Abbott Laboratories will pay about $385 million to resolve allegations that it caused false claims to be submitted to Medicaid and other government programs for powder infant formula and nutritional therapy products made in plants that did not meet federal and state requirements, California Attorney General Rob Bonta said on September 21, 2026. California joined 39 other states and the federal government in the settlement and expects to receive more than $15 million. The claims are allegations only, and there has been no determination of liability.
What California and the federal government announced
Under the agreement described by the California Attorney General’s office, Abbott, an Illinois-based maker of infant formula and nutritional therapy products, will pay $348,700,868 to the United States to resolve False Claims Act allegations and $35,491,288 to participating states for claims related to their state Medicaid programs. California’s share, over $15 million, includes restitution and other recoveries.
The Justice Department announced the federal side of the deal a week earlier. In a September 14 release, it said Abbott agreed to pay $384,999,040 in total, including the $348,700,868 federal payment and $36,298,172 to certain states for claims settled by their state Medicaid and WIC programs. The Justice Department describes its state figure as covering claims settled by state Medicaid and WIC programs, while California’s figure refers to claims related to state Medicaid programs.
“Today’s settlement holds Abbott accountable for its misrepresentation of its product and production,” Bonta said. “These state and federal regulations are in place to ensure we can provide the highest quality of care and products to mothers and their young children. This settlement sends the necessary message that these regulations aren’t suggestions.”
Where the coverage is written down: The Abbott case turned on what public health programs paid for; for a Medicare household the parallel job is knowing what its own plan pays for prescriptions and what help the state offers, which is what the medication and cost tracker and 51 state Medicare cost-help packs cover in The Medicare Cost & Coverage Protection Kit.
The allegations about the Sturgis plant
The settlement covers claims submitted between January 1, 2018, and December 31, 2022, tied to products made at Abbott’s Sturgis, Michigan, and Casa Grande, Arizona, facilities, according to the Justice Department. On November 13, 2025, the United States filed a complaint in intervention alleging that Abbott caused government programs to buy powder infant formula from the Sturgis facility even though the products did not meet statutory, regulatory and contractual requirements.
The government alleged that Abbott knowingly manufactured formula bought with taxpayer dollars in an environment that put the products at unacceptable risk of microorganism contamination. According to the complaint, roof leaks were common at the Sturgis plant, with water running and dripping over equipment. Rather than fixing the root causes, Abbott allegedly relied on temporary measures such as roof leak umbrellas, even though corporate leadership understood the wet environment raised contamination risk.
The complaint also alleged that Abbott kept running spray dryers, where liquid formula is turned into powder, after documenting cracks and pits in the equipment, and that it lengthened the number of batches run between cleaning cycles to increase production. The government further alleged that Abbott intentionally avoided testing for bacterial growth and, in some instances where tests showed contamination, failed to disclose the results when responding to FDA requests during 2019 and 2022 inspections at Sturgis.
Why Medicaid and WIC were at stake
The case centers on public money. The U.S. Department of Agriculture funds and regulates the Special Supplemental Nutrition Program for Women, Infants, and Children, known as WIC, which provides infant formula and other nutritional support to eligible families. More than half of all infant formula purchased in the United States is paid for with USDA funds through WIC, according to both announcements. Many state Medicaid programs also cover certain powder infant formula.
That matters well beyond new parents. Medicaid is a major payer for low-income older and disabled Americans as well, and every dollar lost to allegedly noncompliant products comes out of the same public health budgets. In California, the Division of Medi-Cal Fraud and Elder Abuse, whose funding the attorney general disclosed alongside the settlement, receives 75 percent of its funding from the U.S. Department of Health and Human Services, under a grant totaling $77,652,892 for federal fiscal year 2026, with the remaining $25,884,297 funded by the state.
Federal officials framed the resolution as a warning to manufacturers. “It is critical that infant formula manufacturers adhere to regulatory and contractual requirements to ensure that the products they manufacture are safe for the babies who consume them,” said U.S. Attorney Timothy VerHey for the Western District of Michigan, whose office handled the case with the Civil Division.
Whistleblowers, and what the settlement does not do
The settlement resolves a lawsuit filed under the False Claims Act’s qui tam provisions, which let private individuals sue on behalf of the government and share in any recovery. The relators, Scott Millard, Kristine Cooper and Loren Cooper, were Abbott employees and will receive $69 million from the federal share, the Justice Department said. The case is captioned United States, et al., ex rel. Scott Millard, et al., v. Abbott Laboratories, No. 1:22-cv-994, in the U.S. District Court for the Western District of Michigan.
The payments go to the federal government and participating states to reimburse public programs. Neither announcement describes a refund or claims process for families who bought formula, and the settled claims carry no determination of liability. USDA’s Office of Inspector General assisted the investigation. USDA Inspector General John Walk said the office “remains vigilant against those that would compromise public health and safety by failing to comply with legal standards and put infants at risk.”
For taxpayers of every age, the case is a reminder that Medicaid and nutrition programs depend on the accuracy of what manufacturers certify, and that insiders who report problems can trigger recoveries of this size.
A government recovery is not a household refund
Settlements like this one return money to public programs, not to the people who rely on them. For retirees, the practical question is closer to home: what their own Medicare coverage pays for medicines and supplies, and what to do when a claim or prescription is refused.
The Medicare Cost & Coverage Protection Kit includes a medication and cost tracker, the prior-authorization appeal steps and the new Part D out-of-pocket cap, laid out so a household can follow what it spends and challenge a denial.
Those tools are collected in The Medicare Cost & Coverage Protection Kit.
This article was prepared with AI assistance and reviewed against the linked official sources.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
