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US Appeals Court Revives Whistleblower Case Against Major Drugmakers Over Pricing Program

By  |  March 18, 2026
drugs

A U.S. appeals court on Tuesday reinstated a whistleblower lawsuit accusing four major pharmaceutical companies of overcharging for medications supplied to low-income and uninsured patients, potentially costing federal and state governments hundreds of millions of dollars, according to Reuters.

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    The ruling from the 9th U.S. Circuit Court of Appeals in Pasadena, California, allows claims to proceed against AbbVie, AstraZeneca, Novartis and Sanofi. In a unanimous 3-0 decision, the court found the companies must face allegations that they violated the federal False Claims Act through their role in the long-standing Section 340B Drug Pricing Program, per Reuters.

    The Section 340B program, established by Congress in 1992, enables certain healthcare providers to purchase drugs at reduced prices. In some cases, those prices can drop as low as one cent, a mechanism commonly referred to as “penny pricing,” according to Reuters. The lawsuit alleges that the drugmakers failed to comply with these pricing requirements over a period of years.

    The case was brought by Adventist Health System/West, a nonprofit healthcare provider based in Roseville, California, which operates more than 440 hospitals and clinics. The organization claims that prolonged overcharges led Medicare and Medicaid to issue inflated reimbursements, according to Reuters. It also pointed to a policy shift in 2019, when the U.S. Department of Health and Human Services began imposing significant civil penalties for violations of the 340B pricing rules, which it said brought the alleged overcharging to a halt.

    Related: US Judge Rejects Drugmakers’ Bid to Disqualify Former Prosecutor in Price-Fixing Lawsuits

    Writing for the appeals panel, Circuit Judge Roopali Desai explained that while the 340B statute itself does not grant healthcare providers the ability to sue drug manufacturers directly for overcharges, the False Claims Act provides an alternative legal pathway. Under that law, whistleblowers may pursue claims on behalf of the government for fraudulent conduct that results in financial harm, per Reuters.

    Desai emphasized that the claims raised by Adventist are considered to belong to the government, meaning the case can proceed even though the healthcare provider does not have an independent right to sue under the 340B statute itself, according to Reuters.

    The decision overturns a March 2024 dismissal by U.S. District Judge Dale Fischer in Los Angeles, who had previously thrown out the case. The appeals court has now sent the matter back to her court for further proceedings.

    Representatives for the four pharmaceutical companies and their legal teams declined to comment on the ruling, according to Reuters. Attorneys for Adventist Health System/West did not immediately respond to requests for comment.

    The False Claims Act allows private individuals, often referred to as whistleblowers, to file lawsuits on behalf of the government and share in any financial recovery, a provision that has led to significant settlements in healthcare fraud cases, per Reuters.

    Source: Reuters