On March 17, 2026, the Ninth Circuit revived a whistleblower complaint by Adventist Health System against four major drug companies alleging that the manufacturers violated the federal False Claims Act by overcharging for drugs provided under the federal 340B Drug Pricing Program. The decision is significant because it underscores that 340B pricing disputes may give rise not only to regulatory scrutiny, but also to False Claims Act exposure with the attendant risks of whistleblower litigation, government investigation, and substantial damages.
Adventist alleged that AbbVie Inc., AstraZeneca LP, Novartis Pharmaceuticals Corp., Sanofi SA, and various affiliates charged covered entities hundreds of millions of dollars above the applicable 340B ceiling prices, thereby causing false claims to be submitted to CMS and other government payors. In essence, the theory is that allegedly inflated drug pricing at the front end translated into excessive reimbursement demands at the back end.
The federal False Claims Act permits private whistleblowers, known as relators, to bring suit on the government’s behalf against parties alleged to have caused false claims to be submitted for government payment. The statute also incentivizes such suits by permitting relators to share in any recovery.
The 340B program permits eligible covered entities to purchase outpatient drugs at discounted prices, and participation is effectively mandatory for manufacturers that want their drugs covered by Medicaid. The program uses a statutory formula to establish a maximum ceiling price for covered outpatient drugs. At the same time, the program has long been the subject of policy and industry debate, including disagreement over whether and to what extent covered entities are using 340B savings in a manner consistent with the program’s intended purposes. For manufacturers, covered entities, contract pharmacies, and other participants in the 340B ecosystem, the issue is no longer merely one of program administration. It is increasingly a matter of litigation risk, internal compliance controls, and potential whistleblower exposure.
The decision is also likely to draw the attention of relators and compliance personnel across the 340B landscape. And it comes at a time when the program is already under sustained congressional scrutiny. The Senate Committee on Health, Education, Labor & Pensions, led by Sen. Bill Cassidy, M.D. (R-LA), has been examining whether covered entities, contract pharmacies, and other program participants are generating substantial revenue through 340B without adequately advancing the program’s intended patient-benefit objectives. The overarching concern raised by Senator Cassidy and others is that the 340B program has grown significantly while oversight and transparency have lagged behind.
The Senate investigation remains ongoing. Its initial report was released in April 2025, and the inquiry has since expanded to include Apexus, the prime vendor operating under an exclusive contract with the Health Resources and Services Administration. Previous areas of focus have included hospitals, contract pharmacy arrangements, and large industry participants such as Bon Secours Mercy Health, the Cleveland Clinic, CVS, and Walgreens. Although Senator Cassidy has proposed reforms, those proposals have not yet advanced to a floor vote.
For industry stakeholders, the practical takeaway is not simply that 340B remains politically controversial. It is that disputes over pricing, reimbursement, and program compliance may increasingly be framed through the lens of False Claims Act liability. That raises the stakes considerably. Drug manufacturers should be reviewing their pricing methodologies, assumptions, and documentation practices with care. Covered entities and other participants should likewise ensure they have strong internal controls, escalation pathways, and compliance oversight around 340B-related billing, reimbursement, and contracting practices.
In an environment where relators, regulators, and Congress are all paying closer attention to the 340B program, organizations should not assume that 340B issues will remain confined to policy disputes or ordinary reimbursement disagreements. They may instead become the basis for high-stakes False Claims Act allegations. Now is an optimal time for affected stakeholders to reassess their 340B compliance infrastructure, audit functions, and documentation practices with that possibility in mind.
Leech Tishman has extensive experience advising healthcare providers, pharmaceutical companies, and other industry stakeholders on False Claims Act matters and issues involving the 340B Drug Pricing Program. Our Healthcare Practice Group is prepared to assist clients in evaluating 340B-related risk areas, compliance controls, and response strategies. For assistance or additional information, please contact Harry J. Nelson at hnelson@leechtishman.com, Tara A. Davidoff at tdavidoff@leechtishman.com, or Lydia A. Pappas at lpappas@leechtishman.com.