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EKRA Affects Marketing Relationships with Labs and Addiction Treatment Businesses

By: Jeff Cohen

For those following the federal legislative developments on the issue of compensating marketing people who market the services of labs and addiction treatment facilities there is a new update to take note of. Congress passed on October 24, 2018 the “Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act.”  Yes, that’s a real name!  Part of the law is the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”).

The core aspect of EKRA has to do with how to properly compensate marketing personnel who market the services of labs, addiction treatment facilities and recovery homes.   For those of you already familiar with existing federal law pertaining to compensation arrangements (e.g. the bona fide employee exception (the “BFE”) and the personal services arrangement and management contract safe harbor (the “PSA”)), the EKRA provisions will look familiar!  Key aspects of this law (which has to be read together with similar existing laws) include—

  • Employees and independent contractors are not differentiated, and
  • Commission based payments to bona fide employees are green lighted

That said, this law makes it clear that the following types of arrangements are not acceptable:  paying on the basis of number of people referred, number of tests performed or amounts billed to or collected from health insurers (all of them, not just governmental!).

Regulations are expected to be proposed in the upcoming months.  That’s a good thing, since the new law creates some confusion in terms of how it combines with other laws, like the Anti-Kickback Statute.  Moreover, parts of the new law are controversial, such as the last minute addition of clinical labs to it (which may invite challenge or amendment).  Additionally, there is some question regarding the payment of percentage based compensation to BFEs.  Finally, the issue of requisite intent lingers with the new law.  Prior versions had express intent requirements, but that language didn’t make it into the final law.

The new law is interesting, both in what it says and what it doesn’t say.  There are areas of apparent conflict with the Anti-Kickback Statute and other clear questions raised here that should be cleared up during the rule making process.  We’ll track those regs and let you know what we find as they come out. Good News Note:  there is usually a comment period when regs are proposed.  That gives industry and other representatives an opportunity for regulatory input.