Open Payments Natures of Payment
Natures of Payment – New Video
Open Payments has released a new, short video with general information about the nature of payment categories.
Natures of Payment
These definitions and examples were chosen based on input from Open Payments stakeholders. They are for illustrative and educational purposes only and are not all-inclusive.
Definition: Buyout payments made to covered recipients who have ownership interest in a company that has been acquired.
Example: A drug manufacturer buys a share of ownership in a company that is at least partially owned by a physician or a physician’s immediate family member.
- Charitable contribution
Definition: A payment or transfer of value made to an organization with tax-exempt status under the Internal Revenue Code of 1986. Charitable contributions do not include payments or transfers of value that would be more specifically described by one of the other payment categories.
Example: A medical device manufacturer donates funds to a teaching hospital to help pay for a health education program.
- Compensation for non-consulting services (e.g., faculty/speaker at an event other than a continuing education program)
Definition: Includes payments that a company makes to physicians for speaking, training, and education engagements that are not for continuing education.
- Compensation for serving as faculty or as a speaker for a medical education program*
Definition: Compensation for serving as faculty or as a speaker for medical education program.
Example: 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.
- Consulting fee
Definition: A payment that a company makes to a physician for advice and expertise about a medical product or treatment. Consulting fees are typically arranged with a written agreement between a company and physician based on the company’s particular business needs. These payments often vary depending on the consulting physician’s expertise.
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 researching medicines that could treat this condition. Company A asks Dr. J if she 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 her time.
Example 2: Company B has designed a new tool for surgeons to use when they perform heart surgery. Company B 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 to test the tool and provide feedback on how to make it work better. They are also paid for flights, hotel rooms, and meals.
Example 3: Company C makes a drug and invites a physician who frequently prescribes the 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.
- Current or prospective ownership or investment interest
Definition: Ownership or investment interest currently held by physicians and teaching hospitals, as well as ownership or investment interest that could potentially be held by physicians and teaching hospitals.
Example: Dr. M hears about a new antibiotic that Pharmaceutical Company F is developing. Dr. M thinks the drug might become successful and asks if he can invest in Company F. Company F agrees, and Dr. M ends up owning a percentage of Company F.
- Debt forgiveness*
Definition: Forgiving the debt of a covered recipient, a physician owner, or the immediate family of the physician.
Example: A physician owes Company A an amount of money for medical supplies. Company A forgives the debt so that the physician can keep the supplies without providing payment.
Definition: Payments or transfers of value for classes, activities, programs, or events that involve learning or teaching a profession skill. This payment can include things like textbooks and medical journal articles.
Example: 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.
Definition: Attendance at recreational, cultural, sporting or other events that would generally have a cost.
Example: A physician receives tickets to a local football game from a device manufacturer that owns season tickets.
- Food and beverage
Definition: Food and beverage.
Example: A drug manufacturer salesperson asks to speak with a physician about a new drug. The salesperson and physician meet for lunch, and the salesperson pays for the meal.
Definition: A general category which includes anything a company provides to a physician or teaching hospital that does not fit into another category.
Example: Promotional items such as clocks or flash drives that have the company’s name printed on them.
Definition: A payment to a physician or teaching hospital to support a specific cause or activity.
Example: Company G is a medical device manufacturer. Company G gives a grant to a teaching hospital to pay for special training for physicians who want to learn more about how to perform surgeries to give patients Company G’s device.
Definition: Similar to consulting fees, but generally reserved for a brief, one-time activity. Another distinction is that honoraria are generally provided for services without a set price.
Example: A medical device manufacturer representative goes to a medical meeting. At the meeting, the representative asks physicians for an hour of their time to talk about features they would like to see on a particular medical device. The representative pays each physician a one-time honorarium.
- Long-term medical supply or device loan*
Definition: The loan of supplies or a device for 91 days or longer.
Example: A device manufacturer lends one of its devices to a teaching hospital for 120 days.
Definition: Payments for different types of research activities, including the time a physician spends enrolling patients in studies for 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.
Example: A physician wants to study treatments for a specific ailment. Pharmaceutical Company H is interested in the results and offers to provide funds for the incentives the physician uses to recruit participants.
- Royalty or license
Definition: Payments based on sales of products that use a physician’s intellectual property.
Example: 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.
- Space rental or facility fees
Definition: Payments for fees associated with renting a space or facility (such as a teaching hospital).
Example: A drug manufacturer wants to offer training to physicians on how to administer a drug. The drug manufacturer pays a teaching hospital to reserve space within the hospital to conduct the training.
- Travel and lodging
Definition: Any compensation for costs associated with travel, such as hotel fees, airfare, mileage, and cab fare.
Example: A medical device company offers yearly training events for physicians on how to use their device on patients. The medical device company pays for the physicians’ airfare and hotel rooms when the physicians travel to the medical device company’s headquarters for the training.
*These natures of payment categories are added or updated as of January 1, 2021.
Reporting requirements added for Program Year 2021 are not retroactive, meaning these program updates are applicable to Program Year 2021 and subsequent program years.