OIG Provides Favorable Opinion on Manufacturer Vaccine Discounts

In a December 2025, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion regarding a biopharmaceutical manufacturer’s proposed vaccine discounts and rebates. While OIG determined that certain discounts and rebates would satisfy the federal Anti-Kickback Statute’s (AKS) discount safe harbor, it also found that even those arrangements that would not be protected by the safe harbor presented sufficiently low risk of fraud and abuse that the OIG would not impose administrative sanctions.

The proposed discounts and rebates

The opinion involves three vaccines manufactured by the requestor: (identified as Vaccines A, B, and C) that are reimbursable under different parts of the Medicare program (Vaccines A and C under Medicare Part B and Vaccine B under Medicare Part D). The manufacturer intends to offer four categories of discounts/rebates for these vaccines to its customers, including retail customers, group purchasing organizations, integrated delivery networks, physician buying groups, health care facilities, physician practices, and others. The proposed discount and rebate categories are:

• Upfront Discounts: These discounts are based solely on a percentage reduction in list price or contract price for Vaccine A that are known and applied at the time of purchase. Certain of these discounts require the buyer to satisfy a purchase requirement (determined by market share or volume) during a prior time period. Examples include flat upfront discounts, prompt pay discounts, and supply reservation discounts.
• Upfront Bundled Discounts: These involve a percentage reduction off the list or contract prices on all or some combination of Vaccines A, B, and C if the buyer meets stated volume or market share thresholds during a prior time period. A bundle may include vaccines reimbursed by Medicare Part B and vaccines reimbursed by Part D.
• Bundled Rebates: This category includes rebates (to be paid after the purchase) in the form of a percentage off the list or contract prices for all or some combination of the three vaccines if the buyer meets certain market share or volume purchase requirements for two or more vaccines. Like the upfront bundled discounts, these rebates may include products reimbursed through different Medicare parts. Certain of these arrangements include contractual terms notifying customers that the rebate terms (i.e., the purchase requirement or rebate amount) may be adjusted by the manufacturer to remain competitive in the market.

The manufacturer certified that it complies with all price reporting requirements and notifies customers of their reporting obligations. Importantly, the manufacturer certified that none of the discounts or rebates are contingent on the customer providing additional services or engaging in marketing/promotional activities.

Discount safe harbor

As an initial matter, the OIG relied on the manufacturer’s certification that it satisfied the obligations of a seller necessary to be eligible for the discount safe harbor. The OIG then analyzed whether each of the four arrangements above met the definition of a “discount” or “rebate” under the safe harbor. 

• Upfront Discounts: These percentage price reductions are known to the customer and applied at the time of sale and are protected under the safe harbor because they meet the definition of “discount.” The OIG underscored that if customers were required to perform any services (e.g., marketing or product swapping) to qualify for discounts, the arrangements would no longer present low risk under AKS.
• Upfront Bundled Discounts: These do not meet the “discount” definition because the bundles may include products reimbursed under different Medicare parts. Historically, the OIG has expressed concern about improper cost shifting or price distortion. For example, a manufacturer might discount an item in a bundle reimbursed under Part A (generally not separately reimbursed and therefore incentivize providers to lower costs) to induce the purchase of items reimbursed by Part B (which are separately reimbursed). However, the OIG distinguished the bundled discounts at hand and found they present low risk for the following reasons:
  • The manufacturer discounts each vaccine in the bundle as opposed to offering a deep discount on one product to induce the purchase of another at full price and potentially distorting the price of each.
  • The discounts are readily attributable to each item in a bundle, and each Medicare reimbursement system (Parts B and D) benefits equally from the discount.
  • Each vaccine has at least one competing vaccine with a similar list price. As such, there is a lower risk of price distortion that could incentivize increased list prices for the vaccines.
• Bundled Rebates: Although certain proposed rebates are protected by the discount safe harbor, those that are subject to change after the purchase are not. Despite not meeting the safe harbor elements, the OIG concluded that these rebates present a sufficiently low risk of fraud and abuse because the customer is aware that adjustments may be made to the rebate before the initial purchase. Additionally, changes to the rebate terms to remain competitive in the market could increase patient choice (e.g., manufacturer might lower the number of units necessary to qualify for the rebate, increasing the likelihood that the customer purchase competitors’ products). Additionally, the OIG used the same reasoning noted above for bundled discounts to find that the bundling of products reimbursed by different Medicare system presented a low risk for the rebates.

Key Takeaways

Although the advisory opinion is specific to the requesting manufacturer, it is instructive for manufacturers seeking to implement similar discount/rebate arrangements. Despite the favorable opinion, Manufacturers should be cautious in implementing any discount or rebate program that is not protected by a safe harbor. The following are considerations that are likely to reduce the risk of AKS enforcement:

• To the extent possible, structure price concessions to satisfy all elements of the discount safe harbor.
• Ensure that customers are not required to perform any services (e.g., marketing, promotion, or product switching) to qualify for discounts or rebates and incorporate terms in customer contracts to the same effect.
• Ensure compliant price reporting practices and implement mechanisms for notifying customers of reporting obligations.
• Implement a robust compliance program that includes training, policies, oversight, and safeguards.
• Ensure discounts/rebates are transparent and can be readily attributable to each item in a bundle.
• If rebate terms will be adjusted during the term of a contract, ensure that fact is disclosed in the agreement and that adjustments are made for competitive reasons.

Reed Smith will continue to track developments with regard to drug discounts and OIG fraud enforcement. If you have any questions about this advisory opinion or would like to seek an advisory opinion of your own, please do not hesitate to reach out to the health care lawyers at Reed Smith.