OIG Analyzes Market Share Rebates and Bundled Discounts Under the Discount Safe Harbor

Firm Publication

On December 18, 2025, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published favorable Advisory Opinion 25-11, approving various discount structures, including bundled discounts and rebates contingent on achieving market share requirements, a biopharmaceutical manufacturer (Requestor) offers its customers on three vaccines (Arrangement). This opinion is noteworthy because it offers helpful insight into OIG’s current perspective on discounts and rebates that are contingent on achieving specified market share thresholds for products reimbursed under different federal healthcare program methodologies. Although OIG determined that the Arrangement does not qualify for protection under the federal Anti-Kickback Statute’s (AKS’s) discount safe harbor, it concluded the Arrangement nonetheless poses a low risk of fraud and abuse under the AKS. Because OIG analyzed the Arrangement’s individual facts and circumstances, it did not acknowledge or address recent caselaw holding that the AKS statutory exception for discounts provides a separate and independent basis for protection for certain discount arrangements. By declining to directly address this caselaw, OIG leaves the door open to arguments that certain market share rebates and bundled discount arrangements may be protected by the statutory exception.

The Arrangement

Under the Arrangement, Requestor offers various discounts to its customers, including bundled upfront discounts and bundled rebates, both of which are contingent on satisfying certain market share or volume purchase requirements (Bundled Upfront Discounts and Bundled Rebates, respectively). Two of the vaccines eligible for the Bundled Upfront Discounts and Bundled Rebates are reimbursable under Medicare Part B, and the third is reimbursable under Medicare Part D. Each vaccine in a bundle is subject to a discount, and both the market share or volume requirement and the upfront discount or rebate for each vaccine are set in advance, although Requestor’s agreements with some of its customers allow Requestor to increase the discount or lower the market share requirement on a go-forward basis after providing advance notice to the customer to account for evolving market dynamics. Requestor adheres to the discount safe harbor’s reporting requirements, including disclosing discount amounts on customer invoices and informing customers that they may be obligated to report the discounts to payors.

Each of the vaccines has at least one competing vaccine with a list price comparable to Requestor’s vaccines. Requestor’s customers are neither required nor permitted to provide any services, including any marketing activities or switching patients from one product to another, in connection with the Arrangement. Finally, Requestor implemented various other safeguards, including internal training programs, compliance monitoring of field personnel, and policies prohibiting personnel from “marketing the spread,” to further reduce the risk of fraud and abuse associated with the Arrangement.

OIG’s Analysis

Like virtually all discount arrangements, the Arrangement implicates the AKS because the discounts Requestor offers are intended to induce customers to purchase its vaccines. While OIG concluded that the Bundled Upfront Discounts and Bundled Rebates do not satisfy the Safe Harbor’s definition of “discount,” it concluded that the risk of fraud and abuse posed by the Arrangement is sufficiently low under the AKS to garner a favorable opinion.

OIG first noted that, because the Bundled Upfront Discounts bundle vaccines that are reimbursable under different federal healthcare program methodologies, they cannot meet the Safe Harbor’s definition of “discount,” which excludes “[s]upplying one good or service without charge or at a reduced charge to induce the purchase of a different good or service, unless the goods and services are reimbursed by the same Federal health care program using the same methodology.” However, OIG reasoned that the Bundled Upfront Discounts are sufficiently low risk under the AKS because:

  1. The discounts are readily attributable to each separately billable item, and each Medicare reimbursement system benefits equally from the discount.
  2. Requestor discounts each vaccine in the bundle (as opposed to offering a discount on one product to induce the full purchase price of a different product).
  3. Each vaccine has at least one competing vaccine with a list price that is similar to Requestor’s vaccines, which lowers the risk that the discounts disguise pricing of any vaccine in the bundle to raise prices or maintain a higher list price.

With respect to the Bundled Rebates, OIG noted that the Safe Harbor’s definition of “rebate” requires the price reduction to be a “discount the terms of which are fixed and disclosed in writing to the buyer at the time of the initial purchase to which the discount applies, but which is not given at the time of sale.” Although certain Bundled Rebates do not meet this definition because their terms are not fixed at the time of the initial purchase, OIG nevertheless concluded such rebates are sufficiently low risk under the AKS because the customers are aware before the time of their initial purchases that Requestor may adjust the terms of the discounts and because such adjustments might increase patient choice.

OIG noted in a footnote that, although price reductions based on market share may result in customers choosing to stock Requestor’s vaccines over its competitors’ vaccines, the Arrangement does not require customers to switch from competitors’ vaccines to Requestor’s vaccines or to exclusively purchase Requestor’s vaccines to receive the discounts or rebates. OIG also noted that it would have reached a different conclusion if any services—including any marketing services or utilization management requirements that could impede use of a competitor’s product—were required to qualify for the Bundled Upfront Discounts or Bundled Rebates. This caveat highlights OIG’s long-standing concerns about discount arrangements that create inappropriate financial incentives to limit or influence the products an entity makes available to patients.

Takeaways

Although this opinion is limited to Requestor and the particular facts and circumstances at issue, it offers insight regarding how OIG may view similar arrangements. In particular, this opinion offers comfort that market share rebates—which have been the target of various government enforcement actions, including a 2014 settlement with Omnicare Inc.—can be structured compliantly. Although such arrangements may not satisfy the discount safe harbor’s requirements, they may pose a low risk of fraud and abuse under the AKS as long as they are not paired with agreements for marketing or switching services and include certain other safeguards.

Notably, OIG did not directly address whether the AKS statutory exception for discounts would protect the Upfront Bundled Discount and Bundled Rebates in this opinion. OIG’s longstanding position has been that the AKS discount safe harbor interprets and expands upon the statutory exception. A federal court recently held that, because the safe harbor expands upon the statutory exception by defining additional discounting practices that are not included in the statutory exception, the exception provides an independent basis for protection. See United States ex. rel. Schroeder v. Hutchinson Reg’l Med. Ctr., No. 17-2060-DDC-BGS, 2024 WL 4298655, at *28 (D. Kan. Sept. 26, 2024). If the safe harbor does, in fact, expand upon the statutory exception’s protections by defining additional discounting practices not included in the exception, one might have expected OIG to analyze the Arrangement under the statutory exception before moving to a facts-and-circumstances analysis. Because OIG did not acknowledge or address Shroeder, it also left the door open to arguments that bundled discounts and market share rebates that do not satisfy the discount safe harbor’s requirements may be protected by the statutory exception.

Entities that are considering offering or accepting market share or bundled price concessions may wish to consider implementing safeguards similar to those included in the Arrangement, including:

  • Ensuring each product in a bundle is subject to a discount or rebate. While bundled arrangements that include both discounted and non-discounted products arguably may be protected under the statutory exception for discounts under Shroeder, such arrangements have been the subject of government enforcement actions, including a 2015 settlement with Medco. That settlement resolved allegations that Medco, a pharmacy benefit manager, solicited remuneration (including discounts on drugs) from AstraZeneca in return for including AstraZeneca’s product as the exclusive proton pump inhibitor on certain of Medco’s formularies. See Medco to Pay $7.9 Million to Resolve Kickback Allegations, DOJ (May 20, 2015).
  • Adhering to the discount safe harbor’s reporting requirements with respect to all discounts and rebates.
  • Specifying the terms pertaining to the discount or rebate in writing in advance of any purchases. In a somewhat surprising move, OIG concluded that Requestor’s ability to adjust some customers’ purchase requirements and discounts posed a low risk of fraud and abuse because the customers were aware before the time of the initial purchase that Requestor could make such adjustments. Importantly, the adjustments at issue in the Arrangement would only benefit the customers by lowering the market share requirements or increasing the discount, which OIG concluded could increase patient choice. Parties that wish to make the terms of a discount or rebate subject to adjustment should include the rationale for such adjustments in their agreements and ensure that any adjustments are to the customer’s benefit, not detriment.
  • Conducting internal fraud, waste and abuse training programs and compliance monitoring of field personnel.
  • Implementing policies prohibiting personnel from making written or oral arrangements that are not reflected in the terms of the written agreement, as well as preventing personnel from “marketing the spread” to engage in swapping arrangements.
  • Including contractual terms in written agreements with customers clarifying that price concessions are not contingent on any performance, switching, or conversion requirements (including utilization management techniques that would impede use of competing products).

If you have any questions about how this OIG opinion impacts your business, please contact the authors.

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Firm Publication

On December 18, 2025, the U.S. Department of Health and Human Services Office of Inspector General (OIG) published favorable Advisory Opinion 25-11, approving various discount structures, including bundled discounts and rebates contingent on achieving market share requirements, a biopharmaceutical manufacturer (Requestor) offers its customers on three vaccines (Arrangement). This opinion is noteworthy because it offers helpful insight into OIG’s current perspective on discounts and rebates that are contingent on achieving specified market share thresholds for products reimbursed under different federal healthcare program methodologies. Although OIG determined that the Arrangement does not qualify for protection under the federal Anti-Kickback Statute’s (AKS’s) discount safe harbor, it concluded the Arrangement nonetheless poses a low risk of fraud and abuse under the AKS. Because OIG analyzed the Arrangement’s individual facts and circumstances, it did not acknowledge or address recent caselaw holding that the AKS statutory exception for discounts provides a separate and independent basis for protection for certain discount arrangements. By declining to directly address this caselaw, OIG leaves the door open to arguments that certain market share rebates and bundled discount arrangements may be protected by the statutory exception.

The Arrangement

Under the Arrangement, Requestor offers various discounts to its customers, including bundled upfront discounts and bundled rebates, both of which are contingent on satisfying certain market share or volume purchase requirements (Bundled Upfront Discounts and Bundled Rebates, respectively). Two of the vaccines eligible for the Bundled Upfront Discounts and Bundled Rebates are reimbursable under Medicare Part B, and the third is reimbursable under Medicare Part D. Each vaccine in a bundle is subject to a discount, and both the market share or volume requirement and the upfront discount or rebate for each vaccine are set in advance, although Requestor’s agreements with some of its customers allow Requestor to increase the discount or lower the market share requirement on a go-forward basis after providing advance notice to the customer to account for evolving market dynamics. Requestor adheres to the discount safe harbor’s reporting requirements, including disclosing discount amounts on customer invoices and informing customers that they may be obligated to report the discounts to payors.

Each of the vaccines has at least one competing vaccine with a list price comparable to Requestor’s vaccines. Requestor’s customers are neither required nor permitted to provide any services, including any marketing activities or switching patients from one product to another, in connection with the Arrangement. Finally, Requestor implemented various other safeguards, including internal training programs, compliance monitoring of field personnel, and policies prohibiting personnel from “marketing the spread,” to further reduce the risk of fraud and abuse associated with the Arrangement.

OIG’s Analysis

Like virtually all discount arrangements, the Arrangement implicates the AKS because the discounts Requestor offers are intended to induce customers to purchase its vaccines. While OIG concluded that the Bundled Upfront Discounts and Bundled Rebates do not satisfy the Safe Harbor’s definition of “discount,” it concluded that the risk of fraud and abuse posed by the Arrangement is sufficiently low under the AKS to garner a favorable opinion.

OIG first noted that, because the Bundled Upfront Discounts bundle vaccines that are reimbursable under different federal healthcare program methodologies, they cannot meet the Safe Harbor’s definition of “discount,” which excludes “[s]upplying one good or service without charge or at a reduced charge to induce the purchase of a different good or service, unless the goods and services are reimbursed by the same Federal health care program using the same methodology.” However, OIG reasoned that the Bundled Upfront Discounts are sufficiently low risk under the AKS because:

  1. The discounts are readily attributable to each separately billable item, and each Medicare reimbursement system benefits equally from the discount.
  2. Requestor discounts each vaccine in the bundle (as opposed to offering a discount on one product to induce the full purchase price of a different product).
  3. Each vaccine has at least one competing vaccine with a list price that is similar to Requestor’s vaccines, which lowers the risk that the discounts disguise pricing of any vaccine in the bundle to raise prices or maintain a higher list price.

With respect to the Bundled Rebates, OIG noted that the Safe Harbor’s definition of “rebate” requires the price reduction to be a “discount the terms of which are fixed and disclosed in writing to the buyer at the time of the initial purchase to which the discount applies, but which is not given at the time of sale.” Although certain Bundled Rebates do not meet this definition because their terms are not fixed at the time of the initial purchase, OIG nevertheless concluded such rebates are sufficiently low risk under the AKS because the customers are aware before the time of their initial purchases that Requestor may adjust the terms of the discounts and because such adjustments might increase patient choice.

OIG noted in a footnote that, although price reductions based on market share may result in customers choosing to stock Requestor’s vaccines over its competitors’ vaccines, the Arrangement does not require customers to switch from competitors’ vaccines to Requestor’s vaccines or to exclusively purchase Requestor’s vaccines to receive the discounts or rebates. OIG also noted that it would have reached a different conclusion if any services—including any marketing services or utilization management requirements that could impede use of a competitor’s product—were required to qualify for the Bundled Upfront Discounts or Bundled Rebates. This caveat highlights OIG’s long-standing concerns about discount arrangements that create inappropriate financial incentives to limit or influence the products an entity makes available to patients.

Takeaways

Although this opinion is limited to Requestor and the particular facts and circumstances at issue, it offers insight regarding how OIG may view similar arrangements. In particular, this opinion offers comfort that market share rebates—which have been the target of various government enforcement actions, including a 2014 settlement with Omnicare Inc.—can be structured compliantly. Although such arrangements may not satisfy the discount safe harbor’s requirements, they may pose a low risk of fraud and abuse under the AKS as long as they are not paired with agreements for marketing or switching services and include certain other safeguards.

Notably, OIG did not directly address whether the AKS statutory exception for discounts would protect the Upfront Bundled Discount and Bundled Rebates in this opinion. OIG’s longstanding position has been that the AKS discount safe harbor interprets and expands upon the statutory exception. A federal court recently held that, because the safe harbor expands upon the statutory exception by defining additional discounting practices that are not included in the statutory exception, the exception provides an independent basis for protection. See United States ex. rel. Schroeder v. Hutchinson Reg’l Med. Ctr., No. 17-2060-DDC-BGS, 2024 WL 4298655, at *28 (D. Kan. Sept. 26, 2024). If the safe harbor does, in fact, expand upon the statutory exception’s protections by defining additional discounting practices not included in the exception, one might have expected OIG to analyze the Arrangement under the statutory exception before moving to a facts-and-circumstances analysis. Because OIG did not acknowledge or address Shroeder, it also left the door open to arguments that bundled discounts and market share rebates that do not satisfy the discount safe harbor’s requirements may be protected by the statutory exception.

Entities that are considering offering or accepting market share or bundled price concessions may wish to consider implementing safeguards similar to those included in the Arrangement, including:

  • Ensuring each product in a bundle is subject to a discount or rebate. While bundled arrangements that include both discounted and non-discounted products arguably may be protected under the statutory exception for discounts under Shroeder, such arrangements have been the subject of government enforcement actions, including a 2015 settlement with Medco. That settlement resolved allegations that Medco, a pharmacy benefit manager, solicited remuneration (including discounts on drugs) from AstraZeneca in return for including AstraZeneca’s product as the exclusive proton pump inhibitor on certain of Medco’s formularies. See Medco to Pay $7.9 Million to Resolve Kickback Allegations, DOJ (May 20, 2015).
  • Adhering to the discount safe harbor’s reporting requirements with respect to all discounts and rebates.
  • Specifying the terms pertaining to the discount or rebate in writing in advance of any purchases. In a somewhat surprising move, OIG concluded that Requestor’s ability to adjust some customers’ purchase requirements and discounts posed a low risk of fraud and abuse because the customers were aware before the time of the initial purchase that Requestor could make such adjustments. Importantly, the adjustments at issue in the Arrangement would only benefit the customers by lowering the market share requirements or increasing the discount, which OIG concluded could increase patient choice. Parties that wish to make the terms of a discount or rebate subject to adjustment should include the rationale for such adjustments in their agreements and ensure that any adjustments are to the customer’s benefit, not detriment.
  • Conducting internal fraud, waste and abuse training programs and compliance monitoring of field personnel.
  • Implementing policies prohibiting personnel from making written or oral arrangements that are not reflected in the terms of the written agreement, as well as preventing personnel from “marketing the spread” to engage in swapping arrangements.
  • Including contractual terms in written agreements with customers clarifying that price concessions are not contingent on any performance, switching, or conversion requirements (including utilization management techniques that would impede use of competing products).

If you have any questions about how this OIG opinion impacts your business, please contact the authors.

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