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Natures of Payment


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Natures of Payment

The chart below gives definitions and examples of the natures of payment to help you better understand the context of financial transactions between the companies that make payments and those who receive them.   The definitions were chosen through our work with stakeholders.

The examples in this table are for illustrative and educational purposes only and are not all-inclusive.

Nature of payment

Definition

Examples

Consulting fee

 
Payments made to physicians for advice and expertise on a particular medical product or treatment, typically provided under a written agreement and in response to a particular business need. These payments often vary depending on the experience of the physician being consulted. Example 1: Company A has developed a drug to treat patients with a particular disease and wants advice from physicians on how to design a large study to test the drug on patients. Dr. J has a large number of patients with this disease and has experience doing research on how well medicines work for this condition. Company A asks Dr. J if he would spend about 10 hours per month to work with other physicians to create a new research study. Dr. J agrees and is paid for his time.

Example 2: Company C has designed a new tool for surgeons to use when they are doing heart surgery. The company pays some physicians to give the new tool a “test drive” on a computer-simulated patient at the company headquarters. The physicians are paid an hourly fee for their time testing the tool and giving advice on how to make it work better. They are also paid for flights, hotel rooms and meals.
Compensation for services other than consulting, including serving as faculty or as a speaker at an event other than a continuing education program. Payments made to physicians for speaking, training, and education engagements that are not for continuing education. A physician who frequently prescribes a particular drug is invited by the company that makes that drug to talk about the medicine to other physicians at a local restaurant.  The physician is paid for preparation time as well as the time spent giving the talk.
Honoraria

 
Similar to consulting fees, but generally reserved for a one-time, short duration activity. Also distinguishable in that they are generally provided for services which custom prohibits a price from being set. A medical device manufacturer representative goes to a medical meeting and asks some physicians there for an hour of their time to talk about features they would like to see to improve a particular device. This representative pays each physician a one-time honorarium.
Gift

 
A general category, which will often include anything provided to a physician or teaching hospital that does not fit into another category. Promotional items such as clocks or flash drives that have the company’s name printed on them.
Entertainment
 
Attendance at recreational, cultural, sporting or other events that would generally have a cost. Tickets to sporting events, concerts or theater shows.
Food and beverage
 
Food and beverage. A sales person from a drug manufacturer asks a physician if they can talk with them about a new drug. They meet over lunch, and the salesperson pays for the meal.
Travel and lodging
 
Travel and lodging A medical device company does yearly training events for physicians on how to use their device on patients. The company flies physicians to their headquarters for the training, and pays for their hotel rooms.
Education

 
This category generally includes payments or transfers of value for classes, activities, programs or events that involve the imparting or acquiring of particular knowledge or skills, such as those used for a profession. This category can include things like textbooks and medical journal articles. Companies that produce or sell drugs or devices for a particular medical condition may offer textbooks to physicians, free of charge, related to the latest treatments for that condition.
Research Payment for different types of research activities, including enrolling patients into studies of new drugs or devices. Research payments can include direct compensation to physicians, funding for research study coordination and implementation, or payments to study participants to cover expenses associated with the study.
Charitable contribution Any payment or transfer of value made to an organization with tax-exempt status under the Internal Revenue Code of 1986, but only if it is not more specifically described by one of the other nature or payment categories. A device manufacturer donates funds to a teaching hospital to help pay for a health education program.
Royalty or license

 
Royalty or other payment based on sales of products that use a physician’s intellectual property. A device manufacturer may promise a certain amount of payment in royalties – 1% of all device sales, for example – to a physician who worked with the device manufacturer to invent a new product.
Current or prospective ownership or investment interest

 
Ownership or investment interests currently held by physicians and teaching hospitals, as well as ownership interests or investments that physicians and teaching hospitals have not yet exercised. Dr. M has learned of a drug company that is developing a new antibiotic medicine.  Dr. M thinks the drug might become a success, and asks the company if he can invest in it. The company agrees, and Dr. M ends up owning a percentage of the company.
Compensation for serving as faculty or as a speaker for an unaccredited and non-certified continuing education program Compensation for serving as faculty or as a speaker for an unaccredited and non-certified continuing education program Drug company Y gives money to a teaching hospital to help pay for the hospital’s annual course for its physicians. The course is an update on the latest treatments for diseases.
Compensation for serving as faculty or as a speaker for an accredited or certified continuing education program Compensation for serving as faculty or as a speaker for an accredited or certified continuing education program Drug Company X gives money to a society to organize a continuing education program on a particular condition that Drug Company X produces a drug to treat. The company recommends Dr. C be chosen as one of the lecturers. Because the company specifically recommended the use of Dr. C, they must report the speaking fee under Dr. C’s name.
Grant Payments to a physician or teaching hospital in support of a specific cause or activity. Company A gives a grant to a teaching hospital to pay for part of the cost of special training for physicians who want to learn more about how to perform surgeries to give patients Company A’s device.
Space rental or facility fees Fees for renting space or facilities, in a teaching hospital, for example. A drug manufacturer wants to give physicians at a teaching hospital training on the administration of their drug, so they pay a teaching hospital for one day’s use of space within the hospital to conduct the training.

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