Kang Haggerty News
The U.S. Court of Appeals for the Ninth Circuit just disrupted that assumption. In Adventist Health System of West v. AbbVie, the court revived a qui tam action alleging systemic overcharges under 340B and, in doing so, made a critical point: the absence of a private right of action under 340B does not insulate manufacturers from liability under the False Claims Act (FCA).
In the April 16, 2026 edition of The Legal Intelligencer, Edward Kang writes, “No Private Right? No Problem: Ninth Circuit Lets 340B Pricing Claims Proceed Under the False Claims Act.“
For years, pharmaceutical manufacturers have treated disputes under the 340B Drug Pricing Program (i.e., a U.S. federal program that requires drug manufacturers to provide significant discounts on outpatient prescription drugs to certain health care organizations that serve uninsured or low-income patients) as regulatory matters—issues to be handled through agency processes, not through high-stakes fraud litigation. The U.S. Court of Appeals for the Ninth Circuit just disrupted that assumption. In Adventist Health System of West v. AbbVie, 24-2180, (9th Cir. Mar. 17, 2026), the court revived a qui tam action alleging systemic overcharges under 340B and, in doing so, made a critical point: the absence of a private right of action under 340B does not insulate manufacturers from liability under the False Claims Act (FCA).
For practitioners, the takeaway is immediate and practical. If the facts support it, a 340B pricing case is no longer just a regulatory dispute—it may be a viable FCA case.
The Defense Playbook—and Why It Failed
The defendants advanced what, until now, has been a powerful threshold argument: Astra USA v. Santa Clara County, 563 U.S. 110 (2011) forecloses private enforcement of 340B. Rather, a covered entity must file a claim through the Section 340B administrative dispute resolution process if it alleges a direct pricing violation against a drug manufacturer. That is, a covered entity cannot sue manufacturers directly for overcharges; it must proceed through the administrative dispute resolution process.
In the case before the U.S. district court, Adventist alleged that the defendants harmed the government in many ways. In particular, it alleged that the defendants sold drugs at inflated prices to covered entities, and then federal and state governments paid higher prices for the drugs through their Medicaid payments to the covered entities. Relying on Astra, the defendants argued that Adventist—a covered entity—cannot sue the defendants directly for violating the FCA. Interestingly, the defendants admitted that Adventist’s claims are based on alleged violations of the FCA, not direct violations of Section 340B as in Astra, but they nevertheless argue that Astra’s reasoning bars all claims arising from “purported violations of the 340B statute.” The district court agreed and dismissed the case.
The Ninth Circuit did not.
The Ninth Circuit saw the claims differently. The flaw in the defense argument—and the lesson for practitioners—is straightforward: not every case that involves a 340B violation is a 340B enforcement action. It could be an action under the FCA.
The Critical Distinction: FCA Liability Is Different
The Ninth Circuit’s decision turns on a distinction that should now be at the front of the mind for any practitioner evaluating these cases under the FCA:
An FCA Claim Is Not a 340B Claim
That is not semantics—it is strategy. The relator is not seeking reimbursement for overcharges. It is seeking remedies under the FCA: treble damages and statutory penalties on behalf of the government. The injury is not to the covered entity; it is to the government. That framing changes everything. Courts have long recognized that the FCA operates independently of the statutes whose violations give rise to false claims. The Ninth Circuit simply applied that principle here. The lack of a private right of action under 340B is irrelevant where the cause of action arises under the FCA.
Repackaging vs. Reframing: Getting the Theory Right
The defendants’ second argument—that the case is merely a “repackaged” 340B claim—also failed, and the reason matters. In Astra, the plaintiffs sought to recover their own overcharges. That is classic 340B enforcement. In Adventist, the relator was seeking to recover for the government based on allegedly false claims submitted for payment. That is an FCA case.
This is more than a pleading distinction. It is a structural one:
- 340B ADR process → reimbursement to covered entities.
- FCA action → penalties and damages paid to the government.
If you are building one of these cases, the theory must be clear from the outset. If it looks like a reimbursement claim, it risks dismissal. If it is framed as fraud on the government, it survives.
The Real Risk for Manufacturers: FCA Exposure
The practical consequence of the decision is significant: 340B compliance is now a potential FCA minefield.
Consider the exposure:
- Thousands of transactions
- Across multiple years
- With per-claim penalties and treble damages
Even modest pricing deviations, if systemic and intentional, can produce staggering liability.
Manufacturers will argue—as they generally do—that pricing under 340B is complex, technical, and subject to reasonable interpretation. That defense may ultimately carry weight. But it is no longer a basis for early dismissal. The case will proceed to discovery.
Pleading the Case: Falsity Still Matters
The Ninth Circuit did not lower the bar for FCA claims—it simply allowed this one to proceed. The relator still must prove falsity, and the court’s discussion provides a roadmap. Defendants argued that “penny pricing” obligations did not apply before the 2019 rule of The Health Resources and Services Administration, a unit of the Health and Human Services that manages and oversees the Section 340B program. The court rejected that position, emphasizing that the statutory framework—not just the regulation—can establish the pricing requirement.
For practitioners, the lesson is clear:
- Do not anchor your case solely to post-2019 conduct
- Use statutory text, guidance, and pricing behavior to establish falsity
- Expect a fight over interpretation, not just facts
Equally important, the court refused to resolve disputes about HRSA oversight at the motion to dismiss stage. Those arguments may resurface—but only after discovery.
Strategic Takeaways for Plaintiffs Counsel
This decision is not just doctrinal—it is tactical. For those evaluating potential cases, several points stand out.
First, access to data is leverage. Covered entities are uniquely positioned. They see pricing patterns over time. That visibility is the foundation of a viable FCA case. Second, the theory must be disciplined. Do not plead a grievance about overcharges. Plead a fraud case tied to claims for government payment. Third, scale matters. Isolated errors are unlikely to justify FCA exposure. Patterns, repetition, and internal knowledge are what transform a pricing issue into a fraud case. Fourth, expect a scienter battle. Manufacturers will argue ambiguity and good-faith interpretation. Internal documents, guidance, and post-2019 conduct will be critical.
Strategic Takeaways for Defense Counsel
The ruling also reshapes the defense approach. Early dismissal on Astra grounds is no longer reliable—at least in the Ninth Circuit. The focus will shift to:
- Challenging falsity based on statutory interpretation
- Undermining scienter through complexity and ambiguity
- Attacking materiality (did pricing actually affect government payment decisions?)
In other words, these cases will be fought on the merits, not disposed of at the threshold.
What Comes Next
While the Ninth Circuit answered one question, it left many important ones unresolved:
- Were false claims actually submitted?
- Did the defendants act knowingly?
- Were any misstatements material to payment?
Those are fact-intensive inquiries. This case now becomes a discovery-driven battle involving pricing data, internal communications, and expert analysis.
Conclusion
The Ninth Circuit’s decision is a shift in posture, not just precedent. It confirms that 340B disputes can, under the right circumstances, be litigated as FCA fraud cases. For plaintiffs, it opens a path that did not meaningfully exist before. For manufacturers, it introduces a level of risk that cannot be managed through regulatory compliance alone. And for practitioners on both sides, it reinforces a familiar principle: when government money is involved, statutory complexity does not preclude fraud liability—it often invites it. The FCA is indeed the most effective tool for combating fraud against the government and the waste of taxpayer money.
Edward T. Kang is the managing member of Kang Haggerty. He devotes the majority of his practice to business litigation and other litigation involving business entities. Contact him at ekang@kanghaggerty.com.