J&J Unit, CVS Take Aim at Big False Claims Act Judgments in 2026

Large dollar amounts, constitutional questions, and corporate responsibility are at the center of several False Claims Act lawsuits that courts will address in 2026.

Constitutional debates over the FCA’s whistleblower provisions will carry into 2026, with Janssen Products LP‘s federal appeals court challenge to a $1.6 billion damages and penalties award in an HIV drug fraud suit—among the largest awards in FCA history.

CVS Health Inc. in another case is challenging a $165 million penalty and will likely urge an appeals court to find the penalty is unwarranted, where a jury found no damages; CVS could also ask the court to evaluate what constitutes excessiveness under the Eighth Amendment.

Finally, a potential victory for a whistleblower seeking reinstatement of her suit alleging Allergan Sales LLC perpetrated a $680 million fraud scheme by overcharging the Medicaid Drug Rebate Program could deter companies from working with the government if they’re liable for their interpretations of complex regulations.

Article II

Janssen’s Third Circuit constitutional challenge to the FCA’s whistleblower provisions is part of a growing shadow that began looming over the FCA last year.

The challenge is akin to a pending appeal at the Eleventh Circuit, which recently heard oral arguments in United States ex rel. Zafirov v. Fla. Med. Assocs. LLC.

If either court “breaks from decades of precedent—or if there’s a circuit split—it could tee up US Supreme Court review,” said Hamsa Mahendranathan, an attorney with Whistleblower Partners.

A high court strike-down of the provisions would deprive the government of billions of dollars in fraud recoveries. More than 80% of 2024 FCA recoveries—$2.4 billion of $2.9 billion—came from whistleblower-filed suits, a US Department of Justice report found.

Janssen—now called Johnson & Johnson Innovative Medicine—told the court Article II of the US Constitution bars United States ex rel. Penelow v. Janssen Prods. LP. FCA whistleblowers are US officers who exercise executive power but they aren’t authorized in a manner specified by the appointments clause, Janssen said, adding they aren’t subject to the executive branch’s supervision and control.

FCA whistleblowers don’t receive improper appointments, the government and whistleblowers argued, because they don’t hold continuing positions, their roles are limited in time and scope, and they’re personal in nature.

Excessiveness Challenge

Janssen also aims to convince the Third Circuit that the $1.6 billion judgment—including $1.28 billion in penalties—is excessive under the Eighth Amendment, claiming the 10-to-1 penalties-to-damages ratio in the New Jersey federal district court’s award far exceeds “permissible” ratios.

The penalties fall in the middle of the congressionally-authorized range of penalties per false claim, the whistleblowers said. The district court assessed $8,000 per false claim, and the FCA-sanctioned range for the relevant time period was $5,500 to $11,000.

“Even attempted fraud against the government can be a grave offense, warranting a penalty,” said Caleb Hayes-Deats, who represents FCA defendants with MoloLamken LLP. A numerical cap on the ratio of penalties to damages “would seem to erect a barrier to penalties in cases with no damages.”

On the Hook

CVS Health Inc. might welcome such a barrier, as it fights an FCA penalty after a New York district court ruled its subsidiary, Omnicare Inc., must pay more than $400 million in treble damages and more than $500 million in penalties.

Omnicare—not CVS—caused harm to the government by dispensing prescription drugs without valid prescriptions to elderly and disabled people, an April jury said, but the district court found CVS is “jointly and severally liable” for $165 million of those penalties.

CVS knowingly allowed Omnicare to “dilly-dally” about correcting deficiencies in its drug dispensing systems, Judge Colleen McMahon said in June, “akin to the ‘knowing ratification’” of a subsidiary’s policy.

Congress chose to impose the statutory penalty on a per-violation basis, rather than calculate it as a function of the actual damages awarded, McMahon said in a July 7 opinion, rejecting CVS’ excessiveness argument. CVS participated in 30% of the false claims Omnicare submitted, she said.

Both companies are challenging the award, with briefs due at the Second Circuit early next year, in United States ex rel. Bassan v. CVS Health Corp.

Jury findings receive great deference on appeal, and the June opinion “reads like the trial court found ‘just enough’ for liability, but ‘just enough’ is ‘enough,’” said B. Nathaniel Garrett, who represents whistleblowers with Helmer, Martins, Tate & Garrett Co. LPA.

Possible Deterrent

Re-opening whistleblower Deborah Sheldon’s $680 million suit against Allergan Sales LLC would increase FCA liability risk for potential defendants in complex industries “over legitimate disagreements about the meaning of complicated rules,” said former deputy assistant attorney general Michael Granston, now with Covington & Burling LLP. This could dissuade them from working with the government, Granston said.

A Maryland federal district court dismissed the suit in 2024 for lack of intent, because Sheldon didn’t show that Forest Laboratories—which Allergan acquired—knew its prices violated the Medicaid rebate statute, the rebate agreement with the government, and related regulations.

The Fourth Circuit, in United States ex rel. Sheldon v. Allergan Sales LLC, heard oral arguments Sept. 10.

The lower court said a company can’t possess intent when a statute is ambiguous, a conclusion that’s “simply wrong,” Sheldon’s briefsaid.

But a jury could find Allergan acted with deliberate ignorance of price requirements when it hired outside counsel to urge the US Centers for Medicare and Medicaid to change its regulations affecting price calculations, she said, adding that when the agency didn’t change regulations, Allergan kept improperly billing Medicaid.

The Supreme Court, in its 2023 ruling in United States ex rel. Schutte v. Supervalu Inc., held “burying one’s head in the sand is actionable deliberate ignorance under the FCA,” Sheldon’s brief said.

Allergan claimed Sheldon didn’t allege any facts showing Forest believed its pricing interpretation was incorrect, and making Medicaid price calculations is “a complex exercise that requires manufacturers to make numerous judgments.”