Johnson & Johnson Unit, CVS Challenge Significant False Claims Act Judgments Set for 2026

False Claims Act Cases Set for Major Decisions in 2026 with Billions at Stake

Several high-profile False Claims Act (FCA) lawsuits involving constitutional challenges, massive financial penalties, and questions about corporate responsibility are heading to courts in 2026, with potential far-reaching implications for government fraud enforcement.

The cases feature some of America’s largest healthcare companies and address fundamental questions about whistleblower provisions that have been the backbone of government fraud recovery for decades.

Johnson & Johnson’s Janssen unit is leading one of the most significant challenges at the Third Circuit Court of Appeals, contesting a staggering $1.6 billion judgment in an HIV drug fraud case. This represents one of the largest awards in FCA history and includes $1.28 billion in penalties.

Janssen’s constitutional challenge argues that the FCA’s whistleblower provisions violate Article II of the Constitution. The company contends that FCA whistleblowers effectively serve as U.S. officers exercising executive power without proper appointment or executive branch supervision – a direct challenge to the appointments clause.

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

The stakes couldn’t be higher. According to Department of Justice data, more than 80% of FCA recoveries in 2024—approximately $2.4 billion out of $2.9 billion—stemmed from whistleblower-initiated suits. A Supreme Court ruling against these provisions could drastically reduce the government’s ability to recover billions in fraudulent claims.

Whistleblower advocates counter that FCA relators don’t receive improper appointments because they don’t hold continuing positions, their roles are limited in scope and time, and the nature of their work is personal rather than governmental.

Janssen is simultaneously arguing that the $1.6 billion judgment violates the Eighth Amendment’s prohibition on excessive fines. The company claims the 10-to-1 ratio of penalties to damages far exceeds reasonable limits.

In a parallel case with similar constitutional implications, CVS Health is fighting a $165 million penalty despite a jury finding no actual damages to the government. The case stems from subsidiary Omnicare’s improper dispensing of prescription drugs to elderly and disabled individuals without valid prescriptions.

Judge Colleen McMahon ruled that CVS knowingly allowed Omnicare to delay fixing deficiencies in its drug dispensing systems, making the parent company “jointly and severally liable” for a portion of the more than $900 million in total damages and penalties.

In rejecting CVS’s excessiveness argument, Judge McMahon emphasized that “Congress chose to impose the statutory penalty on a per-violation basis, rather than calculate it as a function of the actual damages awarded.” Both companies are appealing to the Second Circuit, with briefs due early next year.

B. Nathaniel Garrett, who represents whistleblowers with Helmer, Martins, Tate & Garrett Co., noted the challenge CVS faces: “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.'”

A third significant case involves whistleblower Deborah Sheldon’s $680 million suit against Allergan Sales, which alleges the company perpetrated a massive fraud scheme by overcharging the Medicaid Drug Rebate Program. A Maryland federal district court dismissed the case in 2024 for lack of intent, but the Fourth Circuit heard oral arguments in September on potentially reinstating the suit.

This case centers on whether Allergan can be held liable for its interpretation of complex Medicaid pricing regulations. Sheldon argues that Allergan demonstrated “deliberate ignorance” when it continued improper billing practices after hiring outside counsel to unsuccessfully lobby for regulatory changes.

Former deputy assistant attorney general Michael Granston, now with Covington & Burling, warns that reinstating the case could have a chilling effect on companies that work with the government, potentially increasing “FCA liability risk for potential defendants in complex industries over legitimate disagreements about the meaning of complicated rules.”

The outcomes of these cases could fundamentally reshape the landscape of government fraud enforcement and the relationship between federal agencies and their corporate partners for decades to come.