The Baron & Budd Qui Tam team played a central role in a significant unanimous decision by the U.S. Court of Appeals for the Ninth Circuit on March 17, 2026, which allowed their client to proceed with a False Claims Act (FCA) case against major drugmakers for allegedly  defrauding the federal and state governments out of hundreds of millions of dollars. The suit alleges that the defendant drugmakers overcharged healthcare providers participating in the 340B Drug Pricing Program—a federal initiative that provides discounted drugs to hospitals and clinics in low-income communities—causing federal and state healthcare programs, such as Medicare and Medicaid, to pay extremely and unlawfully inflated prices for prescription drugs.

Initially, the U.S. District Court for the Central District of California had ruled in favor of the drugmakers, holding that Baron & Budd’s client, California-based Adventist Health System/West, could not bring a suit involving violations of the 340B Program. In a unanimous decision, a panel of the Ninth Circuit reversed the district court, holding that Adventist Health could proceed with the suit. The drugmakers then requested a rehearing en banc—from the entire roster of Ninth Circuit Judges—and urged the Ninth Circuit to rule that the FCA’s qui tam provisions are unconstitutional. The Ninth Circuit again unanimously ruled in favor of Adventist Health, with every judge declining to request rehearing. This decision is a major milestone that opens the way for whistleblowers to bring cases against drugmakers who commit fraud by overcharging the taxpayers when they illegally inflate the prices of the drugs they provide to safety-net healthcare providers under the 340B Program.

What is the 340B Program?

The 340B Program requires participating pharmaceutical manufacturers to provide drugs at a discount to safety-net hospitals and clinics largely serving low-income patients, called “covered entities.” The 340B Program pins the discount amount to the rate of inflation; the faster a drugmaker increases the price of a product above the rate of inflation, the steeper the discount it must provide to the covered entity. In 2024, the program facilitated more than $80 billion in drug purchases, demonstrating its significance in providing a lifeline to those in underserved communities.

However, 340B covered entities, such as Adventist Health, had evidence that certain drugmakers were ignoring the 340B pricing formula, sometimes charging prices for drugs that were hundreds or even thousands of times greater than they should have been. Unfortunately, in 2011, in Astra USA, Inc. v. Santa Clara County, the Supreme Court had ruled that covered entities could not directly sue drug manufacturers for overcharging them under the 340B Program. This meant that hospitals could not use the court system to recover overcharges from drugmakers, thus passing the burden of oversight fully over to the Health Resources & Services Administration (HRSA), a federal agency. Despite efforts by Congress to shore up HRSA’s oversight capacity, the rollout of oversight mechanisms and dispute resolution processes was extremely slow. And once established, the new processes were seen to be lacking by those seeking restitution.

What is the False Claims Act?

The False Claims Act is the federal government’s primary tool for fighting fraud. The act makes it illegal for any person or company to knowingly submit a false or fraudulent claim for payment to the federal government. And under the “qui tam,” or whistleblower, provision of the FCA, private citizens can file an FCA lawsuit against an offending party on behalf of the government.

How did Adventist’s Case Utilize the False Claims Act?

Adventist Health understood that, since the federal and state governments are the ultimate payers for the vast majority of these drugs, overcharging a hospital for a 340B drug causes the government to overpay. For example, since 340B covered entities are safety-net healthcare providers, many of their patients are covered by programs like Medicare and Medicaid, which pay for their treatment. And many 340B covered entities are funded by state and local government agencies. Therefore, an inflated 340B price often forces the government to pay out more in reimbursements than is legally owed.

Adventist Health alleges that various drugmakers have systematically and flagrantly violated the 340B drug pricing formula, which is set by statute. Under that formula, when a manufacturer raises a drug’s price much faster than the rate of inflation, it triggers an additional discount that can require the manufacturer to offer the drug to 340B covered entities for as little as $0.01 per unit—called “penny pricing.” Adventist Health alleges that for years, many 340B drugs were priced significantly above $0.01. However, shortly after HRSA finalized a 2019 rule imposing heavy civil penalties for 340B overcharges, the prices for those same drugs abruptly dropped to exactly $0.01. According to Adventist Health, these sudden and dramatic price drops can be explained only by the manufacturers’ knowingly disregarding the mandatory 340B formula for years to avoid providing the required discounts.

Adventist Health’s lawsuit alleges that, by failing to follow the 340B pricing formula, drug manufacturers have caused the federal and state governments to pay significantly more in reimbursements than they should have. The Ninth Circuit’s unanimous decision held that Adventist Health’s suit could proceed: while 340B covered entities cannot sue for their own losses, they can act as whistleblowers to recover fraudulent overpayments on behalf of the government and taxpayers.

What Precedent Does This Decision Set?

The Ninth Circuit ruling allows for Adventist Health’s case to proceed to trial, where Baron & Budd intends to show that the defendant manufacturers have fraudulently obtained hundreds of millions of taxpayer dollars. It also sets a precedent that drugmakers who overcharge for 340B drugs paid for by government programs like Medicare and Medicaid can be held liable under the False Claims Act. This is now binding law for federal district courts within the Ninth Circuit, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. For the rest of the country, it serves as a persuasive opinion that could lead other courts to follow suit.

What Is the Role of Whistleblowers?

Defrauding the government means defrauding the taxpayers whose hard-earned money goes to funding programs like Medicare and Medicaid. Drugmakers who defraud the government by overcharging for drugs siphon money from taxpayers and hurt the very people who rely on these programs to get the care they need. Holding drugmakers accountable for fraud helps protect taxpayer dollars by recovering money that can be reinvested back into these government programs. Under the whistleblower provision of the FCA, whistleblowers in successful suits typically receive a reward of 15% to 30% of the amount recovered.

About Us

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%.

Please call (866) 845-2164 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower.