Executive Summary: In United States ex rel. Adventist Health System of West v. AbbVie Inc., 169 F.4th 1137 (9th Cir. 2026), the Ninth Circuit Court of Appeals recently revived a qui tam suit brought by a health system relator and Section 340B “covered entity” against several major pharmaceutical manufacturers. Reversing the district court’s dismissal, the Ninth Circuit held that the lack of a private right of action under the 340B statute does not preclude a relator from pursuing False Claims Act (FCA) claims on behalf of the government. The court concluded that an FCA action is a distinct and independent mechanism from a private suit seeking to enforce 340B pricing requirements.
Why It Matters: The decision is a significant victory for healthcare providers participating in the 340B program. It affirms that the FCA remains a potent, independent tool to remedy fraud involving 340B drug pricing, even when the relator is a covered entity that would otherwise be forced to use the program’s administrative dispute resolution process to recover its own losses. The ruling holds that, while covered entities cannot sue drug makers directly for breach of contract over 340B overcharges, they can serve as qui tam relators and stand in the shoes of the government to recover taxpayer funds under the FCA.
The Facts: Adventist Health System of West operates hospitals and medical clinics and qualifies as a “covered entity” under the Public Health Service Act’s Section 340B Program. The defendants are drug manufacturers who opted into the 340B Program by signing Pharmaceutical Pricing Agreements (PPAs) with the government, legally subjecting them to price ceilings for drugs sold to covered entities.
Adventist alleged that the defendants engaged in a long-running fraudulent scheme by knowingly charging “materially false, unlawfully inflated prices” that ignored the statutory formula. According to the complaint, the manufacturers’ prices suddenly plummeted to $0.01 per unit shortly after January 2019, when the Health Resources and Services Administration (HRSA), which administers the 340B programs, issued a new final rule that imposed hefty civil penalties for non-compliance with the 340B ceiling price formula.
Rather than proceeding administratively to recover the overcharges it paid out of its own pocket, Adventist filed a qui tam action under the FCA. It alleged that the manufacturers’ inflated prices caused the federal and state governments to wrongly pay hundreds of millions of dollars through Medicaid, Medicare (due to critical access hospitals billing at 101% of their drug costs), and government-funded clinics.
Legal Analysis: The district court originally dismissed Adventist’s complaint with prejudice, relying heavily on the Supreme Court’s decision in Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011). In Astra, the Supreme Court held that 340B covered entities cannot sue drug manufacturers for overcharges under a breach-of-contract claim, but must instead use the program’s Administrative Dispute Resolution (ADR) process. Applying this logic, the district court reasoned that Adventist’s FCA claims were essentially an impermissible attempt to enforce Section 340B, which lacks a private right of action.
The Ninth Circuit disagreed and reversed the lower court, making several key points in its legal analysis:
First, the court explained that the absence of a private right of action under Section 340B is immaterial when a relator brings an FCA claim. Adventist was not suing for compensatory damages to recover its own losses as a covered entity; rather, it was standing in the shoes of the government to remedy financial losses to the public fisc. It is “irrelevant” that Adventist happened to be a covered entity. As a relator, it played a separate role in using the FCA as an independent legal avenue.
Second, the Ninth Circuit distinguished Astra, which barred common law breach-of-contract suits intended to enforce 340B PPAs directly. Adventist’s FCA action, by contrast, sought statutory penalties and treble damages under a separate federal fraud statute, meaning it was not “in essence a suit to enforce” Section 340B.
Third, the court stressed that barring the claim would undermine the broad, remedial purpose of the FCA. Because Congress did not write a specific exception into the FCA for 340B claims, the court refused to imply one, noting that there is no “positive repugnancy” between the FCA and Section 340B.
Finally, the Ninth Circuit also rejected the defendants’ argument that Adventist failed to plead “falsity” for claims pre-dating the 2019 final rule. The court found the allegations plausible because the plain text of the statutory formula and a 2011 formal written guidance from the government already established the “penny pricing” policy for situations where the statutory formula resulted in a negative ceiling price.
