By Jonathan Stempel
March 17 (Reuters) – A U.S. appeals court on Tuesday revived a whistleblower lawsuit accusing four large drugmakers of defrauding the federal and state governments out of hundreds of millions of dollars by overcharging on medications for low-income and uninsured patients.
In a 3-0 decision, the 9th U.S. Circuit Court of Appeals in Pasadena, California said AbbVie, AstraZeneca, Novartis and Sanofi must defend against claims they violated the federal False Claims Act through their involvement in the Section 340B Drug Pricing Program.
Created by Congress in 1992, the program lets medical providers buy drugs at discounted prices, and at no more than $0.01 — known as “penny pricing” — when the drugs’ statutory ceiling prices fall below zero.
Adventist Health System/West, a Roseville, California-based nonprofit with more than 440 hospitals and clinics, said many years of overcharges by the four drugmakers caused Medicare and Medicaid to pay inflated reimbursements.
It said this stopped when the U.S. Department of Health and Human Services decided in 2019 to impose large civil fines for Section 340B pricing violations.
Circuit Judge Roopali Desai wrote for the appeals court that while Section 340B does not give medical providers a private right to sue drugmakers for overcharges, they can sue under the False Claims Act to recover damages for alleged fraud that causes “financial loss” to the government.
Adventist’s claims “belong to the government,” and “it does not matter” that Adventist cannot sue on its own behalf, Desai wrote.
AbbVie, AstraZeneca, Novartis, Sanofi and their respective lawyers declined to comment. Lawyers for Adventist did not immediately respond to similar requests.
The appeals court returned the case to U.S. District Judge Dale Fischer in Los Angeles, who dismissed it in March 2024.
The False Claims Act lets whistleblowers sue on behalf of the government, and share in recoveries.
(Reporting by Jonathan Stempel in New York; Editing by Aurora Ellis)
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