Ninth Circuit Allows FCA Claim Based on Alleged Violations of Section 340B Program

In Adventist Health System of West v. Abbvie Inc., No. 24-2180 (March 17, 2026, 9th Cir.), the Court of Appeals for the Ninth Circuit held that the plaintiff, a covered entity under the Section 340B Program, could assert a False Claims Act (FCA) claim based on alleged violations of that statute. While the 340B Administrative Dispute Resolution (ADR) process remains an available mechanism for resolving pricing disputes with manufacturers, this ruling indicates that ADR may not be the exclusive avenue for covered entities. The ruling opens the door for covered entities to file an FCA claim.

The 340B Program was created to improve access to care for low-income and uninsured patients at safety-net hospitals and clinics. The plaintiff alleged that the defendant drug manufacturers engaged in a fraudulent scheme by knowingly charging "materially false, unlawfully inflated prices for their drugs" in violation of the statutory formula. The district court granted the defendant's motion to dismiss because Section 340B lacks a private right of action and plaintiff's claims were in essence claims to enforce Section 340B. The Ninth Circuit Court of Appeals reversed the district court's dismissal and remanded for further proceedings.

In reaching its ruling, the Ninth Circuit distinguished the United States Supreme Court's ruling in Astra USA, Inc. v Santa Clara Cnty, 563 U.S. 113 (2011), which held that there is no private right of action under Section 340B for covered entities to sue drug manufacturers for overcharging and repayment, by noting that the plaintiff brought its claims under the FCA—not under Section 340B—so the absence of a private right of action under Section 340B was immaterial. The Court determined that the plaintiff was not "in essence" suing to enforce Section 340B, but was bringing an FCA claim on behalf of the government and FCA relator damages for itself. The Court held that barring the plaintiff's claims would undermine the FCA.

The effect of this ruling is that rather than being required to process through the administrative process set forth in the 340B Program, a covered entity can file an FCA claim, which carries substantial penalties if the claim is valid.

This decision represents a significant development in the ongoing disputes between health systems and pharmaceutical manufacturers under the 340B Program because it potentially expands the enforcement landscape beyond the Health Resources and Services Administration's administrative framework and into federal fraud litigation. By allowing an FCA theory to proceed, the Ninth Circuit introduces the possibility that certain alleged overcharging practices may be challenged as fraud against the government, thereby exposing manufacturers to treble damages and statutory penalties. As a result, the ruling could influence manufacturer pricing and compliance strategies and further intensify the broader policy and legal conflicts surrounding the scope, administration, and enforcement of the 340B Program.

+++

For more insights, reach out to Traeger Machetanz or a member of our construction & government contracts or healthcare groups and sign up for our alerts.