A pull-through offer is a performance-based payment from a pharmaceutical manufacturer to a health plan or Pharmacy Benefit Manager that compensates the payer not just for placing a drug on its formulary, but for actively driving prescriptions toward that drug. A standard rebate buys passive formulary access. A pull-through contract pays for specific, measurable actions the payer takes to shift prescribing behavior within its network: prescriber outreach, utilization management adjustments, tier changes, EHR prompts, staff training. The structure creates real legal exposure on both sides, primarily under the federal Anti-Kickback Statute and the Medicaid Drug Rebate Program’s best price rules, and getting it wrong can cost far more than the contract generates.
How a Pull-Through Offer Differs From a Rebate
The core problem a pull-through agreement solves is the gap between formulary access and actual prescriptions. A drug can sit on a preferred tier indefinitely without moving market share if prescribers default to a competitor. A pull-through payment converts the payer from a passive gatekeeper into an active participant in adoption, compensating it for deploying its clinical staff, its claims data, and its administrative tools on the manufacturer’s behalf.
That distinction matters because the payer’s involvement costs it real operational bandwidth, which a flat rebate does not fund. The manufacturer is buying something more targeted than advertising: direct access to a defined prescriber network, visibility into who prescribes what, and levers like prior authorization and tier placement that no external marketing effort can replicate.
What the Payer Has to Do to Earn the Payment
The contract lives or dies on how precisely it defines the payer’s obligations. Vague commitments to “promote” a product are unenforceable and create audit problems. Every contracted activity has to be specific enough that both parties can independently verify whether it happened.
Prescriber Outreach and Academic Detailing
Academic detailing involves the payer’s clinical pharmacists or medical staff meeting directly with network prescribers to discuss the preferred drug’s clinical profile and formulary status. The contract should specify measurable deliverables: the minimum number of unique prescribers contacted, the frequency of outreach per prescriber, and the documentation the payer must maintain. Message logs, visit records, and counts of physicians reached during each reporting period serve as verifiable proof. A generalized claim that communications were sent is not a deliverable.
Utilization Management Adjustments
The payer can also commit to reducing administrative barriers. The most common change is modifying step therapy so patients don’t need to fail on older generics before accessing the preferred drug. Loosening prior authorization criteria or streamlining approval workflow are other options. These changes remove friction at the point of prescribing.
Any step therapy changes should account for emerging federal limits on fail-first policies. Legislation pending at the federal level would require group health plans to implement transparent exception processes for step therapy, including mandatory response timelines of 72 hours for standard requests and 24 hours for urgent ones. Contracts should build in flexibility for the payer to comply without breaching the pull-through terms.
Tier Placement and Cost-Sharing
Moving the preferred drug to a lower co-pay tier gives patients a direct financial reason to choose it over a competitor on a higher tier. The contract should specify the co-pay differential and the duration of the placement commitment. The impact is immediate and measurable through claims data.
Clinical Decision Support
Some agreements call for the payer to integrate decision-support prompts into the electronic health record systems used by network providers. The alerts appear during prescribing and nudge the physician toward the preferred drug. This is a significant operational commitment and carries real compliance sensitivity. The prompts must be clinically appropriate and clearly identified as formulary-driven rather than disguised as neutral clinical guidance. Poorly designed alerts that cross into promotional content have drawn federal enforcement action.
Care Manager and Staff Training
Care managers and case workers regularly guide patients and providers through treatment options. Training these staff on the preferred drug’s clinical profile turns routine interactions into pull-through touchpoints. The contract should specify training frequency, required content, and attendance documentation.
How the Money Is Structured
The pull-through payment is a performance-based rebate, separate from any base rebate the manufacturer pays for formulary access alone. The manufacturer only pays if the payer hits the agreed metrics. That at-risk structure protects the manufacturer from paying for effort that produces no results.
Tiered Thresholds
Most pull-through agreements use tiered market-share or volume thresholds that unlock progressively higher payments. A typical structure sets three tiers: a floor that triggers the minimum incremental rebate, a target that pays a mid-level rate, and a stretch goal at the top. Thresholds need to be challenging enough to require genuine payer effort but realistic enough that the top tier looks reachable. Unreachable thresholds kill payer motivation and turn the contract into dead paper.
Per-Unit or Percentage of Net Sales
Two calculation methods dominate. A per-unit payment ties the rebate to each incremental prescription dispensed above the baseline. A percentage-of-net-sales model applies the rebate rate to revenue generated within the covered population. Per-unit payments are generally cleaner because they avoid disputes about net pricing definitions.
Whichever method you pick, the contract has to define “unit” with no ambiguity. Does a 90-day supply count as one unit or three? Does a mail-order prescription count the same as a retail fill? These definitional questions determine the payment amount, and leaving them open invites disputes during reconciliation.
Setting the Baseline
The baseline against which performance is measured is one of the most negotiated elements. The manufacturer wants a high baseline so it pays only for genuine lift. The payer wants a low baseline so it earns the incremental rebate sooner. The baseline is typically set using the manufacturer’s pre-contract market share within the payer’s population over a defined lookback period, often two to four quarters. Both sides should use multiple quarters of historical data to smooth out seasonal variation.
Measurement Period and True-Up
The measurement period, usually one quarter to a full contract year, determines how often performance is assessed. Pharmacy claims data doesn’t finalize instantly. Reversals, resubmissions, and late adjudication mean the utilization picture can shift for up to 90 days after the measurement period closes. The contract has to specify a true-up process that reconciles the initial payment calculation against final claims data after a defined lag, protecting both parties from overpayment or underpayment caused by data timing.
Anti-Kickback Statute Exposure
Any payment from a pharmaceutical manufacturer to a payer that touches a federal health care program is scrutinized under the federal Anti-Kickback Statute. The statute makes it a felony, punishable by up to $100,000 in fines and ten years in prison, to knowingly offer or pay anything of value to induce someone to recommend, arrange for, or order items or services covered by a federal health care program.1Office of the Law Revision Counsel. 42 USC 1320a-7b – Criminal Penalties for Acts Involving Federal Health Care Programs A pull-through payment that incentivizes a payer to steer prescriptions toward a specific drug sits squarely in that risk zone.
The Personal Services Safe Harbor
The statute provides safe harbors, and the personal services and management contracts safe harbor is the most relevant to pull-through agreements. It protects payments for legitimate services if several conditions are met. The arrangement must be in writing and signed by both parties. The services must be specified in advance. Compensation must be set in advance, consistent with fair market value in an arm’s-length transaction, and not tied to the volume or value of referrals. The arrangement must also include periodic reassessment of whether the compensation still reflects fair market value.2eCFR. 42 CFR 1001.952 – Exceptions
For a pull-through contract, that means the payment for the payer’s academic detailing, care manager training, and utilization management changes has to be priced at what those services are actually worth. A manufacturer should obtain a fair market value assessment from an independent valuation firm before finalizing terms, pricing each contracted activity separately.
The Discount Safe Harbor and Its Limits
The discount safe harbor protects price reductions that are properly disclosed and reported. A recent OIG advisory opinion drew a sharp line: discounts conditioned on the buyer performing services, such as promotional activities or patient switching, would not qualify. The OIG stated it would have reached a different conclusion had services been required to earn the discount. Because a pull-through payment requires the payer to perform specific activities, blending service obligations with discount-style rebates risks falling outside both safe harbors.
Volume-Based Payments Create Tension
Tiered payments based on market share thresholds create tension with the safe harbor requirement that compensation not reflect referral volume. Structuring payments around the completion of defined activities rather than achieved market share is cleaner from a compliance standpoint, though it sacrifices some of the performance incentive that makes pull-through agreements attractive in the first place. Most contracts land somewhere in the middle, using activity completion as a gate and market share as a modifier.
Status of the Rebate Safe Harbor Rule
A 2020 final rule that would have eliminated the existing safe harbor for Part D drug rebates and replaced it with one for point-of-sale discounts has been indefinitely shelved. Section 11301 of the Inflation Reduction Act extended the moratorium on implementation to January 1, 2032.3U.S. Department of Health and Human Services Office of Inspector General. Safe Harbor Regulations The current safe harbor framework remains in effect for pull-through agreements structured through at least 2031.
Medicaid Best Price Consequences
This is where a carelessly structured pull-through agreement gets genuinely expensive. Under the Medicaid Drug Rebate Program, manufacturers must report their best price for each drug, which is the lowest price available to any wholesaler, retailer, provider, HMO, nonprofit, or governmental entity in the United States, inclusive of discounts, volume adjustments, and rebates.4Office of the Law Revision Counsel. 42 USC 1396r-8 – Payment for Covered Outpatient Drugs A pull-through rebate classified as a price concession rather than a bona fide service fee gets folded into that calculation, potentially lowering the manufacturer’s best price across all Medicaid lives nationwide.
The financial consequence is severe. Medicaid rebates are calculated as the greater of a statutory minimum percentage or the difference between the average manufacturer price and the best price. If a generous pull-through rebate to one commercial payer becomes the new best price, the manufacturer owes a correspondingly larger rebate to every state Medicaid program. A rebate structured to gain market share with a single payer can end up costing more in Medicaid liability than it generates in commercial revenue.
Bundled Sale Treatment
CMS treats market-share-contingent discounts as bundled sales under 42 CFR ยง 447.502. Any arrangement where a rebate or price concession is conditioned on achieving a market share target, securing a formulary tier, or meeting another performance requirement triggers the bundled sale classification. When that happens, the manufacturer must allocate the total discount value proportionally across all products in the bundle and reflect those allocated amounts in both its Average Manufacturer Price and best price reporting.5eCFR. 42 CFR 447.505 – Determination of Best Price
Most pull-through agreements involve market share thresholds by definition, so the pull-through payment is almost certainly a bundled sale unless it qualifies for an exclusion. The government pricing team should be involved from the earliest stages of contract design. Retrofitting a completed agreement to comply with best price reporting is far harder than building compliance into the structure from the start.
Bona Fide Service Fee Treatment
The most reliable way to keep pull-through payments out of the best price calculation is to structure them as bona fide service fees rather than price concessions. A bona fide service fee compensates the payer for a specific, identifiable service performed on the manufacturer’s behalf, at fair market value, and not passed through to reduce the price of the drug at any point in the distribution chain. If the payment exceeds fair market value, the excess will likely be treated as a disguised price concession and folded into best price.
This is why the specificity of the contracted activities matters so much. Vague commitments to promote the product look like rebates wearing a service fee costume. Detailed, auditable deliverables with independent fair market value support look like legitimate service arrangements. The distinction can mean millions in Medicaid rebate exposure.
Medicare Part D Layering
The Inflation Reduction Act’s redesign of the Part D benefit, fully effective for 2026, changes the economics of pull-through agreements covering Medicare populations. Under the redesigned benefit, the annual out-of-pocket threshold for beneficiaries is $2,100, and the standard deductible is $615.6Centers for Medicare & Medicaid Services. Final CY 2026 Part D Redesign Program Instructions
The Manufacturer Discount Program, which replaced the old Coverage Gap Discount Program, now requires manufacturers to provide a 10% discount on applicable drugs during the initial coverage phase and a 20% discount during the catastrophic phase.6Centers for Medicare & Medicaid Services. Final CY 2026 Part D Redesign Program Instructions These mandatory discounts are a baseline cost the manufacturer bears regardless of any pull-through agreement. Any incremental pull-through rebate for a Part D plan has to be layered on top and modeled against the combined obligation. A pull-through payment that looked attractive before the manufacturer discount can become unprofitable once both layers stack.
Prices negotiated by Part D prescription drug plans are excluded from the Medicaid best price calculation.4Office of the Law Revision Counsel. 42 USC 1396r-8 – Payment for Covered Outpatient Drugs That exclusion provides some insulation for Part D-specific arrangements, but it doesn’t extend to commercial or Medicaid managed care contracts. Each payer segment has to be modeled independently.
Proving Performance and Handling Disputes
Once a measurement period closes, the process shifts from execution to proof. The payer submits aggregated, de-identified claims data showing total prescriptions dispensed and the resulting market share. The contract should define the covered population, the product NDCs included, and the market denominator with no room for interpretation.
Auditing the Data
The manufacturer or an independent third-party auditor verifies the submitted data against the performance thresholds. Verification covers whether the data accurately reflects the contracted population, whether the market share calculation follows the agreed methodology, and whether the product units match the contract’s definition. The audit scope should be defined in the contract, including which records the manufacturer can review and whether the audit uses a full data pull or a statistically representative sample.
Documenting the Payer’s Activities
Verifying market share only proves the outcome. The manufacturer is also paying for the effort. The payer should maintain records of every contracted activity: academic detailing session logs, copies of provider communications, step therapy protocol change documentation, EHR alert implementation records, and internal training attendance sheets.
This documentation also serves a regulatory purpose. If the arrangement is ever scrutinized under the Anti-Kickback Statute, evidence that the payer performed real, identifiable services at fair market value is the manufacturer’s primary defense. Paying a performance-based rebate with no proof the payer did anything other than collect the check looks like a kickback dressed up as a service agreement.
Reconciliation and Final Payment
The final step applies the verified utilization data to the tiered financial structure. Because claims data can take up to 90 days to fully mature, the contract should specify a waiting period before final reconciliation and a mechanism for adjusting payments if post-reconciliation data changes the numbers.
Dispute Resolution
Even well-drafted contracts produce disagreements, usually about data. Payer claims data and manufacturer third-party data rarely match perfectly, and small discrepancies in how the covered population or product units are defined can shift the market share calculation enough to move between payment tiers.
The contract should establish a structured dispute resolution process with defined timelines. A typical approach starts with a good-faith negotiation period where both parties exchange data and attempt to reconcile. If that fails, escalation to senior executives and then to binding arbitration or mediation provides a path to resolution without litigation. Disputes should be documented on a unit basis rather than in dollar amounts or percentages, which mirrors the approach used in government rebate programs.7Medicaid.gov. Medicaid Drug Rebate Program Dispute Resolution
The contract should also address what happens if the payer fails to perform the contracted activities but the market share threshold is still met through organic growth. Without a clear provision, the payer may argue it earned the payment because the outcome was achieved. Making activity completion a condition precedent to payment eligibility, regardless of market share performance, resolves that ambiguity: if the payer didn’t do the work, it doesn’t get paid, even if the numbers look right.