Ninth Circuit Clarifies EKRA: A Wake-Up Call for Labs and Providers

The Ninth Circuit Court of Appeals has issued its first detailed interpretation of the Eliminating Kickbacks in Recovery Act (EKRA)—and the decision is being called a “wake-up call” for the behavioral health and medical testing industries.

The case, U.S. v. Schena, involved a California lab owner who paid marketing agents to mislead doctors about the need for certain blood tests. He was convicted of fraud and EKRA violations, and the Ninth Circuit unanimously affirmed the conviction. (Law360)

🔑 Key Takeaways from the Decision

1. EKRA Applies Beyond. The court made clear that EKRA isn’t limited to payments made directly to physicians or frontline staff. Payments to third-party marketers can also violate the law if they are designed to induce referrals.

2. Commissions Alone Are Not Illegal. Importantly, the judges clarified that paying commissions to sales staff is not inherently unlawful. Liability arises when commissions are paired with deceptive or coercive marketing tactics that unduly influence referral sources.

3. Misleading Marketing = Kickback Liability. In Schena’s case, marketers were directed to misrepresent Arrayit’s blood testing services to physicians, claims the court said crossed the line into illegal inducement.

4. EKRA Is Broader than the Anti-Kickback Statute (AKS). Unlike the AKS, which focuses on federal payors like Medicare/Medicaid, EKRA covers services paid for by private insurers as well, dramatically expanding its reach.

5. No Comprehensive Roadmap Yet. The decision resolves some uncertainty but leaves open significant gray areas. There is still no federal safe harbor framework for EKRA comparable to what exists under AKS.

⚖️ What This Means for Labs & Providers

• Commission-Based Pay Still Possible: Labs and recovery providers don’t need to eliminate commissions, but they must build compliance infrastructure around sales teams.

• No Deceptive Practices: Sales agents must not be directed to mislead referring providers about the necessity or value of services.

• Document Business Purpose: Compensation structures should be transparent, documented, and tied to legitimate business goals.

• Expect Scrutiny: DOJ and state regulators are increasingly focused on marketing arrangements. Even outside the Ninth Circuit, this ruling will likely influence enforcement.

📌 Bottom Line

The Ninth Circuit’s ruling in Schena is both a warning and a modest relief for the industry. It confirms that EKRA liability extends beyond physicians, capturing payments to marketers—but also reassures that commissions aren’t automatically criminal. For labs, recovery homes, and addiction treatment providers, the message is clear: invest in compliance, train your sales teams, and never pair commissions with deception.