If you live in parts of California, Oregon or Hawaii, you have probably seen or been to a facility that Adventist Health operates. It’s a faith-based, nonprofit integrated health system that runs hospitals and clinics as well as primary and cancer care centers (it has over 400 facilities in total).
Adventist Health is a covered entity in the 340B Program and this large system buys a lot of medications for its patients.
In March, Adventist Health scored a victory over Big Pharma and for patients everywhere. The case centers on the Adventist claim that four drug manufacturers engaged in a fraudulent scheme by knowingly charging inflated prices that did not comply with the 340B statutory formula. The companies involved are AbbVie, AstraZeneca, Novartis and Sanofi.
Adventist believed the federal and state governments had overpaid millions through Medicaid, Medicare and other programs because of this action.
At first, a district court dismissed the case because she concluded that the Supreme Court’s decision in Astra USA, Inc. v. Santa Clara County barred the claims because they were, in her view, an attempt to enforce 340B pricing obligations through a different legal mechanism.
However, federal Appeals Circuit Court Judge Roopali H. Desai decided that:
- The federal False Claims Act (FCA) allows covered entities, such as Adventist, to bring claims.
- The alleged defendants were liable for submitting false claims to the government, not merely for violating 340B pricing rules.
- Barring Adventist’s claims would undermine the FCA itself. The FCA was designed to reach all types of fraud resulting in financial loss to the government. Creating an exception for fraud that happens to involve 340B pricing would weaken a statute that Congress intended to be read broadly.
Now Adventist can pursue its False Claims Act against the companies.
Why It Matters for Sagebrush
The Adventist decision was filed just one day after oral argument in Sagebrush’s case against Amgen. Sagebrush promptly filed a notice of supplemental authority alerting the court to the decision. It believes the relevance is clear: if FCA claims touching 340B pricing are not barred, then state law claims arising from obligations independent of the 340B statute should be equally viable.
Covered entities and their supporters say the Adventist decision is a meaningful step toward accountability.