COVID-19 Test Providers, Beware Kickback Enforcement Tool

By Joshua Robbins
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Law360 (April 16, 2020, 3:43 PM EDT) --
Joshua Robbins
Joshua Robbins
Amid the tragedy and confusion surrounding the COVID-19 pandemic, there has been consensus on at least one point: We need testing for the disease, and lots of it — yesterday.

Widespread testing will allow for better-informed public health decision-making, make quarantining more efficient and greatly assist companies and employees in getting back to work.

The market has begun to respond, with dozens of companies announcing plans to import, distribute and administer antibody-based serological tests using blood samples and with labs gearing up to conduct more precise polymerase chain reaction tests using nasal swabs. Currently, these two testing types are the leading ways to test individuals for COVID-19. Much of the cost of that testing will be billed to private health insurers.

The government has helped clear the way for various providers to offer testing. Among other things, the U.S. Food and Drug Administration has enacted a policy under which those seeking to offer serological testing can do so without obtaining an emergency use authorization or other specific approval from the FDA, provided they give the FDA notice and follow several other steps.

Even actor Sean Penn has joined the fray, offering drive-through COVID testing through his nonprofit organization. Other entities have taken a more commercial approach, in some cases charging hundreds of dollars per test, in what has been described as the new Wild West of clinical testing.[1]

This irresistible force of activity and money surging into diagnostic testing, however, will run squarely into the immovable object that is government enforcement. The U.S. Department of Justice and other agencies have promised to crack down aggressively on anyone deemed to be improperly profiteering from the crisis.[2]

One of their available tools will be a federal criminal law — the Eliminating Kickbacks in Recovery Act — that was designed to address a quite different epidemic — the opioid addiction crisis.[3]

Enacted in 2018, EKRA is by now known to many established diagnostic laboratories. But for newer providers entering the market and planning to accept only private insurance or out-of-pocket fees — including many of those now planning to offer blood antibody tests — and who use third-party marketers or commission-based sales staff, it could come as an unwelcome surprise.

Under EKRA, it is a crime to "solicit or receive payment in exchange for referring a patient to a ... laboratory," to "pay or offer any payment to induce someone to make" such a referral or to pay or offer any payment "in exchange for an individual using" a lab.[4] The last phrase appears broader than that used in some previous anti-kickback statutes, prohibiting, among other things, payments to patients to induce them to use a particular provider. The terms "referring" and "referral" are not defined, though courts have interpreted them broadly when used in other laws.[5]

EKRA was meant to prevent exploitation of the country's opioid epidemic by criminalizing the payment of patient referrals for drug addiction treatment. As drafted, however, the law also applies to referrals to a laboratory, defined by reference to the Public Health Service Act as any:

facility for the biological, microbial, serological, chemical, immuno-hematological, hematological, biophysical, cytological, pathological, or other examination of materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings.[6]

That would appear to cover not only a traditional clinical laboratory offering COVID-19 PCR testing, but any other provider that offers COVID serological testing, which can be conducted at other types of locations as a point of care procedure.

Importantly, and unlike the federal Anti-Kickback Statute that is older and more familiar to many, EKRA applies to diagnostic testing that is billed to private, commercial insurers as well as to Medicare or other government programs. It also may apply even when patients pay for the test out of pocket, pursuant to a contract.[7] That means that the vast majority of COVID testing will be subject to it.

In some respects, EKRA has stricter prohibitions than the AKS. For example, while EKRA, like the AKS, creates certain safe harbors and exceptions to its prohibitions, some are narrower than those in the AKS. In particular, while the AKS generally exempts payments to bona fide employees of a lab or other provider,[8] EKRA allows such payments only if they are not based on the number of individuals referred, the number of tests or procedures performed or the amount billed for referred patients.[9]

Thus, under EKRA, a lab or other covered provider may not pay commissions to sales or marketing employees, whether for attracting COVID-testing business or otherwise. In addition, EKRA's list of safe harbors is far shorter than that in the AKS and its implementing regulations. Further, violation of EKRA carries a potential sentence of up to 10 years in prison. This in addition to a $200,000 fine, which is twice that of the AKS.

While demand for COVID-19 testing currently far outstrips supply, which reduces the incentive for labs to pay for referrals, the DOJ has already charged at least one defendant (under the AKS) for receiving kickbacks from a laboratory in return for referrals of COVID tests.[10] The temptation to pay for referrals may increase once enough players enter the market for it to become competitive.

Even now, it is possible that the DOJ or the courts may read one of EKRA's provisions — barring payment "in exchange for an individual using the services of" a particular lab — to prohibit patients, marketers or employers from paying labs for early access to tests.

Meanwhile, many testing providers unfamiliar with EKRA may not realize that paying their own sales employees based on volume or value of tests ordered could be a criminal violation.

Labs and other providers engaged in COVID-19 testing — including those who accept only private insurance or out-of-pocket payment — need to be aware of EKRA and its broad prohibitions when engaging in sales and marketing of their services. To reduce the risk of DOJ criminal enforcement, they should consider the following:

  • Determine whether you are providing a service, such as actually conducting COVID-19 testing, or rather merely providing a good or item, by importing or selling the test kits or other equipment used in the testing. Unlike the AKS, which applies to referrals of orders for items, goods and facilities as well as services, EKRA only applies with respect to services. 

  • Review financial relationships with outside marketing firms to determine whether they might be deemed payment for referrals.

  • Do not pay sales representatives, whether employees or contractors, on a commission basis that takes into account the volume of patients generated or resulting revenue.

  • Evaluate carefully, in consultation with counsel, whether any of EKRA's safe harbors applies.

  • Consider whether the AKS or a state anti-kickback law applies. EKRA does not supersede either, so federal and state prosecutors can still pursue cases under such separate laws if they apply.[11]

Ultimately, while widespread COVID-19 testing is the only way in which Americans will be able to resume normal life in the near future instead of having to wait for a promised vaccine next year, prosecutors will remain unmoved when it appears that unlawful quid pro quos are involved, and EKRA will hand them a new weapon with which to pursue the practice. Testers beware.

Correction: A previous version of this article misstated the prison time associated with the Anti-Kickback Statute. The error has been corrected.



Joshua M. Robbins is a partner at Greenberg Gross LLP and chairs the firm's white collar defense practice. He is a former federal prosecutor.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] "Wild West" Fears Rise as COVID-19 Blood Tests Hit the Market, Yahoo! News, April 12, 2020, https://news.yahoo.com/wild-west-fears-rise-covid-175223933.html.

[2] Georgia Man Arrested for Orchestrating Scheme to Defraud Health Care Benefit Programs Related to COVID-19 and Genetic Cancer Testing, U.S. Department of Justice, March 30, 2020, https://www.justice.gov/usao-nj/pr/georgia-man-arrested-orchestrating-scheme-defraud-health-care-benefit-programs-related.

[3] 18 U.S.C. § 220.

[4] 18 U.S.C. § 220(a).

[5] See United States v. Patel , 778 F.3d 607, 612-618 (7th Cir. 2014) (holding that "referral" under the Anti-Kickback Statute is defined "broadly" to include a doctor's certification of medical necessity for a service, even if the doctor did not recommend the service or provider).

[6] 42 U.S.C. § 263a(a).

[7] See United States v. Manamela , 612 Fed.Appx. 151, 156 (3d Cir. 2015) (definition of "health care benefit program" in 18 U.S.C. § 24(b) not limited to programs or contracts involving insurance).

[8] 42 U.S. Code§ 1320a–7b(b)(3)(B).

[9] 18 U.S.C. § 220(b)(2).

[10] See United States v. Santos, Case No. M-20-9096 (D.N.J.).

[11] 18 U.S.C. § 220(d).

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