US court says pharma giants must face False Claims suit

An appeals court in the US has said that AbbVie, AstraZeneca, Novartis, and Sanofi will have to defend claims they defrauded federal and state government programmes that supply medicines to low-income and uninsured people.

The US Court of Appeals for the Ninth Circuit in Pasadena, California, denied efforts by the pharma companies to dismiss the whistleblower lawsuit brought under the False Claims Act (FCA), which alleges that they overcharged hospitals and clinics supplying medicines under the Section 340B programme.

First created in 1992, 340B requires pharma manufacturers to sell outpatient drugs at significantly discounted prices to eligible "covered entities (CEs)," mainly 'safety-net' hospitals and clinics serving deprived populations.

The lawsuit filed by Adventist Health System/West – a non-profit group representing CEs in California – is claiming that the pharma companies' overcharging led to inflated reimbursement payments from the federal Medicare and Medicaid programmes before the 340B programme was amended in 2019 to include hefty fines for pricing violations.

Specifically, it claims that they knowingly charged prices for drugs that exceeded the statutory ceiling, the maximum price manufacturers can charge CEs for drugs, calculated as the average manufacturer price (AMP) minus the required rebate.

The pharma companies had argued that Adventist had no right of action in this case because disputes over 340B payments should be pursued under administrative procedures with federal and state governments, and it was going beyond its position by effectively suing to enforce 340B. Their argument was previously backed by a California district court, which dismissed the complaint.

In its appeal, Adventist challenged that interpretation, saying that it did have the right to pursue litigation under the False Claims Act seeking to remediate fraud and recover losses on behalf of the governments, and was not seeking to recover personal losses or enforce Section 340B directly

In an opinion, Judge Roopali Desai wrote: "Because Adventist asserts legally cogni[s]able claims for relief under the FCA and has satisfied the necessary pleading requirements, we reverse and remand for further proceedings."

Section 340B has become a focal point for drug pricing-related litigation in the US of late, with a series of challenges trying to block an HHS pilot scheme seeking to implement a new rebate model that CEs argue will cause harm and could force some to close.

J&J appeal starts today

Meanwhile, Johnson & Johnson will make opening arguments today in a hearing at the US Court of Appeals for the Third Circuit in New Jersey in which it will attempt to overturn the largest FCA judgment in history, according to Bloomberg Law.

It is challenging an earlier 2025 district court award, with $1.6 billion in penalties and damages attached, which found the drugmaker ran a scheme for off-label promotion of two HIV/AIDS drugs, Prezista (darunavir) and Intelence (etravirine).

J&J's appeal relies on a similar argument to the above lawsuit in that it is questioning whether it is constitutional for the plaintiffs – in this case, former employees of its Janssen Products unit – to litigate on behalf of the government. It is also arguing that the judgement awarded by the district court is excessive.

Photo by Benjamin Brunner on Unsplash