OIG approves tiered rebate programme based on combination of purchases

The Office of Inspector General (OIG) for the Department of Health and Human Services released a new advisory opinion on 1 July (OIG Advisory Op. 13-07) approving a proposed arrangement by a manufacturer to establish a tiered rebate programme for its customers. Even though the proposed arrangement would aggregate the volume of purchases for products that may not be reimbursable under the same methodology, the OIG found that the arrangement was properly structured to fit in the discount safe harbour of the Anti-Kickback Statute. The advisory opinion contains some important clues as to the OIG’s current attitude towards the reach of the discount safe harbour as applied to bundled sales of different kinds of products and other aggregated purchases that the OIG clarifies do not constitute bundled sales. The advisory opinion seems to conclude that irrespective of the type of buyer, rebates on aggregate volume purchases may be offered on products that would be treated as operating (as opposed to capital) costs, but does not provide any guidance on whether capital equipment can be included among the products for purposes of the rebate.

The requestor of the advisory opinion was a manufacturer of products used to treat ophthalmologic disorders including pharmaceuticals, surgical equipment, vision aids and related products. Under the proposed arrangement, the requestor would establish a tiered rebate programme where the requestor would aggregate customers’ purchases of surgical supplies and devices – whether or not reimbursable by federal healthcare programmes (FHCPs) – to determine the percentage of the customers’ rebate. The manufacturer would notify its customers of the rebate and their reporting obligations in three stages: 1) in the contracts between the parties; 2) in the invoice; and 3) in an end-of-year report that would include a summary of all qualifying purchases, an explanation of the rebate tier the customer reached and a calculation of the total rebate to which the customer is entitled…

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