In a significant decision with implications for 340B enforcement and False Claims Act (“FCA”) whistleblower litigation, the United States Court of Appeals for the Ninth Circuit (the “Court”) held on March 17, 2026, that a health system (the “System”) may proceed with its qui tam action alleging that pharmaceutical manufacturers engaged in fraudulent price-inflation schemes under the 340B Drug Pricing Program (“340B”), in violation of the FCA. United States ex rel. Adventist Health System of West v. AbbVie, et al., No. 24-2180 (9th Cir. Mar. 17, 2026).

Because the System brought suit on behalf of the federal government under the FCA, the Court held that the absence of a private cause of action under the 340B statute was immaterial. The Court emphasized that the FCA creates an independent cause of action for fraud against the government, and limitations on private enforcement under a separate statutory scheme do not displace that remedial framework. It further concluded that the System plausibly alleged falsity and remanded the case to the district court.

Statutory Background

Congress enacted the 340B Program in 1992 to expand access to care for low-income and uninsured patients. The program requires pharmaceutical manufacturers to sell outpatient drugs to safety-net providers, called “covered entities,” at or below a statutory ceiling price.

A key feature of the program is the “penny pricing” policy, which requires manufacturers to charge no more than one cent when the ceiling price calculation falls to zero or below.

In Astra USA, Inc. v. Santa Clara County (“Astra“), the U.S. Supreme Court held that covered entities lack a private right of action to enforce 340B pricing requirements. Instead, disputes must proceed through the statute’s administrative dispute resolution process. The Court distinguished Astra as addressing only direct private enforcement of 340B obligations, not the availability of FCA claims predicated on alleged fraudulent conduct related to those obligations.

Allegations and Procedural History

The System, which operates 340B-enrolled entities and facilities across several states, alleges that pharmaceutical manufacturers knowingly inflated drug prices in violation of the 340B statutory formula.

According to the complaint, the manufacturers charged “materially false, unlawfully inflated prices” over an extended period. The System points to a sudden shift in 2019—when certain drug prices dropped to $0.01 per unit—as evidence of prior misconduct. It alleges that this abrupt change was not driven by market forces or lawful pricing adjustments, but instead reflected an effort to correct longstanding overcharges. The System further claims that the alleged scheme caused the federal government to wrongfully pay hundreds of millions of dollars.

The district court dismissed the complaint with prejudice, reasoning that, under Astra, the absence of a private right of action under the 340B statute barred the claims.

The Ninth Circuit’s Decision

The Court reversed. It held that neither the 340B statute nor Astra precludes FCA claims premised on 340B-related conduct.

The Court’s reasoning was straightforward:

  • The claims arise under the FCA, a statute independent of the 340B framework.
  • The action is brought on behalf of the federal government, not a private plaintiff.
  • Foreclosing such claims would undermine Congress’s intent that the FCA reach “all types of fraud, without qualification.”

The Court also rejected the defendants’ contention that the System merely “repackaged” a 340B claim as an FCA action. It explained that the core of the complaint is fraud—namely, allegedly false pricing representations—not enforcement of 340B statutory compliance itself.

Finally, the Court held that the System plausibly alleged falsity under the FCA. In doing so, the Court accepted that a plausible theory of falsity can be based on allegedly inflated pricing that misrepresents compliance with statutory pricing obligations, even where those obligations are defined outside the FCA itself. It therefore reversed the dismissal and remanded the case for further proceedings.

Practical Takeaways

  • The Court confirmed that 340B covered entities are not barred from pursuing claims under the FCA against drug manufacturers for alleged fraudulent conduct, notwithstanding the absence of a private right of action under the 340B Statute itself. In doing so, the decision provides a practical roadmap for would-be whistleblowers seeking to leverage the FCA to address alleged 340B violations.
  • At the same time, the ruling underscores an important limitation: 340B covered entity relators cannot recover their own direct damages through such FCA actions. Instead, their FCA-related recovery is limited to the statutory relator’s share and attorneys’ fees.

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