Demystifying Fair Market Value

Ask any biopharmaceutical sponsor or investigative site what the term “fair market value” (FMV) means, and you will receive a myriad of explanations and differing opinions on the implications and concerns as FMV pertains to clinical trial budget negotiations. Confusion exists over the definition of FMV, how this affects sponsors and sites, and the implications of noncompliance, among other things. Though not intended to represent official legal or regulatory advice, this article attempts to demystify some basic factors related to FMV principles, with the goal of fostering improved understanding and dialogue on such issues as:

• What does FMV mean?
• Why is it of importance/concern to the pharmaceutical industry?
• How is it determined?
• What do sponsors need to consider to ensure they are in compliance?
• What can investigative sites do to support the budget negotiation process in light of FMV guidelines?

Though not a new concept to the clinical research industry per se, FMV is a growing hot button issue for biopharmaceutical and device sponsors and investigative sites in today’s competitive and cost-constrained environment. Because there is a lack of clarity and understanding on many aspects of FMV, different parties have different interpretations of the “letter and spirit” of FMV guidelines. The result is that budget negotiations are protracted, study startup comtimelines are delayed, and, in some cases, successful agreement on investigative site budgets cannot be achieved. Although the principles of FMV, anticorruption, and antibribery rules and regulations apply globally, due to space limitations, this article focuses primarily on the factors influencing FMV determination and compliance requirements in the United States.

Why is FMV of Importance and Concern to the Pharmaceutical Industry?
Relationships with healthcare professionals and healthcare organizations are under significant scrutiny by regulators at both the federal and state levels. The trend is clear: Enforcement activity will focus increasingly on holding individuals responsible for the legitimacy of relationships between pharmaceutical companies and the physician-consultants they engage. The bottom line is that sponsors face criminal and financial penalties if they fail to comply with the FMV guidelines and regulations.