24-598 Mosaic Health, Inc. v. Sanofi-Aventis U.S., LLC
In the United States Court of Appeals for the Second Circuit
August Term 2024 Argued: May 2, 2025 Decided: August 6, 2025
No. 24-598
MOSAIC HEALTH, INC., CENTRAL VIRGINIA HEALTH SERVICES, INC., INDIVIDUALLY AND ON BEHALF OF ALL THOSE SIMILARLY SITUATED, Plaintiffs-Appellants, v. SANOFI-AVENTIS U.S., LLC, ELI LILLY AND COMPANY, LILLY USA, LLC, NOVO NORDISK INC., ASTRAZENECA PHARMACEUTICALS LP, Defendants-Appellees.
Appeal from the United States District Court for the Western District of New York No. 21-cv-6507 Elizabeth A. Wolford, Chief Judge
Before: PÉREZ, NATHAN, AND KAHN, Circuit Judges.
On appeal from a judgment of the United States District Court for the Western District of New York (Wolford, C.J.). Several federally funded health centers and clinics filed a class action complaint against a group of drug manufacturers alleging violations of federal and state antitrust laws, and state common law, through concerted action to restrict drug discounts offered to contract pharmacies. The United States District Court for the Western District of New York dismissed the first amended complaint and denied leave to file a second amended complaint. Plaintiffs timely appealed.
We conclude that the proposed second amended complaint plead enough facts to give rise to a plausible inference of a horizontal price-fixing conspiracy under Section 1 of the Sherman Act, 15 U.S.C. § 1.
Therefore, we VACATE the district court’s judgment dismissing Plaintiffs’ suit and denying leave to amend and REMAND for the district court to grant Plaintiffs leave to file their second amended complaint.
BRIAN MARC FELDMAN, Aurelian Law PLLC, Rochester, NY (Sheila Baynes, Aurelian Law PLLC, Rochester, NY, Ellen Meriwether, Cafferty Clobes Meriwether & Sprengel LLP, Chicago, IL, Lauren R. Mendolera, Harter Secrest & Emery LLP, Buffalo, NY, on the briefs), for Plaintiffs-Appellants.
JOHN C. O’QUINN, Kirkland & Ellis LLP, Washington, D.C. (Megan McGlynn, Lucas H. Funk, Kirkland & Ellis LLP, Washington, D.C., Daniel E. Laytin, Alyssa C. Kalisky, Katie R. Lencioni, Kirkland & Ellis LLP, Chicago, IL, on the brief), for Defendants-Appellees Eli Lilly and Company and Lilly USA, LLC.
Ashley C. Parrish, King & Spalding LLP, Washington, D.C., Lohr A. Beck, King & Spalding LLP, Atlanta, GA, for Defendant-Appellee Novo Nordisk Inc.
2 C. Scott Lent, Arnold & Porter Kaye Scholer LLP, New York, NY, Matthew Tabas, Allon Kedem, Arnold & Porter Kaye Scholer LLP, Washington, D.C., for Defendant-Appellee AstraZeneca Pharmaceuticals LP.
Rajeev Muttreja, Jones Day, New York, NY, for Defendant- Appellee Sanofi-Aventis U.S. LLC.
MYRNA PÉREZ, Circuit Judge:
While much of this opinion includes doctrinal jargon unique to antitrust
cases, at bottom, this appeal is about whether Plaintiffs-Appellants met the low
pleading threshold for surviving a motion to dismiss. Here, properly granting all
inferences and crediting all non-conclusory facts, Plaintiffs’ proposed second
amended complaint pled sufficient facts to substantiate their antitrust allegations
at the motion to dismiss stage. Accordingly, the district court erred in denying
Plaintiffs’ motion for leave to amend their complaint as futile and ultimately
dismissing Plaintiffs’ complaint. We vacate the district court’s dismissal of the
complaint and remand the case to the district court for further proceedings
consistent with this opinion.
3 BACKGROUND
Plaintiffs filed a putative class action alleging that Defendants violated state
and federal antitrust laws, as well as state common law, by engaging in a
horizontal price-fixing conspiracy. Specifically, Plaintiffs allege that Defendants
conspired, in violation of Section 1 of the Sherman Act, to limit a drug discount
offered to safety-net hospitals and clinics that purchase diabetes drugs filled at
retail pharmacies. As is our obligation at this stage of the proceeding, the facts
that follow are construed in the light most favorable to Plaintiffs.
Plaintiffs Mosaic Health, Inc. and Central Virginia Health Services, Inc. are
two federally funded health centers (collectively, “Plaintiffs”) operating safety-net
clinics that serve low-income, underserved patient populations and provide
medications to patients in need with sliding-fee discounts. Mosaic Health, Inc.
operates twenty-two safety-net clinics in New York, and Central Virginia Health
Services, Inc. operates eighteen safety-net clinics in Virginia. Defendants Sanofi-
Aventis U.S., LLC (“Sanofi”), Eli Lilly and Company and Lilly USA, LLC (together,
“Eli Lilly”), Novo Nordisk Inc. (“Novo Nordisk”), and AstraZeneca
Pharmaceuticals LP (“AstraZeneca”) (collectively, “Defendants”) are a group of
drug manufacturers who produce drugs covered by Medicare and Medicaid.
4 Together, Defendants control three diabetes drug production markets: (i)
rapid-acting analog insulins, (ii) long-acting analog insulins, and (iii) incretin
mimetics. Defendants compete against each other as horizontal competitors in
these diabetes drug production markets. Defendants Sanofi, Eli Lilly, and Novo
Nordisk compete in the sale of rapid-acting and long-acting analog insulins, and
all four Defendants compete in the sale of incretin mimetics. Within the United
States, Defendants report billions of dollars in sales of rapid acting analog insulins,
long-acting analog insulins, and incretin mimetics, which contribute significantly
to each company’s overall financial performance.
The drug discount that Defendants allegedly conspired to limit was offered
through their participation in a program created pursuant to Section 340B of the
Public Health Service Act, 42 U.S.C. § 256b (the “Section 340B Drug Discount
Program”). The Section 340B Drug Discount Program creates a discount for
participating healthcare providers by imposing a ceiling price and requiring each
manufacturer to “offer each covered entity covered outpatient drugs for purchase
at or below the applicable ceiling price” (the “Section 340B Drug Discount”). 42
U.S.C. § 256b(a)(1). Importantly, manufacturers providing drugs covered by
5 Medicare and Medicaid, “must offer” the Section 340B Drug Discount. 1 See Astra
USA, Inc. v. Santa Clara Cnty., 563 U.S. 110, 115 (2011) (first citing 42 U.S.C.
§ 256b(a); and then citing id. § 1396r-8(a)(1)); see also Am. Hosp. Ass’n v. Becerra, 596
U.S. 724, 730 (2022).
For at least a decade, Defendants offered the Section 340B Drug Discount to
safety-net hospitals and clinics for purchase and distribution by retail pharmacies.
By regularly offering Section 340B Drug Discounts, Defendants were able to lower
healthcare costs for patients in need of discounted medications.
But, beginning in 2020, Defendants collectively lobbied the federal
government to limit the Section 340B Drug Discount Program as applicable to
diabetes medications. Defendants used the firm Tarplin, Downs & Young LLC to
assist with lobbying efforts related to the Section 340B Drug Discount Program.
Additionally, Defendants Sanofi and AstraZeneca separately retained the
lobbying firm W Strategies, LLC for the same purpose. Defendants Sanofi, Eli
1 Since 1996, the United States Department of Health and Human Services has taken the position that because, historically, few safety-net providers operate in-house pharmacies, they might participate in “bill to, ship to” arrangements whereby covered providers purchase the discounted drugs for shipment to community pharmacies (also called “contract pharmacies”), to be dispensed to the safety-net providers’ patients there. See Notice Regarding Section 602 of the Veterans Health Care Act of 1992; Contract Pharmacy Services, 61 Fed. Reg. 43549, 43552 (Aug. 23, 1996); see also id. at 43549 (“It has been the Department’s position that if a covered entity using contract pharmacy services requests to purchase a covered drug from a participating manufacturer, the statute directs the manufacturer to sell the drug at the discounted price.”)
6 Lilly, and Novo Nordisk also retained the lobbying firm Williams and Jensen,
PLLC. Tarplin, Downs & Young and Williams and Jensen, PLLC also worked on
the same lobbying efforts with PhRMA, a drug manufacturers’ association of
which all Defendants are members.
The Defendants’ lobbying efforts were unsuccessful in limiting the Section
340B Drug Discount Program. On July 24, 2020, President Trump issued Executive
Order 13937 entitled “Access to Affordable Life-Saving Medications,” which
addressed the use of insulin and epinephrine within the Section 340B Drug
Discount Program but remained extremely limited in scope and impact on the
volume of Section 340B Drug Discounts. That same day, Defendant AstraZeneca
informed the United States Department of Health and Human Services (“HHS”)
privately that beginning October 1, 2020, it would no longer provide the Section
340B Drug Discount to contract pharmacies, except that safety-net providers could
ship discounted drugs to one contract pharmacy if they did not operate an on-site
dispensing pharmacy. AstraZeneca publicly announced this plan in mid-August
2020.
On or about July 27, 2020, Defendant Sanofi also publicly announced that
starting October 1, 2020, it would cut off Section 340B Drug Discounts at contract
7 pharmacies, except if providers would send prescription-claims data to a Sanofi
vendor.
On August 19, 2020, Defendant Eli Lilly sent HHS a private letter stating
that on September 1, 2020, it would cease to permit Section 340B Drug Discounts,
except where a safety-net provider lacked an in-house pharmacy and instead
selected a single community pharmacy to service its patients. Eli Lilly also “added
a special exception to permit Contract Pharmacies to pass along certain insulins
products at cost,” however Plaintiffs allege that the “exception was infeasible for
covered entities and pharmacies, as it required Contract Pharmacies to fill
prescriptions without any fee.” J. App’x 815. Eli Lilly stated that it would offer
the Section 340B Drug Discount only when “[n]o insurer or payer is billed for the
Lilly insulin dispensed” and “[n]either the covered entity nor the contract
pharmacy marks-up or otherwise charges a dispensing . . . fee for the Lilly insulin.”
Id.
On December 1, 2020, Defendant Novo Nordisk informed HHS that on
January 1, 2021, it would cease to offer Section 340B Drug Discounts altogether,
except for non-hospital covered entities, like clinics.
8 Collectively, all four Defendants imposed Section 340B Drug Discount
restrictions that Plaintiffs allege resulted in significant financial loss to safety-net
hospitals and clinics.
Plaintiff Mosaic Health, Inc. filed a class action complaint against
Defendants alleging violations of federal and state antitrust laws, as well as state
common law. Central Virginia Health Services, Inc. joined as a plaintiff in an
amended complaint. Defendants successfully moved to dismiss the first amended
complaint.
Plaintiffs then moved for leave to file the proposed second amended
complaint. The district court denied the Plaintiffs’ motion, reasoning that
Plaintiffs failed to allege parallel conduct and failed to plausibly allege the
requisite factual circumstances giving rise to an inference of conspiracy.
Plaintiffs timely appealed.
STANDARD OF REVIEW
We review the grant of a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6) de novo. See Gelboim v. Bank of America Corp., 823 F.3d 759, 769
(2d Cir. 2016) (citation omitted). “The denial of leave to amend is similarly
reviewed de novo” when “the denial was based on an interpretation of law, such
9 as futility.” Id. (internal quotation marks and citation omitted). At this stage of
the proceedings, “we accept all factual allegations as true and draw every
reasonable inference from those facts in the plaintiff’s favor.” Mayor & City Council
of Balt. v. Citigroup, Inc., 709 F.3d 129, 135 (2d Cir. 2013). The complaint must
provide “enough facts to state a claim to relief that is plausible on its face.” Id.
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
APPLICABLE LAW
Plaintiffs’ claims here arise from antitrust law. An antitrust plaintiff must
plead facts with sufficient particularity in the complaint to state a cause of action
or face dismissal of the lawsuit. Id. at 136.
Section 1 of the Sherman Act prohibits agreements that unreasonably
restrain trade. See 15 U.S.C. § 1 (criminalizing “[e]very contract, combination in
the form of trust or otherwise, or conspiracy, in restraint of trade or commerce”). 2
This case requires us to examine whether Plaintiffs pled sufficient evidence of an
agreement to conspire. Pleading facts sufficient to support an allegation of an
2 A horizontal price-fixing scheme is a particular type of Sherman Act violation that “involve[s] coordination between competitors at the same level of a market structure.” United States v. Apple, Inc., 791 F.3d 290, 313 (2d Cir. 2015) (internal quotation marks and citation omitted) (alteration adopted). Such schemes are, “with limited exceptions, per se unlawful” under the Sherman Act. Id. at 313–14. Accordingly, we need not evaluate whether trade was unreasonably restrained.
10 antitrust conspiracy may be accomplished in one of two ways. “[A] plaintiff
may . . . assert direct evidence,” such as a recorded phone call, “that the
defendants entered into an agreement in violation of the antitrust laws.” Citigroup,
709 F.3d at 136. But conspiracies are rarely evidenced by explicit agreements.
Nearly always a conspiracy must be proven through “inferences that may fairly
be drawn from the behavior of the alleged conspirators,” Michelman v. Clark-
Schwebel Fiber Glass Corp., 534 F.2d 1036, 1043 (2d Cir. 1976); see also United States v.
Snow, 462 F.3d 55, 68 (2d Cir. 2006) (“[C]onspiracy by its very nature is a secretive
operation, and it is a rare case where all aspects of a conspiracy can be laid bare in
court with . . . precision.” (internal quotation marks and citation omitted)).
Because such a “smoking gun” is “hard to come by,” we also accept
“circumstantial facts supporting the inference that a conspiracy existed.” Citigroup,
709 F.3d at 136 (emphasis in original).
The Supreme Court first set forth the standard for supporting a plausible
inference of an antitrust conspiracy at the motion to dismiss stage in Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007). There, the Supreme Court held that
“stating . . . a [Section 1] claim requires a complaint with enough factual matter
(taken as true) to suggest that an agreement was made.” Twombly, 550 U.S. at 556.
11 In other words, the complaint must contain “enough fact[s] to raise a reasonable
expectation that discovery will reveal evidence of illegal agreement.” Id. As a
means of smoking out the illegal agreement, courts have required plaintiffs to
allege, with the requisite factual support, “certain parallel conduct” by the alleged
conspirators and “some factual context suggesting agreement, as distinct from
identical, independent action.” Id. at 548–49.
The requisite factual circumstances are “often referred to as ‘plus’ factors.”
Apex Oil Co. v. DiMauro, 822 F.2d 246, 253 (2d Cir. 1987). Plus factors
may include traditional evidence of conspiracy: statements permitting an inference that the defendants entered into an agreement. They may also include evidence of other circumstances giving rise to a less direct inference of conspiracy, such as ‘a common motive to conspire, evidence that shows that the parallel acts were against the apparent individual economic self-interest of the alleged conspirators, and evidence of a high level of interfirm communications.’
Anderson News, L.L.C. v. American Media, Inc., 899 F.3d 87, 104 (2d Cir. 2018)
(“Anderson News II”) (quoting United States v. Apple, Inc., 791 F.3d 290, 315
(2d Cir. 2015)).
Recognizing that parallel conduct alone could be because of “chance,
coincidence, independent responses to common stimuli, or mere interdependence
unaided by an advance understanding among the parties,” Twombly, 550 U.S. at
12 556 n.4 (quotation marks omitted), courts require a plaintiff seeking to plead a
Section 1 violation to meet both requirements—parallel conduct and plus factors—
in order to nudge their complaint across “the line between possibility and
plausibility of entitlement to relief.” Id. at 557 (internal quotation marks and
citation omitted) (alteration adopted).
But to be clear, Twombly's requirement to plead something “more” than
parallel conduct does not impose a probability standard at the motion-to-dismiss
stage. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This Court has previously
disallowed conflation of probability and plausibility. For example, in Anderson
News I, this Court reversed a district court’s order granting a motion to dismiss
where plaintiff, a magazine wholesaler, alleged that defendants, publishers and
their distributors, plausibly engaged in parallel conduct by withdrawing their
business from the plaintiff following the plaintiff’s announcement of a new
surcharge on magazine shipments. Anderson News, L.L.C. v. American Media, Inc.,
680 F.3d 162, 168–71 (2d Cir. 2012) (“Anderson News I”). The district court held
that, “[t]he most plausible scenario, however, is that the Defendants each
separately came to a similar conclusion—that they did not want to pay a 7–cent
surcharge.” Anderson News, L.L.C. v. American Media, Inc., 732 F. Supp. 2d 389, 407
13 (S.D.N.Y. 2010), vacated and remanded, 680 F.3d 162 (2d Cir. 2012). This Court
concluded that “on a Rule 12(b)(6) motion it is not the province of the court to
dismiss the complaint on the basis of the court's choice among plausible
alternatives. Assuming that [plaintiff] can adduce sufficient evidence to support
its factual allegations, the choice between or among plausible interpretations of the
evidence will be a task for the factfinder.” Anderson News I, 680 F.3d at 190. At the
motion to dismiss stage, our precedent makes clear that a plaintiff must simply
allege enough facts to support the inference that a conspiracy actually existed. See
Citigroup, 709 F.3d at 136.
DISCUSSION
As a threshold matter, Defendants argue that the Supreme Court’s decisions
in Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011), and Illinois Brick Co. v.
Illinois, 431 U.S. 720 (1977), bar Plaintiffs from asserting claims under the Sherman
Act and seeking damages, on the grounds that Plaintiffs are indirect purchasers of
Defendants’ drugs and therefore lack antitrust standing. Before delving into why
Plaintiffs pled sufficient allegations to survive a Rule 12(b)(6) motion to dismiss a
Sherman Act Section 1 claim, 3 we explain why Defendants are incorrect in arguing
3For the purposes of this appeal, we chiefly consider Plaintiffs’ proposed second amended complaint, which the district court denied the Plaintiffs leave to file after concluding that they had not cured the 14 that the safety-net providers are barred from challenging their alleged horizontal
price-fixing.
I. Astra and Illinois Brick Pose No Bar
The Supreme Court’s decisions in Astra and Illinois Brick Co. do not bar
Plaintiffs from bringing this action alleging antitrust violations.
A. Astra Does Not Bar Sherman Act Claims
In Astra, a group of medical facilities brought an action against a group of
pharmaceutical manufacturers for breach of contract alleging that they
overcharged the medical facilities for certain drugs, in violation of the
Pharmaceutical Pricing Agreement between the manufacturers and the federal
government. 4 563 U.S. at 113. The Supreme Court determined there is no private
right of action for a covered entity, including safety-net providers, to sue
manufacturers for violations of Section 340B. Id. Similarly, the Supreme Court
held that overcharged covered entities also have no right to sue as third-party
beneficiaries to enforce the Pharmaceutical Pricing Agreements that drug
deficiencies of the first amended complaint. See Mosaic Health Inc. v. Sanofi-Aventis U.S., LLC, 714 F. Supp. 3d 209, 218 (W.D.N.Y. 2024). 4“Drug manufacturers opt into the 340B Program by signing a form Pharmaceutical Pricing Agreement (PPA) used nationwide.” Astra, 563 U.S. at 113. Pharmaceutical Pricing Agreements “are uniform agreements that recite the responsibilities § 340B imposes, respectively, on drug manufacturers and the Secretary of HHS.” Id.
15 manufacturers sign with HHS. Id. This is because, notwithstanding their name,
Pharmaceutical Pricing Agreements are not “bargained-for contracts”
incorporating “negotiable terms.” Id. at 113, 118. Rather, Pharmaceutical Pricing
Agreements merely “serve as the means by which drug manufacturers opt into the
statutory scheme.” Id. at 118. The Supreme Court reasoned that “[a] third-party
suit to enforce an HHS-drug manufacturer agreement . . . is in essence a suit to
enforce the statute itself.” Id. at 118. Thus, “[t]he absence of a private right to
enforce the statutory ceiling-price obligations would be rendered meaningless if
340B entities could overcome that obstacle by suing to enforce the contract’s
ceiling-price obligations instead.” Id.
Disallowing the action at issue in Astra, the Supreme Court recognized that
“a multitude of dispersed and uncoordinated lawsuits” to enforce Pharmaceutical
Pricing Agreements, “[w]ith HHS unable to hold the control rein,” would
ultimately “undermine the agency’s efforts to administer both Medicaid and
§ 340B harmoniously and on a uniform, nationwide basis.” Id. at 120.
Defendants make two incorrect Astra-related arguments that they claim
preclude suit. First, they incorrectly claim that the limits on Plaintiffs to bring
Section 340B contract claims as indirect purchasers means Plaintiffs cannot bring
16 Sherman Act claims. Astra says no such thing. Plaintiffs do not seek to enforce the
Section 340B Drug Discount mandates nor the Pharmaceutical Pricing Agreements
to compel the drug manufacturers to offer the discounted drugs at a specific
Section 340B ceiling price. Plaintiffs make clear that the second amended
complaint is “agnostic as to [the] question” of whether Defendants violated
Section 340B. J. App’x 900. The instant case does not turn on the meaning of the
Section 340B statute nor on a determination from this Court as to whether
Defendants violated Section 340B. Plaintiffs here would seek to enjoin the
Defendants’ alleged price-fixing independent of the district court finding that
Defendants violated Section 340B.
Second, Defendants claim Plaintiffs’ grievances over the limitations or
denials of Section 340B pricing are entirely governed by the federal Section 340B
program, and their remedy for resolving disputes is within the administrative
scheme that Congress established and which the Supreme Court held is exclusive
in Astra. See Appellees’ Br. 5. Unlike the overcharge claims at issue in Astra,
Congress did not intend for the Health Resources and Services Administration
(“HRSA”), a unit of HHS, to adjudicate and enforce antitrust price-fixing claims.
In Astra, the Supreme Court established that Congress “opted to strengthen and
formalize HRSA’s enforcement authority, to make the new adjudicative 17 framework the proper remedy for covered entities complaining of ’overcharges
and other violations of the discounted pricing requirements,’. . . and to render the
agency’s resolution of covered entities’ complaints binding.” 563 U.S. at 121–22
(internal citations omitted). This principle makes sense when safety-net providers
themselves are not a party to the Pharmaceutical Pricing Agreements that would
be at issue in such an action.
Furthermore, the Supreme Court in Astra reasoned that where the Section
340B Drug Discount program is superintended by HRSA, “Congress directed
HRSA to create a formal dispute resolution procedure, institute refund and civil
penalty systems, and perform audits of manufacturers” to help ensure that
“covered entities pay at or below the ceiling price.” Id. at 121 (internal quotation
marks omitted) (alteration adopted); see also 124 Stat. 823–827, 42 U.S.C. § 256b(d).
At bottom, Astra makes plain that Congress vested authority in HHS to oversee
compliance with the Section 340B Drug Discount Program and enforce the ceiling
price contracts, not to police antitrust violations.
B. Illinois Brick Does Not Preclude this Action
Antitrust standing, at least at the pleading stage, is quite broad. See Gelboim,
823 F.3d at 777 (stating that the unrestrictive language of the private action
18 provision of the Clayton Act demonstrates the congressional purpose in enacting
this remedial provision and cautioning courts not to cabin its broad remedial
objective). All plaintiffs must show is that they suffered an antitrust injury and
are efficient enforcers of antitrust laws. Id. at 772. Moreover, plaintiffs can bring
an antitrust claim alleging a Sherman Act conspiracy even when the underlying
act would be lawful if undertaken alone, outside of a conspiracy. For example, in
Apple, Apple entered into separate contracts with five major book publishers to
adopt an agency pricing model for ebooks. 791 F.3d at 296. Plaintiffs alleged that
Apple consciously organized a conspiracy among the publisher defendants to
raise consumer-facing ebook prices. Id. at 314. In response, Apple argued that the
contracts at issue were vertical, lawful agreements that were in Apple’s
independent economic interest. Id. This Court, rejecting Apple’s argument, held
that “Apple’s benign portrayal of its [c]ontracts with the [p]ublisher [d]efendants
[was] not persuasive—not because those [c]ontracts themselves were
independently unlawful, but because, in context, they provide[d] strong evidence
that Apple consciously orchestrated a conspiracy among the [p]ublisher
[d]efendants.” Id. at 316. Similarly, in Gelboim, plaintiffs, who were purchasers of
financial instruments, accused defendants, the banks issuing the financial
19 instruments, of colluding to depress the London Interbank Offered Rate
(“LIBOR”) by violating the rate-setting rules. 823 F.3d at 764. This Court held that
the plaintiffs plausibly alleged that the defendants were conspiring to artificially
depress the LIBOR rate in violation of the Sherman Act. Id. at 765. At bottom,
Apple and Gelboim make plain that while individual agreements may be lawful on
their own, the defendants’ role in organizing a conspiracy to restrict trade triggers
Section 1 liability.
Illinois Brick does not preclude Plaintiffs from seeking federal damages for
antitrust violations or injunctive relief. 431 U.S. 720. In Illinois Brick, the Supreme
Court held that indirect purchasers alleging overcharge claims do not have
standing to sue for antitrust violations under the Clayton Act. Id. at 746. The
Supreme Court barred indirect purchaser claims out of concern for duplicative
recoveries and the complexities of tracing overcharges through multiple levels of
distribution. Id. at 730–35. Here, Plaintiffs’ claims do not seek damages for
overcharges. Rather, Plaintiffs seek damages for revenue loss resulting from lost
Section 340B Drug Discount Program savings. Furthermore, Plaintiffs seek
injunctive relief to enjoin the alleged horizontal price-fixing conspiracy under
Section 16 of the Clayton Act, 15 U.S.C. § 26. Because standing under Section 16
20 raises no threat of multiple lawsuits or duplicative recoveries, “some of the factors
other than antitrust injury that are appropriate to a determination of standing
under § 4 are not relevant under § 16.” McCarthy v. Recordex Serv., Inc., 80 F.3d
842, 856 (3d Cir. 1996) (quoting Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104,
111 n.6 (1986)) (internal quotation marks omitted). Therefore, Illinois Brick does
not apply here.
II. Plaintiffs’ Proposed Second Amended Complaint Sufficiently Pleads a Conspiracy
Plaintiffs plead sufficient facts in their proposed second amended complaint
to support their allegations of parallel conduct and plus factors.
A. Plaintiffs Sufficiently Plead Parallel Conduct
Defendants would have us define parallel conduct as conduct with precise
similarities, urging us to focus on the differences among the Defendants’ conduct. 5
But, the Supreme Court and our binding authority that followed rejects setting a
high bar for what constitutes parallel conduct. Rather, conduct is deemed
“parallel” when there are general similarities in substance, timing, or effect. In
5 When asked at oral argument why Defendants could not have colluded together to cleverly stagger to avoid detection, Defendants responded “so they could have done that but not at the same time that they stupidly clustered AstraZeneca’s announcement only one business day away from Sanofi’s announcement. That’s what doesn’t make sense if they are being clever.” See generally Or. Arg. 19:00–19:42. The law does not require the collusion to be cleverly disguised to constitute parallel conduct.
21 Twombly, the Supreme Court agreed that plaintiffs had sufficiently alleged parallel
conduct where over seven years the defendant telephone carriers deployed
various strategies with the collective effect of inflating charges for local telephone
and high-speed internet services. 550 U.S. at 550–53 (ranging from making unfair
agreements with competitive local exchange carriers, providing inferior
connections to networks, overcharging, and billing in ways to sabotage plaintiffs’
customer relations); see also American Tobacco Co. v. United States, 328 U.S. 781, 800–
01 (1946) (detailing a price-fixing conspiracy in which the defendants used a
different methods to achieve the same ultimate objective, an understood and
settled price for tobacco). In adequately pleading parallel conduct, the Twombly
plaintiffs alleged only high-level similarities among the defendants’ conduct,
including that defendants had “entered into a contract, combination or conspiracy
to prevent competitive entry in their respective local telephone and/or high speed
internet services markets and ha[d] agreed not to compete with one another and
otherwise allocated customers and markets to one another.” Twombly, 550 U.S. at
551 (internal quotation marks and citation omitted).
Precedent in this Circuit post-Twombly has similarly accepted a broad
understanding of what constitutes parallel conduct. See, e.g., Starr v. Sony BMG
22 Music Ent., 592 F.3d 314, 325 (2d Cir. 2010) (rejecting the argument that antitrust
plaintiffs are “required to mention a specific time, place or person involved in each
conspiracy allegation”). Of course, this Court has found parallel conduct where
defendants allegedly acted at almost the exact same time in imposing near
identical contractual terms or engaging in the same market action. See, e.g., id. at
323 (describing alleged parallel conduct where two groups of defendants launched
two joint ventures for providing music over the internet; used similar most-
favored nation agreements in their licenses with the joint ventures to enforce a
wholesale price floor at 70 cents per song raised uniformly on or about May 2005;
and refused to do business with the second biggest internet music retailer);
Citigroup, 709 F.3d at 138 (describing alleged parallel conduct where the largest
financial institutions simultaneously ceased buying action-rate securities on the
same day). But this Court has also found parallel conduct where plaintiffs alleged
that defendants acted with a similar anticompetitive effect but through varied
means. See e.g., Anderson News I, 680 F.3d at 191 (describing as the “key parallel
conduct allegation” that all publisher and distributor defendants ceased doing
business with the plaintiff despite different reactions from the defendants to the
plaintiff’s announcement of a surcharge).
23 Our Sister Circuits have similarly held that parallel conduct among
defendants should be viewed with a broad lens. See e.g., SD3, LLC v. Black & Decker
(U.S.) Inc., 801 F.3d 412, 428–29 (4th Cir. 2015), as amended on reh’g in part (Oct. 29,
2015) (explaining that existing authority does not require finding parallel conduct
only when defendants move in relative lockstep that achieves common
anticompetitive ends by substantially identical means); Evergreen Partnering Grp.,
Inc. v. Pactiv Corp., 720 F.3d 33, 46 n.3 (1st Cir. 2013) (noting that the examples of
parallel conduct outlined in Twombly are “very broad” and that allegations
supportive of agreement at the pleadings stage may include “conduct that
indicates the sort of restricted freedom of action and sense of obligation that one
generally associates with agreement” (internal quotation marks omitted)); In re
Baby Food Antitrust Litig., 166 F.3d 112, 132 (3d Cir. 1999) (acknowledging that
“parallel pricing does not require uniform prices” but can include “prices within
an agreed upon range” (internal quotation marks omitted)).
From the precedents in our own Circuit, and drawing upon the reasoning
of others, it is plain that antitrust plaintiffs need not plead the exact same conduct
within a tight timeline to state a claim under Section 1 of the Sherman Act. Rather,
24 plaintiffs must state facts consistent with defendants’ having engaged in conduct
that contributes to an inference of concerted action.
The proposed second amended complaint plausibly alleges that Defendants
acted similarly enough in substance by restricting Section 340B Drug Discount
pricing and raising prices in the market of certain popular diabetes medication
over the course of months. By implementing similar policies of primarily refusing
to permit the sale of Section 340B Drugs to covered entities, Defendants eliminated
the majority of their Contract Pharmacy Section 340B Drug Discount sales, earned
higher profits, and avoided competition from their direct competitors over the
availability of Section 340B Drug Discounts on rapid-acting insulins, long-acting
insulins, and incretin mimetics at contract pharmacies.
These announced policy changes were also similar in timing, where over
four months, these policies prevented covered entities from turning to other
competitors, in this case, the other Defendants. Notably, three of the four
Defendants announced these changes within one month of each other—a
timeframe similar to the one-month period that we deemed sufficiently parallel in
Starr, 592 F.3d at 320. Defendants’ reliance on their subsequent modifications to
their new policies does not meaningfully alter our analysis. Specifically, the
25 proposed second amended complaint asserts that following the initially
announced changes: (1) in February 2021, Sanofi relayed an alteration to its claims-
data policy, “limit[ing] its restrictions to . . . consolidated health center programs,
disproportionate share hospitals, critical access hospitals, rural referral centers,
and sole community hospitals,” J. App’x 817; (2) in December 2021, Eli Lilly
announced a policy similar to Sanofi’s of allowing continued Section 340B Drug
Discounts only if covered safety-net providers agreed to provide Eli Lilly claims
data associated with orders to community pharmacies, id.; and (3) in January 2022,
Novo Nordisk announced that it would permit safety-net providers to designate
two, rather than one, community pharmacy to which Section 340B Drug Discount
products might ship, id. The timing of these restrictions remains similar enough
to support an inference of parallel conduct.
The Defendants’ policies also have a similar anti-competitive effect of
limiting or eliminating the availability of Section 340B Drug Discounts. Plaintiffs
allege that these restrictions by Defendants led to “the end of the overwhelming
majority of Contract Pharmacy 340B Drug Discount sales to covered entities.” Id.
at 827. The district court erred when it determined that the Plaintiffs have not
plausibly alleged that the “Defendants’ disparate conduct ultimately achieved the
26 same or a substantially similar end result.” See Mosaic Health Inc. v. Sanofi-Aventis
U.S., LLC, 714 F. Supp. 3d 209, 220 (W.D.N.Y. 2024). Aggregated data in the second
amended complaint shows that these decimated Section 340B Drug Discounts
happened in parallel, which significantly decreased the volume of Section 340B
Drug Discount sales to contract pharmacies. Novo Nordisk’s volume of drugs
sold at Section 340B Drug Discount prices dropped by 70% the month of the new
policy, while the other Defendants’ volumes dropped between 60–90% in similar
periods. See id. at 217.
The exceptions each Defendant included in their announced policies were
the biggest differences among the actions, but these differences are still consistent
with parallel conduct. Sanofi offered an exception to providers willing to send
valuable prescription-claims data to a Sanofi vendor. AstraZeneca permitted
shipping to one community pharmacy but only for safety-net providers without
an on-site dispensing pharmacy. Eli Lilly offered an exception to permit
pharmacies to pass along certain insulin products at no cost, and Novo Nordisk
created an exception for non-hospital entities. These exceptions do not make each
Defendant’s actions more disparate than the conduct found to be parallel in
27 Twombly. Nor did the exceptions change the overall effect of restricting Section
340B Drugs.
The district court found that there was an “obvious alternate explanation for
the facts underlying the alleged conspiracy: the failure of the Defendants’ joint
lobbying efforts.” Id. at 222. But it was not appropriate for the district court to
explore the merits of the alternate explanations at the motion to dismiss stage.
Plaintiffs need not “disprove all nonconspiratorial explanations for the
defendants' conduct.” In re Publ'n Paper Antitrust Litig., 690 F.3d 51, 63 (2d Cir.
2012) (quoting Phillip E. Areeda & Herbert Hovenkamp, Fundamentals of Antitrust
Law § 14.03(b), at 14–25 (4th ed. 2011)). Indeed, “[a] court ruling on [a Rule
12(b)(6)] motion may not properly dismiss a complaint that states a plausible
version of the events merely because the court finds a different version more
plausible.” Anderson News I, 680 F.3d at 185.
Therefore, Plaintiffs sufficiently alleged parallel conduct that contributes to
an inference of a horizontal price-fixing conspiracy.
B. Plaintiffs Sufficiently Plead the Plus Factors
We also require antitrust plaintiffs when relying on circumstantial evidence
to supply allegations of “further circumstance pointing toward a meeting of the
28 minds,” sometimes called “plus factors.” Twombly, 550 U.S. at 553, 557; see also
Anderson News II, 899 F.3d at 104 (explaining that district courts must examine
“defendants’ conduct and communications . . . in context and with the ‘overall
picture’ in mind”). “[P]lus factors may include: [1] a common motive to conspire,
[2] evidence that shows that the parallel acts were against the apparent individual
economic self-interest of the alleged conspirators, and [3] evidence of a high level
of interfirm communications.” Citigroup, 709 F.3d at 136 (internal quotation marks
omitted). As previously noted, we require plaintiffs at this stage to allege a
plausible theory based on circumstantial evidence, not the only or even the most
plausible one. See Anderson News I, 680 F.3d at 184.
Plaintiffs have alleged sufficient facts suggesting that Defendants had a
common motive to conspire to neutralize or mitigate market-share and regulatory
threats just before the restrictions were imposed. As direct competitors, these four
Defendants control the diabetes drug marketplace, which would make concerted
action amongst competing diabetes drug-markers imposing restrictions easy to
coordinate and maintain. By jointly adopting a policy that largely denied covered
entities the ability to purchase Section 340B Drugs for delivery to contract
pharmacies, Defendants effectively eliminated the vast majority of their Section
29 340B Drug Discount sales through those pharmacies—thereby increasing their
profits and reducing competition over discounted pricing for key diabetes drugs.
Plaintiffs have also sufficiently alleged that restricting Section 340B Drug
Discounts would have been against any individual Defendant’s own economic
self-interest. Plaintiffs alleged that restricting discounts alone would lead to
decreased market share and regulatory sanctions that would risk loss of federal
healthcare program coverage. Additionally, Plaintiffs allege that if a Defendant
alone restricted discounts, its market share and sales volumes for rapid-acting
analog insulins, long-acting analog insulins, and incretin mimetics would be
threatened. As the second amended complaint suggests, covered entities service
both Section 340B Drug Discount eligible patients and those who would not
participate in the program, so Defendants would not be losing the market share
for those latter patients unless they all acted together.
Plaintiffs’ allegation that by acting collectively, Defendants limited their
exposure only to civil monetary penalties, is plausible because, if one had acted
alone, that Defendant would have been exposed to the greater risk of exclusion
from Medicare and Medicaid. Given the need for patients to have these drugs on
the market, Defendants at the very least avoid being cut off from the market
30 altogether by allegedly acting in concert. The district court did not credit Plaintiffs’
allegation that there was “safety in numbers” in adopting the challenged policies
that would risk market share by exposing Defendants to severe regulatory
sanctions. Mosaic Health, 714 F. Supp. 3d at 224. Indeed, (i) the potential loss of
market share if safety-net providers responded to discounts by changing their
preferences to move their patients (Section 340B or otherwise) to competing
manufacturers’ firms drugs with discounts, and (ii) the potential devastating
sanction of exclusion of the manufacturers’ drugs from Medicare and Medicaid
coverage serve as conceivable plus factors that weigh in favor of plausibility.
This inference of conspiracy is further supported by the alleged “high level
of interfirm communications” among Defendants on the issue of Section 340B
Drug Discounts. See Apple, 791 F.3d at 315 (internal quotation marks omitted).
Plaintiffs assert that it is likely that Defendants communicated with each other
both indirectly and directly through use of the same lobbying firms and lobbyists
in advance of their restrictions on Section 340B Drug Discounts, making
coordination even more probable. Moreover, they further assert that the same
lobbying firms worked on the Section 340B issue at the same time for PhRMA, an
industry association of which each Defendant is a member and on the board of
31 directors. According to Plaintiffs, the “Defendants, as PhRMA board members,
communicated among themselves, and their most prominent advocacy issue was
340B Drug Discounts, including Contract Pharmacy 340B Drug Discounts.” J.
App’x 862. The district court failed to credit the inference that the Defendants’
sharing of lobbying services and joint participation on the PhRMA board suggests
that the Defendants had ample opportunity to conspire based on months of
communications about Section 340B Drug Discount restrictions with the common
aim of collusion. See Mosaic Health, 714 F. Supp. 3d at 224.
In sum, Plaintiffs have sufficiently alleged parallel conduct and plus factors
that support the plausibility of a Section 1 conspiracy.
IV. District Court Must Re-examine The State-Law Claims
The district court dismissed the state law antitrust and unjust enrichment
claims for the same reason as it did Plaintiffs’ Sherman Act claims. Id. at 225
(“[T]he proposed state law antitrust claims and the proposed state law unjust
enrichment claims are premised on the allegation that Defendants have unlawfully
conspired to overcharge Plaintiffs for their products . . . . As such, their proposed
amendments to their state law claims are futile.”). In light of our conclusion that
Plaintiffs have plausibly alleged that Defendants engaged in a horizontal price-
32 fixing conspiracy, amendment would not be futile. See Panther Partners Inc. v.
Ikanos Commc'ns, Inc., 681 F.3d 114, 119 (2d Cir. 2012) (“Futility is a determination,
as a matter of law, that proposed amendments would fail to cure prior deficiencies
or to state a claim under Rule 12(b)(6) . . . .”). Upon remand, the district court is
directed to reexamine its ruling on Plaintiffs’ allegations regarding state-law
claims in a manner consistent with this opinion.
CONCLUSION
This Court concludes that the proposed second amended complaint pleads
sufficient facts to support a plausible inference of a horizontal price-fixing
conspiracy through circumstantial allegations, where both (1) the conduct that
Plaintiffs allege was sufficiently parallel, as the Defendants’ announced policies
were similar enough in substance, timing, and effect; and (2) Plaintiffs alleged
sufficient circumstantial plus factors, including a common motive to conspire,
parallel conduct contrary to the Defendants’ individual economic self-interest, and
a high level of interfirm communications.
We therefore VACATE the district court’s judgment dismissing Plaintiffs’
suit and denying leave to amend and REMAND for the district court to grant
Plaintiffs leave to file their second amended complaint.