In 2018, the Eliminating Kickbacks in Recovery Act (EKRA) made it an offense for someone to knowingly and willfully pay or offer any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory.
The statute includes safe-harbors and allows for the promulgation of regulations, but guidance for complying with EKRA has been minimal when it comes to marketing services until this year with two important federal cases. On July 11, 2025, the Ninth Circuit issued two decisions, a published opinion in U.S. v. Schena, 142 F.4th 1217 (9th Cir. 2025) affirming convictions based on violations of EKRA, and an unpublished memorandum in S&G Labs Hawaii, LLC v. Graves, No. 24-823 (9th Cir. July 11, 2025), finding no violation of EKRA.
In Schena, a laboratory enlisted marketers to pitch its services to medical professionals and paid them a percentage of revenue for the business that they brought in. In doing so, it was alleged that the marketers misrepresented the lab’s services to medical professionals. Moreover, the marketers “controlled” which lab the blood samples were sent to. The government’s charges against the lab owner included EKRA violations, based on payments made to one of the marketers, but the owner argued EKRA does not apply since the percentage payments were made to marketing intermediaries and not the providers making the referrals. The Ninth Circuit disagreed, finding that EKRA “covers marketing intermediaries who interface with those who do the referrals” and “the plain meaning of ‘to induce a referral of an individual’ includes situations where a marketer causes an individual to obtain a referral from a physician.”
The Ninth Circuit continued and held that percentage-based compensation for marketing agents is not sufficient evidence, on its own, to establish wrongful inducement that would violate EKRA. In doing so, the Ninth Circuit held that “[a]ll marketing efforts are intended to influence the recipient. In the absence of a clearer indication in the statute, we are hard-pressed to read EKRA to criminalize (with major federal penalties) a standard payment structure for marketing personnel, even when the marketing personnel are persuasive in driving business.” Importantly, the government agreed that percentage-based payments to a marketer is not per se unlawful under EKRA. Nevertheless, the Ninth Circuit affirmed the convictions of the defendants because the marketing agents unduly influenced referrals through false or fraudulent representations about the covered medical services.
In S&G Labs, the Ninth Circuit affirmed a jury’s award for breach of contract, wrongful termination, and defamation claims based on the Schena decision. In that matter, an employer attempted to argue that plaintiff’s employment agreement was unenforceable based solely on the fact that the compensation was based on a percentage of business. The Ninth Circuit rejected the employer’s argument based on the Schena decision.
These decisions provide some well needed guidance in marketing arrangements when dealing with EKRA.
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