HHS-OIG Issues Favorable Opinion On Vaccine Manufacturer Offering Upfront Discounts And Rebates To Customers For Vaccines

Highlights

• The proposed arrangement included safeguards, HHS-OIG said, that limited risk under the Anti-Kickback Statute and accordingly did not warrant sanctions.
• It also did not require customers to purchase services from the manufacturer and did not pose a risk of patient steering to the manufacturer's vaccines.

The U.S. Department of Health and Human Services' Office of Inspector General (HHS-OIG) recently released Advisory Opinion No. 25-11, a favorable opinion regarding the federal Anti-Kickback Statute (AKS) as applied to a biopharmaceutical manufacturer that manufacturers certain vaccines offering discounts and rebates on vaccines reimbursable under federal health care programs to its customers.

Background

The proposed arrangement involves a biopharmaceutical manufacturer that manufacturers certain messenger RNA vaccines that are reimbursed under Medicare Part B, Medicare Part D, and other federal healthcare programs. Each of the vaccines has at least one competing vaccine with a list price similar to the manufacturer's vaccines.

The manufacturer's customers for these vaccines include retail pharmacies and non-retail pharmacies, which includes group purchasing organizations (GPOs), integrated delivery networks (IDNs), long-term care facilities, physician buying groups (PBGs), mass immunizers, and healthcare providers and physician practices.

The manufacturer offers assistance through upfront discounts and rebates (collectively, the "Discounts"):

1. Upfront Vaccine Discounts: A certain percentage off the list price or contract price for a vaccine, with no minimum purchase required. The discount percentage is known and applied at the time of purchase.
2. Upfront Discounts with a Purchase Requirement: A certain percentage off the list price of a single vaccine, contingent on the purchaser satisfying a certain purchase requirement (e.g., a purchaser's market share or a volume purchase requirement for the specific vaccine), during a prior measurement period (e.g., the prior quarter or a six-month period). The discount percentage is known and applied at the time of purchase subject to satisfaction of such contingencies.
3. Upfront Bundled Discounts with a Purchase Requirement: A specified percentage off two or more vaccine list prices, contingent on the purchaser satisfying certain purchase requirements for the specific vaccines, during a measurement period. This category includes bundles of products reimbursed by the same federal healthcare program using the same methodology (e.g., two vaccines reimbursed under Medicare Part B) and bundles of products reimbursed by the same federal healthcare program using different methodologies (e.g., one vaccine reimbursed under Medicare Part B and one vaccine reimbursed under Medicare Part D).
4. Bundled Rebates: A certain percentage off the list price or contract price for multiple vaccines where: (i) the percentage and terms are fixed and disclosed in writing in advance of a purchase, (ii) the rebates are contingent on satisfying certain purchase requirements during a measurement period, and (iii) the rebate is provided for units purchased during the measurement period. This category includes bundles of products reimbursed by the same federal health care program using the same methodology (e.g., two vaccines reimbursed under Medicare Part B) and bundles of products reimbursed by the same federal health care program using different methodologies (e.g., one vaccine reimbursed under Medicare Part B and one vaccine reimbursed under Medicare Part D).

HHS-OIG's Findings

In this instance, HHS-OIG found that the proposed arrangement implicates the AKS as the furnishing of additional (non-medical) services constitutes remuneration to customers in the form of an upfront discount or rebate on the price of vaccines, in exchange for customers' agreement to purchase the vaccine.

However, HHS-OIG found that the proposed arrangement meets the conditions of the discount safe harbor, solely with respect to the upfront Discounts and the bundled rebates where the terms do not change after the initial purchase, because the manufacturer is a "seller", the upfront Discounts qualifies as a "discount" under the safe harbor.

Although the bundled discounts and bundled rebates where the terms change after the initial purchase do not qualify as "discounts" under the safe harbor, and therefore do not satisfy the discount safe harbor, HHS-OIG found that these price reductions pose a sufficiently low risk of fraud and abuse.

In concluding that the manufacturer is a "seller" under the AKS safe harbor, HHS-OIG found that the manufacturer met all of its obligations. Specifically:

• The manufacturer provides all customers the information necessary, including the Discount terms, and notifies customers of their reporting obligations in the written agreements and invoices, applicable, to ensure customers can properly disclose the on applicable cost reports or claims submitted to federal healthcare programs.
• With respect to Discounts that are contingent on a purchase requirement, before the Discount period begins and at the end of each performance period, the manufacturer sends an explanation of the Discount program tier for which the customer has qualified and the total Discount to which the customer is entitled.
• With respect to rebates, at the end of each performance period, the manufacturer sends each participating customer a report that includes the customer's total qualifying purchases for a rebate and a calculation of the total rebate to which the customer is entitled.
• The manufacturer complies with all price reporting requirements for pharmaceutical manufacturers under all federal and state healthcare programs.
• The manufacturer refrains from doing anything that would impede the customer's reporting obligations.

With respect to the upfront vaccine discounts and the upfront discounts with a purchase requirement, HHS-OIG concluded that these qualify as "discounts" under the AKS safe harbor because the price reduction is known and applied at the time of purchase and are not contingent on the customer purchasing services from the manufacturer.

As for the bundled rebates where the terms of the rebate do not change after the initial purchase, HHS-OIG concluded that these rebates qualify as "discounts" under the AKS safe harbor because the terms are fixed and disclosed in writing to the customer at the time of the initial purchase to which the discount applies.

Regarding the bundled discounts and bundled rebates that involve a change in the rebate terms after an initial purchase, HHS-OIG concluded that these do not qualify as "discounts" because a bundle could include vaccines reimbursed under two different methodologies, which is explicitly excluded from the definition of "discount" in the safe harbor because bundled discounts shift costs among reimbursement systems (e.g., Medicare Part B and Medicare Part D) and make it difficult to determine the net price of any item for reporting purposes.

However, in this case, the price reductions for such bundled discounts or rebates apply equally to each applicable reimbursement methodology, and there is at least one competing vaccine with a similar list price to the manufacturer's list price. Thus, HHS-OIG concluded that the risk of fraud and abuse is sufficiently low under the AKS.

An additional factor that HHS-OIG relied on in determining that the proposed arrangement poses low risk of fraud and abuse, overall, was that none of the Discounts are contingent on the customer providing any additional services or taking any steps to promote any of the vaccines or otherwise engaging in switches or therapeutic conversions.

HHS-OIG ultimately concluded that the proposed arrangement poses low risk of fraud and abuse due to the safeguards the manufacturer has in place. However, HHS-OIG noted that if customers were required to purchase services from the manufacturer in order to receive a Discount, the arrangement would no longer fall under the discount safe harbor and/or would not be considered sufficiently low risk.

Key Takeaways

In this Advisory Opinion, HHS-OIG approved a vaccine manufacturer's discount and rebate programs offered to customers, even though the programs did not all meet the conditions under an AKS safe harbor. In doing so, HHS-OIG opened the door for other different discount and rebate arrangements and reiterated the importance of safeguards in developing and effectuating such programs to reduce fraud and abuse risk under the AKS.

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