What the Ninth Circuit's EKRA Ruling Means for Genetic Testing Labs
Short answer: In July 2025, the Ninth Circuit issued the first federal appellate ruling on the Eliminating Kickbacks in Recovery Act (EKRA), holding in United States v. Schena that percentage-based commissions paid to lab marketers are not automatically illegal — but become unlawful when paired with deceptive claims or "wrongful inducement." The ruling only binds one circuit, DOJ is pushing a broader reading elsewhere, and states like New Jersey have since added their own restrictions, leaving genetic testing labs with a compliance picture that is clearer in outline but still fragmented in practice.
The Ruling That Reset the EKRA Conversation
For years, laboratory compliance officers have wrestled with a genuinely difficult question: does the Eliminating Kickbacks in Recovery Act (EKRA) — a 2018 federal law originally aimed at patient brokering in addiction treatment — also reach the ordinary commission-based pay structures labs use for their sales and marketing teams? In July 2025, the U.S. Court of Appeals for the Ninth Circuit answered part of that question in its first-ever appellate decision interpreting EKRA, United States v. Schena.
The case grew out of a Medicare and COVID-19/allergy-testing fraud prosecution involving Arrayit Corporation. On appeal, the Ninth Circuit held that a percentage-based compensation structure for marketing agents, standing alone, does not violate EKRA. The court's reasoning, as summarized in coverage from Frier Levitt and Dickinson Wright's Health Law Blog, turned on the statute's "to induce a referral" language: commission pay becomes unlawful when it is coupled with evidence of fraud or "wrongful inducement," such as marketers making false or exaggerated claims about a test to influence physician ordering behavior.
Notably, the court also confirmed that EKRA is not limited to payments made directly to referring physicians — it reaches payments to third parties, including outside marketers and independent sales representatives, who indirectly influence referrals. That closes off any theory that a lab can insulate itself from EKRA simply by routing sales compensation through a marketing company rather than paying a clinician directly.
What Changed, and What Didn't
It is easy to over-read Schena as a green light for aggressive commission structures. It is not. Here is what the ruling actually establishes and what remains unresolved:
- What changed: A percentage-of-revenue or percentage-of-volume commission, by itself, is not automatically an EKRA violation. The government must also show evidence of wrongful inducement — for example, marketers making false claims about a test's accuracy or necessity to move physicians toward ordering it.
- What didn't change: EKRA still criminalizes remuneration intended to induce referrals when it is tied to deceptive marketing, targets providers likely to be misled, or otherwise functions as a disguised kickback. The Ninth Circuit's opinion, as reported by Hall Render and the National Law Review, was in other respects described as a broad, enforcement-friendly reading of the statute — it is not a narrowing decision overall.
- What's still unresolved: Schena binds only the Ninth Circuit (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington, plus Guam and the Northern Mariana Islands). The Department of Justice has continued arguing for a broader reading of EKRA in other jurisdictions — including opposing a narrower interpretation in S&G Labs Hawaii v. Graves — and Mark Schena petitioned the Supreme Court for review in October 2025. As of the most recent published analysis reviewed for this article (Mintz, January 2026), the Court had not yet acted on that petition, and no other circuit had weighed in.
A Patchwork Problem: State Law Is Moving Too
Federal uncertainty is only half the picture. In August 2025, New Jersey amended its own patient-brokering statute to more explicitly criminalize payments tied to clinical laboratory referrals, with limited exceptions preserved for compensation that does not vary with patient volume or referral counts, according to Mintz's review of 2025 developments. Labs operating across state lines should not assume that a compensation model defensible under a Ninth Circuit reading of EKRA is automatically defensible under every applicable state anti-kickback or patient-brokering statute — several states have their own, sometimes stricter, versions of these laws layered on top of EKRA and the federal Anti-Kickback Statute.
What This Means for Lab Sales Compensation Design
For molecular and genetic testing labs, medical directors, and compliance officers, the practical takeaways are narrower than "commissions are now fine":
- Percentage-based pay is not a categorical violation, but it is not a safe harbor either. The structure of the payment matters less, post-Schena, than the conduct of the people being paid.
- Marketing accuracy is now a compliance control, not just a brand issue. Claims about a test's clinical utility, accuracy, or necessity made by commissioned sales reps should be reviewed and approved through the same channel as any other regulated marketing claim, with particular attention to claims made to providers less likely to independently verify them.
- Geography matters. A compensation model built around the Ninth Circuit's Schena reasoning may not hold up in other circuits, where DOJ continues to argue for broader EKRA liability, or in states like New Jersey with their own volume-linked restrictions.
- Document the "why," not just the "how much." Compliance programs should be able to show that commission payments correspond to legitimate marketing or sales activity, independent of referral volume, and that sales training materials do not encourage overstated claims.
- This is still moving. With a Supreme Court petition pending and no other circuit yet ruling, treat current compensation structures as subject to revisit, not permanently settled, and loop in healthcare counsel before making structural changes.
For related context on how payer and government coverage policy intersects with lab billing risk more broadly, see our guide to Medicare coverage for genetic testing and our breakdown of common genetic testing denial reasons, which covers related documentation and medical-necessity pitfalls RCM teams encounter downstream of how a test gets ordered in the first place.
Educational Disclaimer
This article is provided for general educational and business-operations purposes for laboratory, compliance, and revenue cycle audiences. It summarizes publicly available legal commentary and court decisions as of the date of publication and is not legal advice for any specific compensation arrangement, organization, or jurisdiction. EKRA, the federal Anti-Kickback Statute, and state patient-brokering and anti-kickback laws are complex, fact-specific, and actively evolving through litigation; organizations should consult qualified healthcare fraud and abuse counsel before designing, modifying, or relying on any sales or marketing compensation structure. This content does not constitute diagnostic or treatment guidance for any patient.
Sources: United States v. Schena, 9th Cir. (July 2025), as analyzed by Frier Levitt, "Ninth Circuit Clarifies Permissible Marketing Compensation Under EKRA: Laboratories Beware," and Dickinson Wright Health Law Blog, "The 9th Circuit's EKRA Ruling: Implications for Behavioral Health and Clinical Labs" (Feb. 2026); Mintz, "The Eliminating Kickbacks in Recovery Act in 2025: New Developments and New Questions for Laboratory Sales Compensation" (Jan. 2026); The Dark Report, "DOJ: EKRA Governs Lab Sales and Marketing Commissions," on S&G Labs Hawaii v. Graves. Learn more about how ScreenMyGene supports labs navigating coverage, billing, and compliance operations at screenmygene.com.
Frequently Asked Questions
Does the Schena ruling mean commission-based sales pay is now legal everywhere?
No. Schena binds only the Ninth Circuit and holds that percentage-based pay alone is not automatically illegal — it still becomes unlawful when combined with deceptive marketing or wrongful inducement. Other circuits have not ruled, DOJ continues arguing for broader EKRA liability elsewhere, and a Supreme Court petition was pending as of the most recent analysis reviewed.
Does EKRA only apply to addiction treatment and recovery services?
No, despite its origin in the SUPPORT Act's response to the opioid crisis. EKRA's laboratory provisions apply broadly to clinical laboratory testing and cover referrals reimbursed by any payer, including commercial insurers, not just federal healthcare programs like Medicare.
How is EKRA different from the federal Anti-Kickback Statute for a genetic testing lab?
The Anti-Kickback Statute generally applies to federal healthcare program business and has established regulatory safe harbors. EKRA applies regardless of payer type and has a narrower, still-developing set of exceptions, which is part of why its application to routine commission-based lab sales compensation has been so contested in court.
Did any state pass its own related law recently?
Yes. New Jersey amended its patient-brokering statute in August 2025 to more explicitly criminalize payments tied to clinical laboratory referrals, preserving limited exceptions for compensation that does not vary with patient or referral volume. Labs should review state-specific patient-brokering and anti-kickback laws separately from federal EKRA analysis.
What should a lab do right now while the law is still unsettled?
Review existing sales and marketing compensation structures with healthcare fraud-and-abuse counsel, ensure marketing claims about test accuracy or necessity are substantiated and centrally reviewed, avoid tying pay directly to referral or test volume where possible, and monitor for developments in the pending Supreme Court petition and other circuits.