HHS OIG Clarifies Scope Of Discount Safe Harbor In Advisory Opinion

On December 15, 2025, the U.S. Department of Health and Human Services' Office of the Inspector General (OIG) issued a favorable advisory opinion analyzing four vaccine discount arrangement structures detailed below (collectively, the Discounts), concluding that while the Discounts implicate the Federal Anti-Kickback Statue (AKS), OIG would not impose administrative sanctions under the AKS for any of the Discounts, either because they are protected by the discount safe harbor or otherwise present a low risk of fraud and abuse, as described in more detail below.

Of particular note, the advisory opinion is one of OIG's clearest articulations of the parameters of the discount safe harbor and clarifies that volume-based and market share-based discounts may qualify for safe harbor protection, if other elements of the safe harbor are satisfied. OIG emphasized that Requestor certified that no services, including promotional activities or switching patients from one product to another, are required to obtain any of the price reductions described in the advisory opinion. If any services were required to obtain the price reductions, OIG stated that the remuneration would not meet the definition of a "discount," and it might opine differently on the arrangement.

The advisory opinion addresses Requestor's arrangements with a variety of customer types that acquire and administer vaccines, including retail pharmacies, Group Purchasing Organizations, integrated delivery networks, long-term care facilities, physician buying groups, mass immunizers, physician practices, and other health care provider customers. While these arrangements include entities affiliated with pharmacy benefit managers (PBMs), the advisory opinion does not address rebate arrangements with PBMs or payors. The vaccines included in the Discount arrangements are (i) Vaccine A; (ii) Vaccine B; and (iii) Vaccine C (collectively, the Vaccines). Vaccine A and Vaccine C are reimbursed under Medicare Part B, and Vaccine B is reimbursed under Medicare Part D; the Vaccines also are reimbursable by other federal health care programs.

Requestor Safeguards for All Categories of Discounts

Requestor has implemented a number of safeguards applicable to each category of Discounts, including:

• In general, ensuring the terms of the Discount arrangement are set in advance pursuant to a written agreement with the customer;
• Providing customers the information necessary and notification of their reporting obligations in written agreements and invoices as applicable, to ensure customers can properly disclose and appropriately reflect the Discounts on applicable cost reports or claims submitted to federal health care programs;
• Contractually requiring Group Purchasing Organizations and physician buying group customers to inform their members of their obligations to report price concessions on purchases to payors;
• Prohibiting Requestor personnel from discussing service agreements or any other items of value in connection with the Discounts;
• Prohibiting Requestor personnel from making any written or unwritten agreements with customers not reflected in the terms of the written Discount agreement;
• Enacting safeguards to prevent Requestor personnel from "marketing the spread" and engaging in swapping arrangements;
• Conducting ongoing compliance monitoring of field personnel and internal training programs; and
• Having contractual terms with customers clarifying that the Discounts are not contingent on any performance, switching, or conversion requirements.

Upfront Vaccine Discounts

Requestor offers Upfront Discounts based solely on a certain percentage of the Vaccine A list price or expressed as a specific contract price. Such Upfront Discounts may include flat discounts that are a certain percentage off of Vaccine A's list price, prompt payment discounts, and supply reservation discounts. OIG found that each of the Upfront Discounts in this category meets the definition of "discount" under the discount safe harbor and is protected by the safe harbor.

Upfront Discounts With Purchase Requirement

Requestor offers another category of Upfront Discounts that offers a certain percentage off of Vaccine A's list price that is also contingent on the customer having satisfied certain purchase requirements (e.g., market share or volume purchase requirements) during a prior measurement period. OIG concluded that each of the Upfront Discounts in this category also meets the definition of "discount" under the discount safe harbor because they are not contingent on any services from the customer (e.g., marketing the vaccines or interventions to switching patients from one product to another). Moreover, while a Discount agreement may require a product to be "preferred" in order to obtain the Discount, the agreements do not limit the sale of any competing products or require purchasing exclusivity.

Thus, OIG concluded the Upfront Discounts also are protected by the discount safe harbor.

Upfront Bundled Discounts With a Purchase Requirement

This category of Upfront Discounts includes offers of specified percentages off of the Vaccine A list price and Vaccine B and/or Vaccine C list prices that are known and applied at the time of purchase and contingent on meeting certain purchase requirements across two or three of the vaccines during a prior measurement period (Upfront Bundled Discounts).

OIG found that because the purchasing requirements bundle two or three of the Vaccines that are reimbursed under two different methodologies, this category of discounts does not meet the definition of "discount" in the safe harbor. OIG noted its concerns about discounts on bundled items when the bundled items are reimbursed under two different reimbursement systems, such that a discount on one product is used to induce purchases of other products for which the federal health care programs pay the full price, because these bundled discounts shift costs among reimbursement systems or distort the true costs of all items.

Nonetheless, OIG concluded that while the Upfront Bundled Discounts in this category do not meet the definition of "discount," they present sufficiently low risk of fraud and abuse under the AKS.

OIG found that the market share or volume requirements are clear for each of the Vaccines in the bundle, and the resultant upfront percentage price reduction also is clear. These Upfront Bundled Discounts are readily attributable to each separately billable product, and each Medicare reimbursement system (Parts B and D) equally benefits from the Discount, which was the same percentage across products. OIG also noted that Requestor discounts each Vaccine in the bundle, which distinguishes the Upfront Bundled Discounts in this category from arrangements in which a seller offers a deep discount on one product to induce the full price purchase of a different product, potentially distorting prices on both products.

In its analysis, OIG also noted that each of the Vaccines has at least one competing vaccine with a list price similar to Requestor's Vaccines, which decreases the risk that these bundled discounts obscure the pricing of the individual Vaccines in the bundle with the purpose of raising prices or maintaining a higher list price.

Bundled Rebates

Requestor offers bundled Rebates involving a certain percentage off the Vaccine A list (or contract) price and the Vaccine B and/or Vaccine C list (or contract) prices where: (i) the percent and terms are fixed and disclosed in writing in advance of any purchase; (ii) the Rebates are contingent on satisfying certain purchase requirements (i.e., market share or volume purchase requirements for two or more of the Vaccines) during a measurement period; and (iii) the Rebate is provided for units purchased during the measurement period. These Upfront Discounts include: (i) bundles of products reimbursed by the same federal health care program using the same methodology (i.e., bundles with Vaccine A and Vaccine C, both of which are reimbursed under Medicare Part B); and (ii) bundles of products reimbursed by the same federal health care program using a different methodology (i.e., a combination of Medicare Parts B and D). Certain of the Bundled Rebate arrangements allow Requestor to lower purchase requirements during the contract term to account for evolving market dynamics.

Non-Fixed Terms: OIG found that some of the Bundled Rebates in this category did not meet the discount safe harbor requirement that the terms of the rebate be fixed and disclosed in writing to the buyer at the time of the initial purchase to which the rebate applies. Specifically, for Bundled Rebates where the terms changed after the initial purchase was made, the Bundled Rebates did not meet the discount safe harbor criteria. Nonetheless, OIG concluded that where the terms are not fixed at the time of the initial purchase (i.e., the agreement specifies that there may be changes made to meet competition), the risk of fraud and abuse is sufficiently low, for a few reasons. First, the customer is aware before the time of initial purchase that changes may be made to the terms of the discount. Second, allowing the terms to adjust to, for example, meeting competition, might increase patient choice, e.g., if Requestor lowers the number of units a customer must purchase to qualify for a Rebate, then the customer may be more likely to keep both Requestor's and its competitors' vaccines in stock rather than being incentivized to stock and sell more of Requestor's Vaccines (instead of a competitor's vaccines) to meet the preset volume or market share requirements to obtain the Rebate.

Fixed Terms: OIG found that certain of the Bundled Rebates do meet the discount safe harbor criteria. When there is no adjustment to the Rebate terms during the contract year, and when the bundle includes only Vaccine A and Vaccine C, both of which are reimbursed by Medicare Part B, the Rebates meet the definition of a "discount" under the safe harbor. Such Rebates are protected by the safe harbor.

OIG stated that its analysis of the Rebates that are bundled where the Vaccines are not reimbursed by the same methodology is the same as for the bundled Upfront Discounts: while these Rebates do not meet the definition of a "discount" under the safe harbor, OIG believes the risk of fraud and abuse is sufficiently low for OIG to issue a favorable opinion for the same reasons.

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