Trade relations
Bona Fide Service Fee (BFSF) Advisory
Test distribution and pharmacy fees against the four bona fide service fee criteria.
Definition
What is a bona fide service fee?
A bona fide service fee (BFSF) is a fee a drug manufacturer pays an entity, such as a wholesaler or specialty pharmacy, for an itemized service actually performed on the manufacturer's behalf. To qualify, the fee must be at fair market value, cover a service the manufacturer would otherwise perform or contract for, and not be passed on to the entity's customers.
Fees that meet every criterion can be excluded from average manufacturer price (AMP) and best price calculations under Medicaid Drug Rebate Program rules, which is why the documentation matters.
BFSFs sit inside the gross-to-net model because every fee changes net revenue. Related distribution work appears under trade relations.
Engagements on this topic are led by Osama M. Elhelw, RPh, LSSBB, Managing Partner of HealthBridge Consulting. View credentials and licenses.
| Criterion | Question to ask | Evidence to keep |
|---|---|---|
| Fair market value | Would an unrelated party pay about the same amount for the same service? | Benchmark study or comparable contracts |
| Itemized service actually performed | Is each service described and documented as delivered? | Service descriptions, activity reports, and invoices |
| Service the manufacturer would otherwise perform | Would the manufacturer need to do or buy this service without the arrangement? | Business rationale memo |
| Not passed on | Is any part of the fee passed on to the entity's customers? | Contract terms and written attestations |
General information based on the Medicaid Drug Rebate Program definition, not legal advice. Final determinations belong to your legal and compliance teams.
Our approach
How we will approach bona fide service fees
Step 01
Inventory every fee
- We will list every fee paid to wholesalers, distributors, specialty pharmacies, and group purchasing organizations.
- We will map each fee to its contract and the service it covers.
Step 02
Test each fee
- We will test each fee against the four criteria.
- We will flag fees that need a closer legal review.
Step 03
Build the file
- We will assemble the documentation file for each arrangement, including fair market value support.
- We will standardize service descriptions and reporting.
Step 04
Monitor changes
- We will set an annual review and a trigger list for contract changes.
- We will track new services added to existing agreements.
Keep reading
Related guides
Questions about bona fide service fees
Who typically receives bona fide service fees?
Wholesalers, distributors, specialty pharmacies, group purchasing organizations, and similar entities that perform services for manufacturers can receive them. The treatment depends on the service and the contract terms, not the type of entity.
Why do BFSFs matter for best price and AMP?
Payments that act as price concessions can lower best price or AMP and change Medicaid rebate obligations. Fees that qualify as bona fide service fees are excluded from those calculations.
Is a fee a BFSF just because the contract calls it a service fee?
No. The label in the contract does not decide the treatment. The arrangement has to meet each criterion, and the evidence has to support it.
Does HealthBridge Consulting provide legal advice?
No. The firm prepares the operational analysis and documentation for your legal and compliance teams, who make the final determination.
Talk to us about bona fide service fees
Tell us about your organization and we will respond within 24 business hours.