Paying Commission to Marketers of Laboratory Services

We have noted the adoption of the Eliminating Kickbacks in Recovery Act (EKRA) before. We now have a 9th Circuit Court opinion which overturns a prior district court decision regarding the legitimacy of paying commission to marketers of laboratory services. The prior case said an employed salesman could be paid commission for introducing physicians and others to the laboratory which employed him. He had no contact with any individual patients whose own specimens would be tested. In USA v. Schena (No 23-2989) (July 11, 2025) the facts were egregious. The laboratory owner paid percentage commission payments to marketers who would induce physicians to refer patients to the laboratory. The statute explicitly prohibits compensation to employees based on the amount the laboratory received for the services marketed. Worse, the representations they made about the quality of the allergy blood tests were false; they specifically targeted physicians who would not be knowledgeable about allergy testing; and they performed the maximum number (120) of tests on each patient that the equipment could produce. When the allergy testing dropped in volume because of COVID, they switched to COVID testing and misrepresented the validity of their tests there as well. The appeals court explicitly rejected the lower court opinion in the earlier case. While they concluded that a percentage-based compensation for marketing does not per se violate the statute, (despite the limitation on compensation to employees) combined with the intentional misrepresentations, the defendant’s conviction was upheld.