Baron & Budd played a central role in a significant unanimous decision by the Ninth Circuit Court, which reversed a district court ruling and allowed California-based Adventist Health System to proceed with its False Claims Act (FCA) case against major drugmakers AbbVie Inc., AstraZeneca LP, Novartis Pharmaceuticals Corp., Sanofi SA, and various affiliates. The decision relies on a rarely seen FCA theory applied to a prominent drug discount program known as 340B.

Behind 340B

340B is a federal initiative that lowers drug prices for hospitals and clinics in low-income communities. In 2024, the program facilitated more than $80 billion in drug purchases. In 2011, the Supreme Court held that hospitals and local governments cannot sue drug companies directly for overcharging under the 340B program. Thus, pricing disputes, which are common within the program, have typically been addressed through administrative channels or litigation over the meaning of the program’s criteria.

A Precedent-Setting Decision

The Ninth Circuit’s ruling marks an important shift. Rather than attempting to enforce 340B directly, Adventist’s case proceeds under the False Claims Act, alleging that inflated drug prices led to false or fraudulent claims submitted to government healthcare programs such as Medicare and Medicaid. As the court explained, the case represents “a prototypical FCA action to remedy allegedly false or fraudulent claims resulting in financial loss to the government.”

By allowing this theory to move forward, the decision may open the door to similar actions by healthcare providers seeking to challenge alleged overcharges through fraud-based claims, rather than direct enforcement of 340B.

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Baron & Budd’s whistleblower representation team has more than 50 years of experience representing dozens of clients in government fraud cases. They have returned more than $6 billion to federal and state agencies with whistleblower recovery shares as high as 50%.

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