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Many mortgage lenders/brokers treat their loan officers (who are their salespersons) as independent contractors. Those loan officers are paid on a commission based on the successful funding of a loan. The mortgage lenders/brok

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ers pay the loan officers either as each transaction closes or on a periodic basis. The amount paid to the loan officer contains no deduction for federal, state or local taxes. Frequently, the loan officer does not receive any

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

benefits, such as company-paid health insurance or paid sick or vacation time. At the end of each year, the mortgage lenders/brokers issue IRS Form 1099s to their loan officers.

As a mortgage lender/broker, you cannot classify

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

hether your loan officers are independent contractors or employees. That task has been given to the Internal Revenue Service, the U.S. Department of Labor, your state unemployment insurance agency, your state department of labor

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

and your state workers compensation insurance agency. Although each agency has its own guidelines, typically the determination turns on the degree of control that the mortgage lender/broker exercises and the degree of independe

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ce that the loan officer enjoys. When the mortgage lender/broker has the right to dictate what will be done and how it will be done, then the loan officer is an employee. The government agencies look at facts concerning the beh

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

avioral control of the loan officer, the financial control of the loan officer and the relationship between the mortgage lender/broker and the loan officer. The Internal Revenue Service has a 20 factor test to determine whether

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

an employer/employee relationship exists. Such factors include whether the loan officer has to comply with instructions, gets training from the mortgage lender/broker, works exclusively for the mortgage lender/broker, whether th

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

loan officer can independently hire assistants, whether the loan officer has set hours of work, whether there is a continuing relationship, and whether regular reports must be given to a supervisor. The IRS seems to have a bias

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

towards finding an employer-employee relationship. Even if the mortgage lender/broker has a written agreement with the loan officer classifying him/her as an independent contractor, that is not binding on any federal or state a

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ency.

If you have been treating your loan officers as independent contractors, when in reality, they pass the 20 factor test as employees, what are the ramifications? If the Internal Revenue Service or Department of Labor find

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

you have misclassified employees, they will require you to pay back withholding taxes plus interest, or they can assess fines that can bankrupt a company, or even file criminal charges against the owners. Once the IRS has come i

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

n, other federal and state agencies follow right behind them and assess their fines and penalties as well. If there is anything left, the loan officer can sue for unemployment compensation, retirement benefits, profit sharing, v

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

cation pay, disability or any other benefit that he/she would have received as an employee. Many mortgage companies have gone out of business because they treated many of their loan officers as independent contractors and did no

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

t comply with wage-and-hour laws

How does the Internal Revenue Service or Department of Labor find out about you? Usually, a dismissed loan officer will file for unemployment benefits or a disgruntled loan officer will make a t

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

lephone call to the agency. And the agency will always follow up.

You should also be aware that the agency that approved your lender/broker license considers the loan officers to be employees because you have responsibility for

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

their actions. Although some states do not require that the loan officers be W-2 employees, they will not care how you classify the loan officer who is in regulatory hot water. The Banking Departments are concerned that your co

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

mpany supervises the people operating under the auspices of your license. This requires that you supervise the activities of your loan officers regardless of whether you pay them as employees or as independent contractors. After

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ll, you are responsible for any violations of the mortgage lender/broker law, rules and policies committed by anyone, including a loan originator, operating under your license. Therefore, it's in your best interests to supervise

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

them.

This Article is designed to be of general interest. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal and accounting adviser

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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