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Recent Prosecutions Give Labs Insight Into DOJ's Use of Opioid Bill's Anti-Kickback Statute


NEW YORK – Since its passage in 2018, a federal law meant to help ease the nation's opioid crisis has loomed as a concern for clinical laboratories, as its anti-kickback provisions appeared to outlaw certain business practices common within the industry.

The last year has seen some of the first prosecutions under the law — called the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, or SUPPORT Act — giving labs and their legal advisers a more concrete picture of the enforcement landscape.

Intended to combat the nation's opioid crisis, the SUPPORT Act included the "Eliminating Kickbacks in Recovery Act of 2018," or EKRA, which was meant to outlaw patient brokering in the addiction treatment industry. Patient brokering refers to the practice of drug rehabilitation centers paying third parties to direct patients to their facility.

Under EKRA, it became a federal crime punishable by a fine of up to $200,000 and/or imprisonment for up to 10 years per offense to knowingly and willingly solicit or receive "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; or in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory."

Upon the law's passage, many in the lab industry raised concerns that, as written, it criminalized common lab business practices such as paying sales staff on commission or placing phlebotomists in physician offices for sample collection.

The law also provided to private payors anti-kickback protections previously extended only to federal healthcare programs, raising the prospect that private insurers could use the law to deny or claw back lab payments.

The first guilty plea for violating EKRA came at the beginning of 2020 in the case of Theresa Merced, a manager at a Kentucky substance abuse clinic accused of asking for and receiving cash payments from a Lexington, Kentucky-based lab in exchange for referrals for urine drug testing.

In September of 2020, a pair of California men, Kevin Dickau and Akikur Mohammed, pleaded guilty to EKRA violations as part of a scheme in which they used recruiters to bribe individuals to enter drug rehab and paid referral fees for these patient referrals.

That same month 34 defendants in Florida were charged under EKRA and the Anti-Kickback Statute with defrauding insurers out of more than $1 billion, including for unnecessary urine drug tests and blood testing.

Jason Mehta, a partner at Bradley Arant Boult Cummings, said that while EKRA was used to prosecute these cases, they could likely have been prosecuted under traditional healthcare fraud law without reliance on EKRA.

The cases "left many of our clients thinking that EKRA is not being widely used as an enforcement mechanism yet, and that traditional healthcare fraud is still kind of the playbook for the government," he said.

He added that while private payors continued to use the various tools at their disposal to limit lab spending, EKRA has not played a particularly large role in this trend as of yet.

Mehta, who previously handled a number of healthcare fraud cases as an assistant US attorney said, however, that he would still advise clients to avoid business arrangements that could run afoul of EKRA.

"Because EKRA is a criminal statute, it raises the stakes for laboratories," he said. "There is now the possibility of volume-based arrangements, whether it is federal payors or not, falling under scrutiny and potential criminal prosecution. We tell our clients that while EKRA might not be the most prolifically used statute at the moment, the risks are very significant, and they would be very well served to be exceptionally cautious."

Alex Porter, a partner at Davis Wright Tremaine and formerly the healthcare fraud coordinator in the US attorney's office in Los Angeles, said that prosecutors aren't saying, "Look, we have this new statute. Let's go look at every single lab and their arrangements and see if they violate EKRA."

"That's not really the way that it works," he said.

Prosecutors are, however, using the law to go after areas where there is perceived to be a high level of fraud, Porter said. "Enforcement activity focuses on those areas, and they look at what is going on, and they say, 'OK, here is an arrangement that violates EKRA, and we can use EKRA as a tool to go after that conduct.'"

Danielle Tangorre, a partner at law firm Robinson+Cole, noted that while EKRA was written with the opioid crisis in mind, a recent case suggests it will be used to prosecute fraud in other areas, as well — genetic testing, for instance.

She cited the case of a New York physician, Yitzchok Kurtzer, who was indicted in July in US District Court for the District of New Jersey, for violations of several laws including EKRA as part of a scheme in which he solicited payments in exchange for referring pharmacogenetic testing to a pair of laboratories.

"We were hoping for regulations or a fix for [the law] to be made more narrow, but we haven't seen that, and, instead, the cases are showing a broader applicability of how the [US Department of Justice] is using EKRA," Tangorre said.

She added that while some labs outside the toxicology space might have been on the fence as to whether they needed to change their practices to comply with the law, "we can now point to these cases and say, you're a clinical lab, you need to be concerned about EKRA and how you conduct your business, whether it is how you structure your sales and marketing or how you address your pricing models. Labs need to think about it as they would any other statute."

Porter said COVID-19 testing could also be an area prosecutors target for prosecuting violations of EKRA and other healthcare fraud and anti-kickback laws given the large amounts of money poured in this testing since the start of the pandemic.

"Efforts to try to pare down or clarify EKRA have been ongoing but they have not yielded any type of clarification," said David Gee, Porter's colleague at Davis Wright Tremaine. He added that in its communications with labs and their attorneys, the DOJ has essentially said "the statute is the statute."

"Obviously, that's not helpful," he said.

Immediately following the passage of the SUPPORT Act, some in the industry suggested that changes to the law's language could be made to narrow its impact and allow for business practices like commission-based sales compensation.

Sharon West, vice president of legal and regulatory affairs for the American Clinical Laboratory Association, said, for instance, that the organization believed a change to the language of the law would be the cleanest fix and noted that ACLA had been communicating with Congress about this possibility.

No changes have been made, though, and the issue does not appear to be a high priority either for Congress or organizations like ACLA, which declined to comment when asked if it was still advocating for changes to the law.

A congressional staffer familiar with the legislation told 360Dx that the idea of making changes to the bill has received little attention in Congress and that industry representatives had done little advocating for changes since its passage.

"I've been fairly resolute with clients telling them, this is not going to go away as far as we can tell, and it is time for labs to be taking steps to bring their sales compensation into line by making sure that it doesn't vary with volume or the value of the referrals that sales reps are responsible for," Gee said.

He noted, though, that this could present challenges for labs if their competitors continue to offer volume-based sales compensation.

"The first thing that the sales rep says is that they can go across the street to X lab or Y lab that is still offering percentage-based commissions," he said. "And that inconsistent reception to EKRA has been a challenge to most laboratories who are trying to be compliant."