United States: HHS-OIG Issues FAQ Guidance Related To Pharmacy Benefit Manager Arrangements

The U.S. Department of Health and Human Services, Office of Inspector General ("OIG") has provided insight into the applicability of the discount and group purchasing organization safe harbors to payments retained by pharmacy benefit managers ("PBMs").

On June 2, 2023, the OIG published FAQ responses related to, among other questions, the application of the discount and group purchasing organization ("GPO") safe harbor protections to remuneration under PBM arrangements. First, the FAQ response states that the discount safe harbor does not protect any payment retained by PBMs. Instead, OIG states that pursuant to definitions in existing regulation, a rebate is a form of discount and a payment qualifies as a discount only where passed to the buyer.

As outlined in the FAQ, the OIG takes the position that any payment retained by a PBM is a service or administrative fee, not a discount, even where the parties characterize a PBM-retained payment as a rebate. OIG further states that this interpretation is supported by definitions in existing law and, thus, can be advanced regardless of the current moratorium on implementing, administering, or enforcing the November 30, 2020, final rule (85 Fed. Reg. 76666).

The OIG notes in its response that the remuneration retained by the PBM may be structured to maintain GPO safe harbor protection but cautions that parties must be mindful of certain structural impediments in reliance on the safe harbor. For instance, OIG interprets applicable regulation to define a GPO as an entity authorized to act as a purchasing agent for a group of individuals or entities who are neither wholly owned by the GPO nor subsidiaries of a parent corporation that wholly owns the GPO (directly or indirectly). As such, certain PBMs may not be able to meet this definition as interpreted by the OIG.

Further, OIG emphasizes that while the GPO safe harbor might protect payments from vendors to the GPO, it does not protect any discounts (or rebates) that the GPO negotiates on behalf of its customers.

Stakeholders may need to review existing PBM arrangements to assess whether payments retained by PBMs or payments to GPOs advance such OIG interpretations and operational measures to promote compliance.

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