Civil Penalties
Ninth Circuit Permits 340B Program Enforcement Under the FCA
Drug manufacturers participating in the Section 340B Drug Pricing Program now face a significant new litigation risk under the False Claims Act (“FCA”). In a recent decision, Adventist Health System v. AbbVie, the Ninth Circuit reversed a district court to hold that a covered entity can pursue an FCA qui tam action premised on 340B overcharging even though Section 340B itself provides no private right of action. For hospitals, health systems, and other 340B-participating entities, the ruling deserves careful attention. Background: The 340B Program and Astra USA v. Santa Clara County The 340B Program, created in 1992, requires drug manufacturers that participate in Medicaid to sell drugs to qualifying covered entities, such as safety-net hospitals, federally qualified health centers, and similar facilities, at ceiling prices set by a statutory formula. Covered entities use the discounted acquisition costs to stretch limited resources for low-income and uninsured patients. For years, the principal legal obstacle to covered entities pursuing overcharge claims has been Astra USA, Inc. v. Santa Clara County, 563 U.S. 113 (2011). The Supreme Court held that Section 340B suits by covered entities to enforce manufacturers’ Pharmaceutical Pricing Agreements are “in essence” suits to enforce the statute itself, which are barred because the statute does not create a private right of action. If a covered entity believed it was overcharged, the exclusive remedy was Section 340B’s Administrative Dispute Resolution process, administered by the Health Resources and Services Administration (“HRSA”). Covered entities have complained for years that the ADR process is slow, resource-intensive, and provides only direct remedies like overcharge reimbursement or PPA termination. Notably, the ADR process does not provide anywhere near the scope of damages and penalties available under the FCA, which allows treble damages and per-claim penalties. Adventist’s Allegations Adventist, a nonprofit operator of clinics and hospitals, alleged that AbbVie, AstraZeneca, Novartis, and Sanofi knowingly charged prices that violated 340B’s ceiling price formula for many years. According to the qui tam complaint, all four manufacturers dropped the prices for several categories of drugs to $0.01, the default price when 340B’s ceiling price formula results in a ceiling price of $0 under HRSA’s penny pricing rule. Adventist contends that market forces could not explain the sudden uniformity of the decrease, but instead that the drop is explained by years of inappropriate price increases followed by belated correction. Adventist brought suit as a qui tam relator on behalf of the federal and state governments, alleging that the inflated manufacturer prices caused Medicaid and Medicare to reimburse covered entities at fraudulently inflated rates, that critical access hospitals overbilled Medicare at 101% of costs, and that government-funded prisons and clinics paid unlawfully inflated prices. The Ninth Circuit’s Holding The Court reversed the district court’s dismissal on two independent grounds. First, the Court reasoned that the absence of a private right of action under Section 340B does not bar an FCA qui tam action. The Court ruled that the FCA provides its own independent right of action and creates a cause of action on behalf of the government. As a result, Adventist was not suing to vindicate its own interests as a covered entity. Rather, it was suing on behalf of the government. The Court analogized to an earlier decision holding that the absence of a private right of action under the Service Contract Act did not bar a relator from bringing FCA claims premised on violations of that Act. To the Court, what mattered was whether false claims were presented to the government, not whether the relator could independently enforce the underlying regulatory requirement. Second, the Court explained that Adventist’s claims are not “in essence” an attempt to enforce Section 340B in an end run on Astra USA. There, the plaintiff sought compensatory damages for breach of contract, relief that mirrored what the 340B ADR process provides. Here, Adventist seeks treble damages and civil penalties under the FCA for false claims submitted to government healthcare programs. The Court concluded this difference placed Adventist’s claims in a different category, noting that Adventist’s claims of an FCA violation required more because “the violation of a statute does not itself create a violation of the FCA.” The Court also rejected the defendants’ arguments regarding a failure to allege falsity, holding that the plain text of the statutory ceiling price formula independently required penny pricing regardless of any regulation, and that HRSA’s 2011 written guidance had formally adopted that interpretation years earlier. What This Means Going Forward For covered entities, the decision potentially opens a previously unavailable avenue to pursue fraud losses the government sustained from 340B overcharging, which is beyond the losses recoverable through the ADR process. Covered entities sitting on pricing anomaly data, or on evidence of precipitous price decreases like those alleged here, may have a viable FCA theory to evaluate alongside the ADR route. For drug manufacturers, the exposure calculus has changed materially, particularly in the Ninth Circuit. FCA liability means treble damages plus per-claim civil penalties, consequences that would be far steeper than ADR reimbursement. The FCA’s statute of limitations and statue of repose, however, may limit the scope of potential liability based on Adventist’s theory. The decision highlights the importance of documentation around 340B ceiling price calculations and compliance histories. The Court permitted Adventist’s pre-2019 claims to survive at the pleading stage based on the theory that the statutory formula was self-executing. What discovery reveals about how the defendant manufacturers calculated and what the defendants knew about ceiling prices in earlier years will likely be key to ultimate exposure. The Ninth Circuit’s ruling has no immediate effect outside the circuit, and it may well be contested further. But given the scale of the 340B program, which facilitated more than $80 billion in drug purchases in 2024 alone, and the relative novelty of FCA theory, the Adventist decision is a development that organizations and practitioners across the spectrum will monitor closely.
March 23, 2026
by Alex Hontos, Chris DeLong, Matthew Gillespie, and Anna Ashley
Civil Penalties
SuperValu: Relators’ SCOTUS Victory Turns Pyrrhic After Jury’s Defense Verdict and Denial of Post-Trial Motions
Last week, after fourteen years of litigation, United States ex rel. Schutte v. SuperValu, Inc. arrived at its likely end after the U.S. District Court for the Central District of Illinois rejected relators’ bid for a new trial after a jury returned a defense verdict earlier this year. Filed in 2011 and unsealed in 2015, SuperValu led to a landmark Supreme Court decision on the FCA scienter requirement in 2023, with SCOTUS holding that scienter turned on a defendant's subjective belief not what an objectively reasonable person may have thought. After remand, the district court held a three-week jury trial in February 2025. The jury found in favor of the relators on scienter but concluded there was insufficient evidence of damages, rendering what was ultimately a favorable verdict for the defense. The relators alleged SuperValu violated the FCA by reporting prices to Medicare and Medicaid that were higher than those “usually and customarily” charged to the public. In particular, the relators alleged that the reported retail prices did not account for discounts that SuperValu regularly applied to the majority of drug sales to the general public. Relators contended this violated Federal regulations requiring reimbursements paid to pharmacies by Medicare and Medicaid be limited to the “usual and customary” price of the drug as it is offered to the general public. To prove a violation of the FCA, the relators had to prove SuperValu had scienter—that SuperValu knew the claim was false. SuperValu argued it did not knowingly submit any false claims because it adopted applied objectively reasonable interpretation of “usual and customary” by not including discounts in its reimbursement requests. The district court and Seventh Circuit had agreed with SuperValu that this defeated the relators’ claims. SCOTUS, in a unanimous decision, reversed, however, holding that a defendant’s subjective belief of a claim’s falsity was the relevant focus in determining scienter. SCOTUS explained that a later-developed, objectively reasonable interpretation could not, on its own, defeat scienter if the defendant did not subjectively believe that interpretation to be true. After remand, relators moved for summary judgment, arguing that SuperValu knew it submitted false claims because it was previously informed its discount prices were the “usual and customary” prices, SuperValu subjectively believed its discounted prices were its “usual and customary” prices, and SuperValu tried to hide its discounted prices from regulators. The district court granted summary judgment on falsity and materiality, narrowing the jury’s factfinding to scienter and damages. During trial, the jury was presented with two questions: (1) whether SuperValu knowingly submitted false claims, and (2) whether SuperValu’s false claims resulted in government damages. On the first question, the jury found SuperValu did knowingly submit false claims to the government. However, on the second, the jury found the relators failed to prove the false claims damaged the government, and the court entered judgment in favor of the defense. In post-trial motions, relators argued that causation was not a required element of liability under their theory of the FCA violation. Because the FCA provides for two forms of damages, actual damages and civil penalties assessed on a per-claim basis, the relators argued SuperValu could still be liable for per-claim civil penalties based on the submission of knowingly false claims even absent actual damages. The district court rejected relators’ arguments, noting that some circuits have adopted a distinction between these two types of liability, but that the Seventh Circuit has not, instead having chosen to “leave [the question] for another day.” United States ex rel. Calderon v. Carrington Morg. Servs., LLC¸ 70 F.4th 968, 978 (7th Cir. 2023).
November 7, 2025
by Chris DeLong, Matthew Gillespie, and Joe Coffey
Civil Penalties
Home-Health Services Company Settles After Allegations of Double-Billing Scheme
The Department of Justice recently announced that a home-health services company has agreed to pay over $45,000 to resolve alleged False Claims Act (“FCA”) violations. Professional Family Care Services, Inc. (“PFCS”), a North Carolina corporation, faced allegations of fraudulent billing for work by an employee that was convicted of wire fraud and sentenced to prison for her role in the alleged scheme. For two years starting in 2015, PFCS billed the Department of Veterans Affairs (the “VA”) for home-health services related to the medical care of an Army veteran identified by the initials W.R. While PFCS was billing the VA for home-health services, W.R. was actually residing with a Certified Nursing Aide. Relevant evidence indicated that PFCS was billing the VA based on falsified timesheets provided by the aide, for example, timesheets showing her providing services to W.R. and another patient simultaneously. As a result, VA alleged that PFCS failed to provide W.R. with the time and quality of care required under the VA program. W.R. was eventually admitted to the hospital, where it was discovered that W.R. was extremely malnourished and died shortly after. Following the death of W.R., PFCS submitted 15 separate claim forms seeking payment from the VA for the services provided by the aide totaling $11,273.92. Under 31 U.S.C. § 3729(a)(1), civil FCA claims may lead to treble damages in addition to other penalties for false or fraudulent claims. As a result, PFCS agreed to pay $45,486.76 to settle the dispute and avoid litigation. The aide was sentenced to twelve months and one day in federal prison for wire fraud related to the charging of home services for W.R. and ordered to pay over $90,000 in restitution. The primary takeaway here is that businesses that bill services to the government must closely review their invoices. PFCS’s employee was double-charging the government for services, which could have been identified by internal review protocols. Regardless of whether PFCS was aware of or condoned the actions, they were ultimately liable for monetary penalties. Healthcare is one of the largest drivers of FCA liability, and this case serves to highlight the importance of internal controls when billing the government for healthcare services.
March 8, 2022
by Ryan Cole
Civil Penalties
Enforcement Standards Tighten on Private Insurers: Sutter Health Settles for $90 Million Following Dispute With DOJ
On August 30, 2021, the Department of Justice (“DOJ”) announced that Sutter Health and several of its affiliated entities (“Sutter”) agreed to pay a total of $90 million to settle allegations that Sutter violated the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733, by “knowingly submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans.” Sutter Health and Affiliates to Pay $90 Million to Settle False Claims Act Allegations of Mischarging the Medicare Advantage Program, Department of Justice (Aug. 30, 2021), https://www.justice.gov/opa/pr/sutter-health-and-affiliates-pay-90-million-settle-false-claims-act-allegations-mischarging. As a part of its settlement, Sutter also entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services to implement a centralized risk assessment program. Id. The central allegation from qui tam Plaintiff Kathy Ormsby (“Ormsby”) was that Sutter had submitted inaccurate and unsupported medical information that artificially inflated Medicare reimbursement for Sutter’s Medicare Advantage patients. United States ex rel. Kathy Ormsby v. Sutter Health, No. 3:15-cv-01062-LB, 444 F. Supp. 3d 1010 (N.D. Cal. 2020). In December of 2018, the United States formally intervened in the case and took primary responsibility for prosecuting the action. Shortly thereafter, Sutter agreed to pay $30 million to settle some of the allegations in April of 2019, but explicitly denied any liability related to the allegations. In so doing, Sutter argued that the United States had taken a mistaken approach to the case by applying an analysis involving traditional Medicare programs (using a fee-for-service model) as opposed to focusing on the unique nature of Medicare Advantage, which Sutter argued “is a fundamentally different program with its own unique standards for establishing overpayments” and thus the United States was relying on an inapplicable FCA theory of liability. Sutter argued the United States had not, and indeed could not, prove that Sutter had knowingly submitted false claims or received overpayments for submitted claims that they failed to return. Ultimately, Sutter returned to the table to discuss settling the Medicare Advantage claims following recent FCA decisions holding that the overpayment rule did not improperly hold private insurers to higher standards on the basis that nothing in the FCA renders actuarial equivalence a defense against the obligation to refund any individual, known overpayment. This is expected to buttress FCA enforcement by rejecting the idea that Medicare Advantage insurers receive apples-to-apples reimbursement with traditional Medicare. Sutter eventually settled the remaining claims for $60 million, bringing the total amount of the settlement to $90 million in addition to implementing further oversight and compliance mandates. The settlement between Sutter and the United States makes clear that defendants claiming protection against FCA enforcement should be careful when relying on rapidly changing FCA precedent. Though defendants may be tempted to highlight and defend their actions under novel legal theories, the attention brought by said action may invite unwanted scrutiny, and ultimately, harsher penalties as opposed to settling and adjusting internal procedures early in the dispute.
November 2, 2021
Civil Penalties
DOJ Demonstrates Continued Focus on Opioid Crisis with $600 Million Criminal and Civil Settlement Against Indivior Solutions, Indivior Inc., and Indivior plc
The Department of Justice’s (“DOJ”) most recent settlement with Indivior Solutions, Inc., Indivior Inc., and Indivior plc (together, “Indivior”) demonstrates not only that the DOJ is continuing its pursuit of claims and settlements related to the opioid crisis, but also that the DOJ is searching for creative penalties beyond large monetary payouts. In a July 24, 2020 press release, the DOJ announced a $600 million civil and criminal settlement against Indivior related to marketing the opioid-addiction-treatment drug Suboxone. This settlement follows a larger, $1.4 billion settlement with Rickeitt Benckiser Group PLC, Indivior’s former parent company, inked in 2019. The DOJ touts the combined $2 billion value of the 2019 and 2020 settlements as the largest-ever resolution in a case brought by the DOJ involving opioid drugs. The civil settlement resolves claims from six qui tam lawsuits brought against various combinations of the Indivior entities under the False Claims Act (“FCA”). United States ex rel. Finkelstein v. Reckitt Benckiser Pharms., Inc., No. 14-cv-00059 (W.D. Va.); United States ex rel. Williams v. Reckitt Benckiser, Inc., No. 13-cv-00036 (W.D. Va.); United States ex rel. Lemons v. Reckitt Benckiser Pharms., No. 15-cv-00016 (W.D. Va.); United States ex rel. Kruszewski v. Reckitt Benckiser Pharms., Inc., No. XX-cv-XXXX [UNDER SEAL] (D.N.J.); United States ex rel. Scott v. Reckitt Benckiser Pharms, Inc., No. XX-cv-XXXX [UNDER SEAL] (N.D.J.); United States ex rel. Greene v. Indivior PLC, No. XX-cv-XXXX [UNDER SEAL] (D.N.J.). Under the civil settlement, Indivior Inc. and Indivior plc agreed to pay $300 million, with $209.3 million going to the federal government and $90.7 million going to certain participating states. The amount awarded to the individual whistleblowers has yet to be determined. While Indivior did not admit fault in its civil settlement, the settlement resolves three main allegations. First, the DOJ alleged Indivior knowingly promoted the sale and use of Suboxone to physicians who were writing prescriptions not for a medically-accepted indication, lacked a legitimate medical purpose, were issued without counseling or psychosocial support, were for unsafe, ineffective, and medically-unnecessary uses, or were often diverted. Second, the DOJ alleged that Indivior knowingly promoted the sale or use of Suboxone Film to physicians and state Medicaid agencies using false and misleading claims that Suboxone Film was less susceptible to accidental pediatric exposure than Suboxone Tablets. And third, the DOJ alleged that Indivior tried to delay the entry of generic competition to control the price of Suboxone—including pricing to federal healthcare programs. Such actions allegedly included the improper submission of a petition to the Food and Drug Administration (“FDA”) claiming that Suboxone Tablet had been discontinued “due to safety concerns” about the tablet formulation of the drug. As part of the criminal resolution, Indivior Solutions pleaded guilty to a one-count felony criminal information charging false statements related to health care matters, in violation of 18 U.S.C. § 1035. See United States v. Indivior Solutions, Inc., 19-cr-00016-JPJ-PMS (W.D. Va.). The plea included an admission that Indivior Solutions made false statements to promote the film version of Suboxone to the Massachusetts Medicaid programs regarding the safety of Suboxone Film around children. The settlement includes a criminal fine, forfeiture, and restitution in the combined amount of $289 million. The criminal resolution also includes novel, non-monetary components, requiring that Indivior Inc. permanently disband its entire Suboxone sales force and a prohibition from using data obtained from surveys of health care providers for marketing, sales, or proposal purposes. Indivior’s CEO will also be required to annually certify—under penalty of perjury—either that: (1) Indivior was complaint with the Food, Drug, and Cosmetic Act and did not commit health care fraud; or (2) list all of Indivior’s non-compliant activity and the steps taken to remedy it. Finally, Indivior Inc. is also required to remove health care providers from its promotion programs at high risk of inappropriate prescribing. Neither the press release nor settlement materials explain how Indivior is supposed to identify high-risk providers. Failure to meet the above requirements will cause contempt sanctions and a reinstatement of the dismissed charges. Besides the civil and criminal settlements, Indivior also agreed to a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General, under which Indivior will implement numerous accountability and auditing provisions, including a yearly compliance certification by Indivior executives and Board of Directors, annual risk assessments and other monitoring, and multi-faceted audits conducted by an independent review organization. These cases serve as a reminder that the DOJ continues to aggressively pursue both civil and criminal claims related to the opioid crisis and provides insight into the non-monetary, compliance-based penalties the DOJ may pursue as part of global civil and criminal resolutions. As the stated by Elton Malone, Assistant Inspector General for Investigations with the Office of Inspector General of the U.S. Department of Health and Human Services, “[t]his resolution, along with our law enforcement partners’ work, should serve as a warning that large companies will face prosecution if they break the law.”
August 25, 2020
by Vanessa J. Szalapski
Civil Penalties
$145 Million Settlement Shows the Depth of Government’s Effort to Combat Opioid Crisis and its Interest in Fraud Actions Against Electronic Health Records Companies
Less than a year after United States Attorney Christina E. Nolan warned electronic health records (“EHR”) companies in a DOJ press release that they “should consider themselves on notice” following a $57.25 million FCA settlement with EHR software developer Greenway Health LLC, the DOJ announced in a recent press release a $145 million settlement with another EHR vendor, Practice Fusion, Inc. The settlement includes $26 million in criminal fines and forfeitures, which Practice Fusion agreed to pay as part of a deferred prosecution agreement. That settlement figure is notable as the largest criminal fine in the District of Vermont’s history. Practice Fusion agreed to pay another $118.6 million in civil settlement, which includes approximately $113.4 million to the federal government and up to $5.2 million to states that opt to participate in separate state agreements. Practice Fusion, founded in 2005, provided electronic medical record software called Practice Fusion Solution free of charge. Instead of making money through software sales and support, the company supported itself through drug advertising revenues. The government brought both civil and criminal claims against Practice Fusion. Like the Greenway case, the government alleged Practice Fusion submitted false claims by certifying its EHR software products had specific capabilities when the software apparently did not. The settlement also resolves claims that Practice Fusion violated anti-kickback laws through programs it ran with opioid and other drug manufacturers. According to the criminal Information filed in the District of Vermont by U.S. Attorney Nolan—the same district that filed charges leading to the Greenway settlement—Practice Fusion created pain clinical decision support (“CDS”) alerts that were inconsistent with CDC Guidelines and clinical quality measures. As alleged, these CDS alerts were intended to prompt physicians to prescribe—and therefore increase sales of—extended release opioids in exchange for remuneration from the opioid manufacturer. The extended release opioid CDS alerts began in 2016, even as the opioid crisis was coming to a head and the CDC released guidelines identifying addiction and overdosing as concerns with opioid use. The settlement is noteworthy for several reasons. It resolves the first ever criminal prosecution of an EHR company, according to the press release. It also demonstrates the government’s willingness to combat the opioid crisis by targeting entities other than opioid drug manufacturers. In addition, the settlement was the result of charges brought solely by the government without any qui tam relators, just like the case in the Greenway settlement, demonstrating the government’s willingness to investigate EHR companies on its own initiative. Finally, the settlement clearly emphasizes U.S. Attorney Nolan’s prior admonition, “EHR companies should consider themselves on notice.”
March 5, 2020
by Vanessa J. Szalapski
Civil Penalties
Early Resolution of FCA Civil Damages Under the Eighth Amendment's Excessive Fines Clause? A Pending Case in Washington May Provide the Answer
The False Claims Act authorizes civil penalties between $10,781 to $21,563 per false claim, as well as three times the amount of damages which the government sustains (i.e. treble damages). The Eighth Amendment provides that "[e]xcessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted." The Supreme Court of the United States has recognized that a statutory penalty constitutes a "fine" subject to Eighth Amendment review if it constitutes punishment for an offense. Accordingly, the Fourth, Seventh, Eighth, and Ninth Circuit Court of Appeals have determined that the per-claim penalty and treble damages provided for under the FCA are subject to scrutiny under the Excessive Fines Clause of the Eighth Amendment because they have a punitive purpose, at least in part. A punitive sanction violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense. Nonetheless, federal courts undertaking this Eighth Amendment analysis have generally upheld FCA per-claim penalties and treble damages. Proportionality of a punitive sanction is determined by a variety of factors, including the reprehensibility of the defendant's conduct; the relationship between the penalty and the harm to the victim; the sanctions in other cases for comparable misconduct; the possible maximum penalty available under the FCA and other statutes; and the legislative intent for the statute. See United States v. Aleff, 772 F.3d 508, 512 (8th Cir. 2014); United States v. Mackby, 339 F.3d 1013, 1016-18 (9th Cir. 2003). The Supreme Court has noted that the treble damages provision of the statute has a compensatory aspect, in addition to its punitive objectives, because some amount of money beyond actual damages is "necessary to compensate the Government completely for the costs, delays, and inconveniences occasioned by fraudulent claims." Cook Cnty., Ill. v. United States ex rel. Chandler, 538 U.S. 119, 130 (2003). Additionally, the treble damages provision allows the government to recover some measure of the amount it must pay to compensate relators in qui tam actions. See United States ex rel. Drakeford v. Tuomey, 792 F.3d 364, 388 (4th Cir. 2015). In contrast, the per claim penalty is purely punitive. Id. In the context of a FCA jury trial, the jury will generally be charged with determining the measure of the damages to the government and the number of false claims. The Court will then apply the treble multiplier to the damages award and, utilizing the jury’s determination of the number of false claims, determine what amount (between $10,781 to $21,563) to assess for each false claim. In cases involving the submission of hundreds or even thousands of false claims/statements (e.g., Medicare fraud claims), FCA damage awards can be daunting. As a result, Defendants may raise the Excessive Fines Clause as a defense to a massive award. However, with some exceptions, courts have generally upheld these awards, taking into account the above-mentioned factors as well as the general public interest in preventing fraud on the government. In litigation pending in the U.S. District Court for the Eastern District of Washington, United States of America et al v. Washington Closure Hanford LLC, et al, the defendant contractor raised constitutional challenges to the FCA’s penalties and treble damages provisions as an affirmative defense in its answer. The Government moved for summary judgment arguing that this defense was premature because the Court had not yet imposed penalties or treble damages; this constitutional challenge should instead be raised at the judgment phase. The contractor responded that courts can address the merits of such a defense based on the amount of damages sought by the Government, which in this case are in excess of $70 million. While the timing for addressing this Eighth Amendment challenge is typically at the post-trial stage, courts have not clearly addressed whether it may be considered in advance, which may provide a strategic advantage to litigants. Accordingly, the pending motion for summary judgment presents an interesting question for the trial court to resolve which may help provide further guidance for FCA litigants. FCA Now will be monitoring the Court’s ruling and keep you updated with any key developments.
December 29, 2017
by Benjamin Greenberg
