As Holland & Knight previously reported, since its enactment in 2018, the Eliminating Kickbacks Recovery Act (EKRA) has been a source of anxiety and confusion for the clinical laboratory and behavioral health industries in part because of the dearth of clarifying court opinions and enforcement actions. Additionally, the statute requires the U.S. Department of Justice (DOJ) to issue regulations implementing EKRA, but to date, no such rulemaking activity has occurred.
The U.S. Court of Appeals for the Ninth Circuit recently issued two opinions interpreting EKRA in cases that stakeholders have been monitoring since 2021: USA v. Schena, Case No. 23-2989 (9th Cir., July 11, 2025) (Schena) and S&G Labs Hawaii, LLC v. Graves, Case No. 24-823 (9th Cir., July 11, 2025) (unpublished) (S&G Labs).
The Ninth Circuit's interpretation answers two key questions: 1) whether EKRA applies to marketing intermediaries who interact with doctors and not patients (spoiler: it does) and 2) whether EKRA prohibits all volume- or value-based payment structures (e.g., percentage-based payments or commissions) for laboratory marketers (spoiler: it does not).
In Schena, the Ninth Circuit addressed the first question by confirming that EKRA covers payments made to marketers and other intermediaries who interact with providers (but not patients), as well as payments made to persons who interact directly with patients. In making this determination, the Ninth Circuit overruled the district court's interpretation in S&G Labs, which held that EKRA did not apply to marketing activity directed solely at providers.
As to the second question, the Ninth Circuit clarified that while commission- and/or percentage-based compensation arrangements for marketers do not meet EKRA's safe harbors, such arrangements are not per se inducements that violate EKRA. According to the Ninth Circuit, such payments are unlawful only if they are accompanied by statements or other activity that constitute undue influence over the resulting referrals (e.g., through false or fraudulent representations regarding a lab test's capabilities). The court expressly recognized that percentage- and commission-based compensation structures are common for marketers and opined that EKRA is not a blanket prohibition on such structures, "even when the marketing personnel are persuasive in driving business." The Ninth Circuit reiterated this interpretation in S&G Labs, an unpublished decision issued concurrently with Schena (and heard by the same panel).
Key Takeaways
- Schena and S&G Labs reaffirmed that EKRA applies to compensation that is paid to marketers who interact only with referring providers in addition to marketers who interact directly with patients.
- Schena provides important clarity that percentage- or commission-based compensation is not prohibited by EKRA per se, unless such arrangements also involve undue influence over the flow of referrals (such as false or misleading statements designed to secure a referral).
- The Schena and S&G Labs decisions are applicable only in those states covered by the Ninth Circuit. Nonetheless, clinical laboratories, clinical treatment facilities, recovery homes and others in the behavioral health space can utilize these decisions to inform their marketing arrangements and overall compliance efforts.
