair market value.

Alex Morillo is program director for Medicare coverage analysis at the Biomedical Research Alliance of New York.