OIG Offers Contemporary Guidance on Various Discount Constructs in Recent Advisory Opinion

On December 15, 2025, the Office of Inspector General (“OIG”) issued Advisory Opinion No. 25‑11 (“Advisory Opinion”) and concluded it would not impose administrative sanctions under the federal Anti‑Kickback Statute (“AKS”) on a biopharmaceutical manufacturer for a series of discounts and rebates offered on multiple vaccines. Although portions of the arrangement failed to meet the technical requirements of the discount safe harbor (42 CFR § 1001.952(h)), OIG determined that the overall fraud and abuse risk was sufficiently low.

This Advisory Opinion provides guidance regarding discounts subject to purchase requirements, bundled discounts and bundled rebates, particularly when products are reimbursed under different Medicare payment methodologies. Notably, OIG has issued limited substantive guidance on the discount safe harbor in recent years, making this Advisory Opinion a significant addition to the agency’s body of interpretive guidance.

Proposed Arrangement

The requestor is a biopharmaceutical manufacturer (“Requestor”) that produces three different types of vaccines (“Vaccines A, B and C”). Vaccine A and Vaccine C are reimbursed under Medicare Part B, while Vaccine B is reimbursed under Medicare Part D. Each vaccine competes with at least one other competitor product with a similar list price.

The arrangement includes four general categories of price concessions:

1. Upfront Vaccine Discounts. The Requestor offers immediate price reductions on Vaccine A, including flat percentage discounts off list price, prompt‑payment discounts for timely remittance and supply‑reservation discounts for customers that reserve doses in advance of the vaccination season.
2. Upfront Discounts with a Purchase Requirement. The Requestor also offers upfront discounts on Vaccine A that are contingent on customers meeting prior market share or volume targets during an earlier measurement period (such as a prior quarter or six months). These discounts are structured in tiers, with higher market share leading to larger discounts, and the applicable discount level is known at the time of purchase. Customers qualify based on past purchasing volume. The discount is applied immediately at the sale once the customer qualifies.
3. Upfront Bundled Discounts with a Purchase Requirement. Similarly, the Requestor offers bundled upfront discounts across two or three vaccines, contingent on customers meeting market share or volume thresholds for multiple products in prior periods. These bundles may include: (i) products reimbursed by the same federal health care program using the same methodology (e.g., bundles with Vaccine A and Vaccine C, both of which are reimbursed under Medicare Part B); and (ii) products reimbursed by the same federal health care program using a different methodology (e.g., a combination of Medicare Parts B and D). Examples include price protection arrangements, incremental discounts tied to combined market share and “2 for 2” or “3 for 3” offers that award a discount to customers for achieving certain targets across multiple vaccines. Like the Upfront Discounts with a Purchase Requirement, discounts are applied at the time of sale but depend on historical performance.
4. Bundled Rebates. The Requestor offers bundled rebates across two or more vaccines where: (i) the rebate percentage and terms are generally (see below) fixed and disclosed in advance; (ii) the rebates are contingent on meeting market share or volume requirements during a defined measurement period; and (iii) the rebate is provided for units purchased during the measurement period. As with the Upfront Bundled Discounts with a Purchase Requirement, the Bundled Rebates include bundles of products that are all reimbursed by the same federal health care program; however, some bundles may be reimbursed using different methodologies. Unlike upfront discounts, these rebates are paid after the performance period.

The Requestor offers these discounts and rebates to a wide range of customers, including retail pharmacies, GPOs, IDNs, physician buying groups and other provider entities.

Importantly, the Requestor certified that the applicable fixed percentage upfront discount and rebate terms are generally set in advance pursuant to a written agreement; however, some of these agreements state that, during the term of the agreement, the Requestor may increase the discount offered, lower the market share requirements for particular market share tiers, or both after providing advance notice to the customer in order to “meet competition.” With the exception of certain bundled rebates where the purchase requirements were (and may be in the future) lowered during the contract term to account for evolving market dynamics, the customer is aware of the adjustment before making the purchases to which the discount applies.

Analysis

The discounts offered under the proposed arrangement implicate AKS because the Requestor provides remuneration (either through a discount or rebate on the vaccines) in exchange for customers’ agreement to purchase the vaccines, which may be reimbursed by a federal health care program. OIG analyzed each proposed discount and rebate separately under the discount safe harbor.

Upfront Vaccine Discounts

OIG concluded that each of the Upfront Vaccine Discounts described by the Requestor meet the definition of a “discount” and therefor are protected by the discount safe harbor.

Upfront Discounts with a Purchase Requirement

Similarly, OIG concluded that the Upfront Discounts with a Purchase Requirement meet the definition of “discount” and therefore are protected by the discount safe harbor. Even though these discounts are contingent on having satisfied certain purchase requirements, all the discounts in this category are either volume-based or involve calculating the market share tier based on a previous, set time period of purchases, such that the customer knows at the time of purchase the total price of Vaccine A it is purchasing.

Importantly, OIG noted that they are aware that many entities that offer this type of discount require, explicitly or implicitly, some level of services from the purchaser (e.g., marketing the products or switching patients from one product to another). OIG stated that they would come to a different conclusion on these discounts if the Requestor did not specifically certify that they do not require these types of services from customers.

Upfront Bundled Discounts with a Purchase Requirement

OIG concluded that the risk of fraud and abuse presented by these discounts is sufficiently low under AKS because the market share or volume requirements are clear for each of the vaccines in the bundle, and the resulting upfront percentage price reduction is also clear. More specifically, the discounts here are readily attributable to each separately billable item, and each Medicare reimbursement system (e.g., Medicare Parts B and D) benefits equally from the discount if the conditions are met. Additionally, by discounting each vaccine in the bundle, the arrangement is further distinguished from one in which an entity offers a deep discount on one product to induce the full price purchase of a different product, potentially distorting prices on both products.

The definition of “discount” under the discount safe harbor 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 [. . .].” OIG specifically acknowledged that the Upfront Bundled Discounts with a Purchase Requirement may include bundles of vaccines reimbursed under two different methodologies, and therefore do not meet the definition of “discount.” OIG has previously expressed concerns about discounts on bundled items when the bundled items are reimbursed under two different reimbursement systems, given that a reduced price on one item can be used to induce purchases of other products for which the federal health care programs pay the full price, shifting costs among reimbursement systems and distorting the true costs of items.

However, in this case, given the discounts are readily attributable to each separately billable item, and each Medicare reimbursement system benefits equally from the discount if the preconditions are met, OIG ultimately concluded that the risk of fraud and abuse presented by these discounts is sufficiently low under AKS.

Bundled Rebates

With respect to Bundled Rebates where the vaccines are not reimbursed by the same methodology, OIG’s analysis is the same as the Upfront Bundled Discounts with a Purchase Requirement: while the Rebates do not meet the definition of a “discount” under the safe harbor, the risk of fraud and abuse presented is sufficiently low for the aforementioned reasons.

However, as provided by the discount safe harbor, the definition of a “rebate” requires that the price reduction be a discount (i.e., a reduction in the amount a buyer is charged for an item or service based on an arms-length transaction) and that its “terms . . . [be] 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.” Some of the Bundled Rebates terms change after the initial purchases are made, and therefore do not meet this requirement.

Nonetheless, OIG stated that this aspect of the Bundled Rebates is also sufficiently low risk because the customer is aware before the time of initial purchase that adjustments may be made to the terms of the rebate. Additionally, OIG stated that allowing the terms to be adjusted to meet competition might increase patient choice (if the 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).

Practical Takeaways

This Advisory Opinion signals increased flexibility in structuring bundled discounts and rebates, and comes on the heels of a DOJ-HHS press release published on  July 2, 2025, which announced the formation of a False Claims Act Working Group to combat health care fraud through the advancement of priority enforcement areas. Taken together, the future direction of the enforcement of AKS is difficult to forecast.

However, the Advisory Opinion does provide helpful guidance that should be considered when structuring future rebate and discount arrangements. In particular:

• Discounts and rebates should not be contingent on the customer providing any marketing services or promotional activities, even if the expectation of performance of those services is not explicitly stated. OIG does not specifically provide whether other types of services required by the Requestor would render the opinion unfavorable; however, OIG is clear that it would look negatively on any type of discount or rebate that would be earned on the expectation that the customer engages in activities to persuade patients to switch from one product to another.
• While OIG uses the term “upfront discounts” to refer to certain discount structures offered by the Requestor, OIG does not specifically distinguish or tie the use of this term to the OIG guidance letter published on July 17, 2000 (“July 2000 Letter”), whereby OIG specifically warns against upfront percentage payments to customers (also known as “prebates”). As such, we do not believe the Advisory Opinion will impact guidance in the July 2000 Letter.
• Bundled discounts (and rebates) that include products not reimbursed by the same methodology do not meet the definition of a “discount” under the safe harbor. However, the risk of fraud and abuse can be sufficiently low if the discounts are readily attributable to each separately billable item and each Medicare reimbursement system benefits equally from the discount.
• To receive safe harbor protection, rebate terms must be fixed and disclosed in writing to the buyer at the time of the initial purchase to which the discount applies. However, altering rebate terms after the initial purchases are made does not always result in a violation of AKS. Rather, altering these terms may be considered low risk if the customer is aware before the time of initial purchase that adjustments may be made to the terms.

For help in understanding the impact of this Advisory Opinion or guidance assessing AKS risk under other similar arrangements, please contact:

• Jen Viegas at (317) 977-1485 or jviegas@hallrender.com;
• Matt Decker at (248) 457-7867 or mdecker@hallrender.com;
• Jonathan Tarro at (317) 429-3603 or jtarro@hallrender.com;
• Caulin McGraw at (317) 977-1421 or cmcgraw@hallrender.com; or
• Your primary Hall Render contact.