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False Claims Act Insights—When 340B Overcharges Become False Claims Act Violations

 
Podcast

     

Host Jonathan Porter welcomes Husch Blackwell senior counsel Robert Hess to discuss a groundbreaking Ninth Circuit decision that expands False Claims Act exposure in the 340B drug pricing program. With the Adventist Health case challenging long-held assumptions about FCA liability in the 340B context, Rob provides essential guidance for manufacturers, covered entities, contract pharmacies, and payors navigating this evolving risk landscape.

We begin with the fundamentals of the 340B program. Rob explains what 340B is, why Congress created this drug discount program, and how it operates in practice. While 340B is notoriously complex—with lawyers dedicating entire careers to guiding clients through its intricacies—Rob breaks down the basics that general counsels need to understand, providing a foundation for the FCA implications we explore later in the episode.

Next, we tackle a critical misconception about 340B and the False Claims Act. Many practitioners have long believed that 340B violations cannot form the basis of FCA liability because the program involves manufacturer discounts rather than direct federal payments. Rob unpacks why this assumption is more complicated than it appears, explaining how 340B overcharges can actually result in the government paying more than it should—creating the kind of financial loss that triggers FCA exposure.

Our conversation then turns to the Adventist Health case itself. Rob walks us through the story: who sued whom, what the core allegations involve, and where the case currently stands procedurally. We examine the Ninth Circuit's analysis and rationale for allowing these FCA claims to proceed, and how this decision compares to other recent litigation involving pharmaceutical manufacturers and 340B-related pricing issues, including the Second Circuit's Mosaic decision.

We then address the debate this decision has sparked in the healthcare bar. Rob tackles the fundamental question: Is the Ninth Circuit wrong on the law, with the connection between 340B overcharges and federal money too attenuated to support FCA liability? Or does this case simply demonstrate how broadly the FCA can be enforced when courts are willing to follow the statutory language? Rob provides his perspective on what this case means for FCA risk going forward and how covered entities appear to be calculating the balance of litigation risks between themselves and manufacturers.

We close with practical guidance for our listeners. Rob outlines specific steps that manufacturers, hospitals and clinics participating in 340B, contract pharmacies, and payors should take now to prevent 340B compliance issues from escalating into FCA problems. We discuss cost-based reimbursements, Medicaid duplicate discounts, and other 340B issues that may create connections to federal claims for payment—and what stakeholders can do to manage these risks in an increasingly complex regulatory environment with limited HRSA rulemaking authority.

Jonathan Porter | Full Biography

Jonathan focuses on white collar criminal defense, federal investigations brought under the False Claims Act, and litigation against the government and whistleblowers. He draws on his experience as a former federal prosecutor to guide clients in sensitive and enterprise-threatening litigation. At the Department of Justice, Jonathan earned a reputation as a top white-collar prosecutor and trial lawyer and was a key member of multiple international healthcare fraud takedowns and high-profile financial crime prosecution teams. He also teaches white collar crime as an adjunct professor of law at Mercer University School of Law.

Robert Hess | Full Biography

Rob counsels academic medical centers and other healthcare clients on regulatory compliance matters. He offers health systems and healthcare providers advice on state and federal regulatory requirements, including licensure, reimbursement rules, Medicaid and Medicare requirements, medical staff privileging and credentialing, Stark Law and Anti-Kickback compliance, 340B program matters, and graduate medical education requirements. Drawing on his broad range of experience, including 12 years in-house advising the University of Missouri’s health system and health schools, Rob helps health systems successfully plan and complete strategic transactions and integrations. While he works frequently with healthcare clients generally, a significant portion of his practice focuses on academic medical centers, medical schools, and university health systems. He regularly assists these clients in managing the multi-layered legal issues surrounding their missions of providing patient care, teaching students and medical residents, and serving as research leaders. It’s a balance Rob understands on a personal level, after serving on the University of Missouri’s legal team for more than a decade.

Read the Transcript

This transcript has been auto generated

00;00;00;00 - 00;00;27;19

Jonathan Porter

Welcome to another episode of Husch Blackwell's False Claims Act Insights podcast. I'm your host, Jonathan Porter. The False Claims Act is geared towards punishing people who commit knowing fraud on the government. Thinking back to historical roots, it's for the defense contractor that says they're giving the Army gun powder, but in actuality it's just sand or sawdust. It's it's for billing a health care encounter that's not actually done.

00;00;27;21 - 00;01;01;23

Jonathan Porter

It's invoicing the government for something that you get through a bribe. The connection between the claim and the payment has historically been pretty simple. The Army's paying for gunpowder. Medicare's paying for an office visit. GSA or whatever federal agency is paying for a widget. The link between claim and payment is obvious there, but your federal government is far more complicated than back in the Civil War days, and that creates some issues when it comes to False Claims Act enforcement, because sometimes the link between claim and payment is not so obvious.

00;01;01;23 - 00;01;22;09

Jonathan Porter

And that's where I get fascinated, because the scope of FCA enforcement seems to be growing, and it grew a little bit more a few months back, when the Ninth Circuit released an opinion relating to the 340B program. That's what we're talking about today for two reasons. One, 340B is hugely important to many of our regular health care listeners.

00;01;22;16 - 00;01;43;21

Jonathan Porter

But two, it's useful to FCA practitioners because it shows how FCA is reaching things that don't have a super obvious connection between a claim and a payment of federal funds. And so that's our topic on today's episode. A Ninth Circuit case on 340B and joining me to talk about this Ninth Circuit case is my Husch Blackwell colleague, Rob Hess.

00;01;43;23 - 00;02;03;29

Jonathan Porter

Rob is back at Husch Blackwell after 12 years as the primary legal advisor within the University of Missouri's health system. Now back at Husch, Rob helps the firm's academic medical center, clients and other health care clients with really complex regulatory issues, including 340B. And Rob just wrote an article with some of our colleagues about this Ninth Circuit case.

00;02;03;29 - 00;02;17;08

Jonathan Porter

And so we're talking with Rob today on the podcast about what this case means for health systems and for FCA enforcement. So, Rob, welcome to the podcast. Thanks for telling our listeners a little bit about this Ninth Circuit case on 340B.

00;02;17;13 - 00;02;19;20

Robert Hess

Thanks for having me, Jonathan. I really appreciate it.

00;02;19;20 - 00;02;39;22

Jonathan Porter

All right, Rob, let's start with the basics. Now I know that 340B is complicated. And there are lawyers like you who spend their entire careers guiding clients through those complexities. But just give us a basic overview of 340B what is 340B? Why does this program exist and just very high level how does it work.

00;02;39;25 - 00;03;05;27

Robert Hess

Yeah. And it start the high level. The history goes back to the Medicaid rebate program actually a couple of years before the 340B statute got enacted. But the Medicaid rebate program got instituted in 1990. And Congress set up a program there where, as a condition, drug manufacturers being allowed to have their drugs covered by Medicaid and Medicare Part B, they had to offer Medicaid rebates.

00;03;05;29 - 00;03;40;26

Robert Hess

And that kind of disturbed the current ecosystem at the time, disproportionate share hospitals and others were able to negotiate separate, better discounts that reflected their safety net missions. But when the Medicaid rebate program came into effect, rebates were based on best price. Drug manufacturers standardized their pricing, and some of the safety net providers lost out on that. So then, two years later, Congress added section 340B to the Public Health Service Act, and that was to remedy some of the impacts of the Medicaid rebate program.

00;03;41;00 - 00;04;24;21

Robert Hess

They created a separate discount program for safety net hospitals, generally. Similar structure tied to manufacturers ability to sell to Medicaid and Medicare Part B, they execute a pharmaceutical pricing agreement, and as a condition of being allowed to sell, they agree to offer discounts to disproportionate share hospitals and other safety net hospitals. The programs really continued. There have been a few statutory amendments over the years, but it's continued in its basic format since 1992, and so it is a eligible entities register with the oversight agency, Health Resources and Services Administration.

00;04;24;23 - 00;04;48;15

Robert Hess

They by being a registered recognized entity, it's recognized that they're entitled to 340B pricing. You get set up with per se. You get set up with your wholesaler with separate accounts. You have a 340B account you buy your drugs on, and then your other drugs go on your wholesale acquisition costs account, your WAC account. Or if they're inpatient drugs, they go on your GPO account.

00;04;48;18 - 00;05;16;06

Robert Hess

Inventory management occurs virtually in most places through electronic systems, not through physical inventory segregation. And then key compliance considerations are in the statute. One, there's a non diversion requirement. So you can only use it for your patients. And two, there's a prohibition on duplicate discounts. That goes back to the shared history with the Medicaid rebate program. But for claims where the states claiming the Medicaid rebate, you can't use 340B drugs.

00;05;16;06 - 00;05;39;20

Robert Hess

The manufacturers only wanted to pay one discount. And there's a GPO prohibition, which means that when you're a 340 B entity enrolled in the program, you can't also buy outpatient drugs on your GPO account. So those are the key compliance considerations in the statute. One thing that people need to understand at the beginning is the financial benefit.

00;05;39;20 - 00;06;02;20

Robert Hess

A lot of times it gets talked about now about how much the finance and how important it is to covered entities, which is the right end outcome. But it starts out it's not because you're getting paid more for the drugs, it's because you're buying the drugs at a discount. So here the financial benefit comes because covered entities are able to buy the drugs at a substantial discount compared to what they would otherwise.

00;06;02;21 - 00;06;25;20

Robert Hess

It varies based on drugs, but most surveys say it's something like a 40% discount. So a substantial discount. There is a formula written into the statute about how the discount is calculated. We'll get into that a little bit more when we come around to the case. But yeah, that's really how the financial benefit flows to covered entities. They aren't required to use that benefit in any particular way.

00;06;25;20 - 00;06;47;03

Robert Hess

So some covered entities have it set up where they have programs. They dedicate the savings in those programs, and they use those to increase access to drugs or do other things that are consistent with their safety net mission, but others just let it drop to their bottom line. Then they take the position, hey, we're doing good work in multiple domains and this is a benefit that helps us in all those domains where we're doing work.

00;06;47;05 - 00;07;05;08

Robert Hess

The oversight does come from HRSA instead of CMS. So that's a differentiator compared to a lot of the federal health care programs that people are used to. CMS is a government payer, right? They've got the payer perspective a lot of the time versus a public health agency. So they come at their programs with more of a public health perspective

00;07;05;08 - 00;07;31;17

Robert Hess

that's been important over time. The current state is it has grown from kind of a small program benefiting safety net hospitals to a large pillar of support for the safety net system. Two weeks ago, HRSA released their latest statistics on 340B discount volume. They estimated in calendar year 2025 that there were over $100 billion in 340B drug purchases.

00;07;31;19 - 00;08;01;20

Robert Hess

That's compared to about $9 million in total prescriptions spending and $600 billion in manufacturer revenues. So somewhere from 10 to 20% of the drug spend is on 340B at this point. Manufacturers have taken notice. They're interjecting with their perspective on the right parameters in the program. Payers have taken notice, particularly by adjusting reimbursement right and reimbursing covered entities differently when they use it.

00;08;01;20 - 00;08;28;09

Robert Hess

340B drug a claim and trying to capture some of the benefit for themselves. Medicaid Medicare, commercial payers in varying degrees have taken that tack. So that's a brief overview of the program. Super important. If you're a safety net, hospital or other safety net provider, you're seeing pressures across all your missions. And this is one of the places that safety net providers have continued to be able to find some benefit to help support their missions.

00;08;28;12 - 00;08;51;28

Jonathan Porter

Thanks, Rob. That's super helpful. Background. And you mentioned the difference between HRSA and CMS, where CMS is payer HRSA not necessarily. And so a lot of people hear that, and I think they know what they know about 340B and one of the rumors that was going around, you know, False Claims Act enforcement circles for years was that 340B can't be the basis of a False Claims Act theory for a number of reasons.

00;08;52;00 - 00;09;09;20

Jonathan Porter

Yeah, I've always heard that. But as I read your article, Rob, I could see where the FCA hook is actually a little bit more complicated than I originally thought. And one reason is because even though 340B is a discount program, it's possible that the government could end up paying more if there's an overcharge. And so unpack that for us just a little bit more Rob.

00;09;09;20 - 00;09;15;12

Jonathan Porter

How could 340B overcharging results in loss to a government payer.

00;09;15;17 - 00;09;35;21

Robert Hess

Yeah, and I'll take that in two pieces. Maybe there is the historical view about how 340B is just fundamentally set up different than Medicare or Medicaid, which are government payment programs. And so historically, 340B has been viewed as being lower risk, having a different risk profile than all those programs. I think there are several reasons for that.

00;09;35;28 - 00;10;15;29

Robert Hess

And number one is the discounts are on the supply side. It's private funds. It's not federal funds from the discount to start. Two, in 2011, there was a case with Astra as the lead party went up to the United States Supreme Court frequently referred to the Astra case, but the United States Supreme Court held that covered entities as private parties couldn't directly enforce the manufacturers pricing agreements against the manufacturers, and so absent that ability to assert a direct private cause of action against the manufacturers, covered entities have had to rely on enforcement coming from the Secretary of Health and Human Services.

00;10;16;01 - 00;10;40;19

Robert Hess

So third, the program is overseen by HRSA. HRSA is set up more as a public health agency, particularly in this context. One of the important factors is HRSA has very limited rulemaking authority in the statute. They don't have a broad grant of rulemaking authority. And so they've got some rulemaking authority over the alternative dispute resolution process and then some program integrity provisions.

00;10;40;21 - 00;11;08;21

Robert Hess

But it's much narrower. It's not general rulemaking authority. There have been some cases on that that have confirmed that interpretation. So the practical result is the enforcement regime is person mediates between covered entities and manufacturers. It issues non-binding subregulatory guidance. If the parties don't agree or disagree about how consistent that guidance is with the statute, it ends up in litigation in the courts.

00;11;08;28 - 00;11;40;06

Robert Hess

The big hammer that HRSA has to play, and the Secretary of Health and Human Services is they could revoke the agreement that the manufacturers have that allowed them to have their drugs covered by Medicare Part B and Medicaid. But that's a big, big hammer, one they don't want to play a lot of the time. So historically, people have looked at that whole set up and structure and said, this is just fundamentally different, right, than normal federal broad enforcement tools don't apply.

00;11;40;07 - 00;12;02;08

Robert Hess

There's not federal funds. We're talking about a discount program that's overseen in a different way. The rules that HRSA issues or subregulatory guidance, but they're not binding in the same way the statute is. So that is the historical kind of perspective. What's changed then is the program is just grown and it's huge. So the stakes in the interest are large.

00;12;02;14 - 00;12;28;27

Robert Hess

It's gotten mature. Covered entities have been in the program a long time. And so we're not just talking about first order purchases for hospital programs. There are secondary relationships with contract pharmacies and other players. And it it's really gotten to be, large and operationally complex to keep track of. On the reimbursement side, it's common for Medicaid programs to have differential reimbursement.

00;12;28;27 - 00;12;53;01

Robert Hess

And so that's a direct tie to federal health care program reimbursement then, where they're reimbursing covered entities differently when they fill a script with the 340B drug. Medicare's also implementing differential reimbursement. They took a first pass at that and that got challenged at the Supreme Court and overturned because of a procedural issue that they had not completed a required pricing survey.

00;12;53;03 - 00;13;22;08

Robert Hess

But that is back. And in their most recent OPPS rule that will be effective for 2027 they have completed the pricing survey, and they are proposing again to have differential reimbursement. So reduced reimbursement for 340B claims. Another federal tie is duplicate discounts. It started out with just tied to Medicaid fee for service drug rebates. But with the Medicare drug price negotiation program a maximum fair price,

00;13;22;08 - 00;13;47;02

Robert Hess

there's also a need to coordinate on those discounts there, and manufacturers aren't required to pay both the 340B discount and the Medicare maximum fair price discount. States have gotten involved, and a lot of states are passing laws to address contract pharmacy restrictions that manufacturers are imposing a differential reimbursement from payers. And so it's gotten to be a lot more it's a lot bigger program.

00;13;47;02 - 00;14;24;09

Robert Hess

It's a lot more factually complicated program. And it's not as clean as it was to start. There are ties now to the traditional federal reimbursement programs. There are additional legal complexities. There are differences of opinion and then opportunities for people to dispute in litigation the positions that other stakeholders are taking. So my general takeaway, it's all a lot more complicated to answer your like simple question at the beginning where you can identify an instance where giving or not giving the discount is increasing a payment or having a financial consequence to the federal government.

00;14;24;11 - 00;14;30;17

Robert Hess

There's more opportunity for false statements or false claims that are affecting federal payment decisions.

00;14;30;19 - 00;14;47;07

Jonathan Porter

Thanks, Rob. Yeah, it's all a lot more complicated than it used to be, is perhaps the understatement of the history of this podcast. Rob, I'm glad you're on our team so you can advise clients of this, because that's certainly not something anyone wants me to do. All right, let's move on to this ninth circuit Adventist case. Rob tells a story behind the case.

00;14;47;09 - 00;14;52;28

Jonathan Porter

Who sued who? What are the core allegations? And really, where do things stand right now in the case?

00;14;53;01 - 00;15;18;02

Robert Hess

Yeah. So this is kind of a unique and interesting case. Got a lot of attention in the trade press. Adventist Health System was out in California sued. They sued 18 different drug manufacturers. AbbVie's the lead drug manufacturer there, but they sued 18 different drug manufacturers. They sued as a qui tam relator. So that's kind of an infrequent procedural posture for a health care provider.

00;15;18;04 - 00;15;38;13

Robert Hess

But they sued as a qui tam relator. They sued on behalf of the United States, 27 states, Puerto Rico and the District of Columbia. And so they have asserted claims under the federal False Claims Act. But then also under Individual State False Claims Act or State False Claims Act analogs for all those states that they're also suing on behalf of.

00;15;38;19 - 00;16;05;20

Robert Hess

They are suing as a qui tam relator. So they are bringing claims on behalf of the United States and those other governmental entities. So the specific issue that comes to head in this case is one of the features of the 340B program. In calculating the amount of the discount, there are times when the formula will render a discount that results in the price of the drug being zero or below zero.

00;16;05;22 - 00;16;52;06

Robert Hess

And in 2019, HRSA promulgated a rule that allowed it to impose penalties if a manufacturer charges more than $0.01 per drug. So any pricing for drug in those instances. So HRSA’s rule is if the formula results in a cost of zero or less, the most you can charge is a penny. Following that rule, the allegation is a number of drug manufacturers had drugs that they were charging substantially more than a penny for and reduced their prices of those drugs to a penny, and Adventist inferred that the manufacturers had not been complying with the 340B pricing formula prior to 2019, and while the rule went into effect in 2019, their argument is there was a

00;16;52;06 - 00;17;18;05

Robert Hess

statutory requirement to offer the drugs, at the discounted price before then. And if the price was zero or less and they were offering it for something more than a penny, they were clearly violating the statute. So that's the dispute on whether, prior to 2019, the drug manufacturers had been charging more than the 340B statutorily mandated discount ceiling price plaintiffs.

00;17;18;05 - 00;17;44;09

Robert Hess

Importantly, here, they alleged three different kinds of injuries to the government entities. So they're not trying to recoup for their own damages. They're trying to recoup for damages to government entities. And in some cases, there was increased Medicaid payments for drugs purchased by covered entities. This would be where, like the Medicaid programs were reimbursing on a cost basis or otherwise increase Medicare payments to critical access hospitals.

00;17;44;09 - 00;18;08;16

Robert Hess

Because critical access hospitals are reimbursed on a cost basis. I think it was 101% is the allegation. And so where there was increased acquisition cost of the drugs more than they should have meant, Medicare was paying more than it should have. And then lastly, just increased cost to government funded prisons and health clinics who may purchase 340B drugs through covered entities.

00;18;08;18 - 00;18;40;21

Robert Hess

When they got the case, the district court reviewed it and granted a motion to dismiss the theory was the plaintiffs was essentially stating a direct private claim against the manufacturers, which was foreclosed by the 2011 Supreme Court case in Astra. Plaintiff appealed after that, and the case went up to the Ninth Circuit, and the Ninth Circuit said, we disagree, and we reverse. What they held is Adventist is clearly asserting separate claims to government entities here.

00;18;40;23 - 00;19;08;18

Robert Hess

And so this is a cognizable FCA claim. They're not alleging their own direct injury. And Astra does not foreclose that kind of claim. It was notable that the United States Department of Justice put in an amicus brief here, and they argued to overturn the district court decision as well. So the Ninth Circuit case is a circuit level precedent, recognizing you can have a cognizable false claim.

00;19;08;18 - 00;19;33;25

Robert Hess

That case involving 340B case has been remanded back down now to district court. And it's going through new procedural motions, motion to dismiss the parties are fighting over some of the standard FCA issues like the public disclosure bar. It's one of the manufacturers leading arguments right now is this was all known to everybody. And it's been publicly disclosed, can't be the basis of a FCA claim.

00;19;33;27 - 00;19;38;23

Robert Hess

And at the very early stages. So that's where the case sits. That's the Ninth Circuit holding.

00;19;39;00 - 00;19;56;13

Jonathan Porter

Thanks, Rob. Yeah I can see both sides here. And I'm really curious about your take on this because in the aftermath of this decision, I've heard some people say the Ninth Circuit is wrong and the law and that the connection between the overcharge and federal money is just too stretched to result in something actionable under FCA and all the cases that have interpreted it.

00;19;56;13 - 00;20;17;05

Jonathan Porter

But I've also heard others say that these facts fit the False Claims Act. It’s just showing how broad FCA can be when enforced by courts and a sort of broad way, because federal funds do reach a lot of new things. So which is it? Rob? Big picture. What does this case mean for FCA risk, which our listeners know about that.

00;20;17;06 - 00;20;37;06

Robert Hess

Yeah. Classic lawyer answer here. But I think it's potentially both right. I think there's definitely a narrow reading of the Ninth Circuit decision here that it stands for the proposition that the Astra case does not foreclose other kinds of claims, that an FCA claim can still be brought on the right facts. This case went up on a motion to dismiss.

00;20;37;06 - 00;21;08;02

Robert Hess

So the court was accepting all of the plaintiffs facts as pleaded and true and alleged. Right. So very early. And so one reading of this is, hey, this is just a simple Ninth Circuit decision saying that's not the right way to read Astra. Astra is only for foreclosing, direct private right of action. But for all the reasons we discussed earlier about why 340B is different than Medicare or Medicaid or other traditional federal health care programs, the case may not ultimately succeed.

00;21;08;04 - 00;21;28;17

Robert Hess

I think there's an argument there, and that's consistent with the historical position. I do think the complexity has fundamentally changed, and I don't know if they'll stick the landing in this case, particularly right. Public disclosure bar could be an impediment. The defendants may bring other good defenses, but I don't think this is the last FCA case you're going to see in 340B.

00;21;28;17 - 00;21;56;01

Robert Hess

I think for the reasons that we discussed earlier, it has gotten more complex, is really big. There are enough connections and internal linkages to Medicare and Medicaid that people are going to start following the string out and seeing what's going on here, right. It's really complex. There's a lot of dollars moving through this. Has there been an injury to the federal government, and if so, is there a false statement or a false claim underlying that?

00;21;56;01 - 00;22;12;21

Robert Hess

And so I'm not sure they'll win this case. But I think the decisions right. I think the program's big. It's complicated and it's kind of rife for more oversight. I think you'll see more cases like this spinning out similar theories.

00;22;12;23 - 00;22;34;01

Jonathan Porter

Thanks, Rob. I think that's right. And look, a lot of us will give the Ninth Circuit a hard time from time to time and say that they're out beyond where they should be. But for those who read the Supreme Court's Wisconsin Bell opinion a year ago that dealt with funds that were pooled by private carrier contributions, they said that that was okay to reach the False Claims Act.

00;22;34;01 - 00;22;50;18

Jonathan Porter

And so this actually does fit with what the Supreme Court allowed there, because federal funds, if they're at all involved, the Supreme Court has said that false claims that can apply. But that's why I think it's really important to get a legal team that understand the nuances of the false claims. Act two and 340B if you're in this sort of space.

00;22;50;18 - 00;23;11;28

Jonathan Porter

And so, Rob, I'm glad you're on our team on this. So Rob, close this out by telling our listeners what they should do in response to this case. If you're a manufacturer or a hospital or clinic in a 340B or a contract pharmacy or a payer, what are the 2 or 3 practical steps that you would take now to keep a 340B issue from turning into a False Claims Act problem?

00;23;11;28 - 00;23;13;05

Jonathan Porter

Close us out on that. Rob.

00;23;13;08 - 00;23;41;02

Robert Hess

So I think like I have one high level observation, I do think there's increased FCA risk. I think there's probably more risk for manufacturers, right, who withhold the discount from somebody. And there's a more direct argument there that you're entitled to get a drug at a discount. You didn't. As a result, the pass-through cost to the government through whatever payment mechanism increased the cost and therefore, if you knew you were providing the discount when you should have that, there's more False Claims Act liability there.

00;23;41;05 - 00;24;10;07

Robert Hess

But I think you could also flow both ways. Right? I think covered entities could be on the receiving end in some scenarios. I think generally, I'm a healthcare regulatory lawyer, so there's just increasing risk overall. FCA and other places. One of the things I've noted just for this not being an outlier, there's an antitrust decision that's very similar in the Second Circuit, came out in the fall 2025 too, Mosaic Health, Inc. v. Sanofi-Aventis, but similar,

00;24;10;07 - 00;24;40;03

Robert Hess

they brought antitrust claims around the 340B program. The defendants argued the Astra case foreclosed those in the second circuit said no. So I think the Second Circuit and Ninth Circuit are right, that what drug manufacturers may be trying to do with the Astra case, there's too broad, right? Like other traditional enforcement remedies, can still come into play. I think for your 340B program, you need to be treating it like other highly regulated programs at this point where you really need multidisciplinary review teams involved.

00;24;40;11 - 00;25;02;03

Robert Hess

It's not just pharmacy, it's not just finance. You know, you need a team of pharmacy, finance, compliance, legal, all tag team doing it. It's too complicated just to silo at one place. You need a line to the C-suite. There's a lot of dollars and a lot of uncertainty when you're making decisions. And so those people need to be talking the C-suite.

00;25;02;03 - 00;25;24;11

Robert Hess

They need to understand the decisions that are being made and the time horizon for planning and other things. You need appropriate oversight, monitoring external resources to tap into consultants, either pharmacy consultants, legal advisors, whoever the right consultants are to help you get through that. I think that will help you do all the things you need to do to manage your FCA risk.

00;25;24;13 - 00;25;52;05

Robert Hess

I think we've crossed the line from the older, historical, smaller program, and while it doesn't have the same risk profile yet of Medicare or Medicaid across the board, it's getting there and the risk manifests in other ways. My second would be the FCA. Risk is highest, where you do have those connections to Medicare and Medicaid reimbursement, right. And particularly where you're dealing with differential Medicare or Medicaid reimbursement or the discounts, really thinking through those issues, making sure you've got them right.

00;25;52;08 - 00;26;13;08

Robert Hess

Pharmacies high volume, high dollars. Right. But if you're doing something that affects federal payment, making sure you're doing it right, it's really going to be viewed under the lens of traditional Medicare Medicaid payment issues there and making sure you're thinking about it right in those touchpoints and not saying, oh, well, this is just 340B. We treat it differently.

00;26;13;08 - 00;26;31;13

Robert Hess

It's just a supply chain thing. What do they care. We're past that. Right. So particularly where the government is trying to get some of the benefit through differential reimbursement and is putting in rules to making sure the discounts are only paid once, those are your highest risk areas and the arguments are not as creative.

00;26;31;16 - 00;26;55;23

Jonathan Porter

Thanks for all that's all super helpful. I think our listeners in 340B are going to find this tremendously helpful, so thanks for telling it. But I hope our listeners who didn't know what 340B was before the program, understand how complicated programs that don't seem to be. The most likely instances of false claims, like enforcement, can result in FCA enforcement just because of how the law works, how FCA enforcement is growing in scope.

00;26;55;26 - 00;26;59;27

Jonathan Porter

And so, Rob, I'm super grateful that you came on the podcast. Thanks for coming on. Rob.

00;27;00;02 - 00;27;06;09

Robert Hess

Thanks so much for having me. I learned something, A great discussion. I love having some nerdy lawyer discussion, so thanks for having me.

00;27;06;10 - 00;27;40;08

Jonathan Porter

That's exactly right, Rob and the nerdy lawyer discussion is why I enjoy practicing  at Husch so much because we've got an amazing healthcare regulatory team. Rob obviously knows his area and then others know their own areas as well. And one of the great things about practicing at Husch with our False Claims Act team, is working with the healthcare regulatory lawyers who get in the weeds on these things, make sure that us False Claims Act folks, we understand what we're doing and understand the nuances of the program because a lot of times the devil's in the details, the devil's in the gray area things where we could read an LCD and think something differently than the

00;27;40;08 - 00;27;51;12

Jonathan Porter

healthcare regulatory lawyers. And so that's why it's great teaming up like this. And so for our listeners, we thank you for listening. And we'll see you next time.

Professionals:

Robert Hess

Senior Counsel