Antitrust Law Daily Wrap Up, ANTITRUST—2d Cir.: Drug price fixing case brought by federally funded clinics revived on appeal, (Aug 6, 2025)

By Peter Reap, J.D., LL.M.

A horizontal price fixing conspiracy to restrict drug discounts was plausibly pleaded.

The Second Circuit has concluded that a putative class action brought by two federally funded health clinics against a group of drug manufacturers plausibly pleaded a horizontal price fixing conspiracy under Section 1 of the Sherman Act. The appellate court first held that the Supreme Court’s decisions in Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011) (Astra), and Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (Illinois Brick), did not bar the clinics from bringing their claims. Next, the second amended complaint proposed by the plaintiffs sufficiently pleaded parallel conduct that contributes to an inference of a horizontal price fixing conspiracy. Finally, the plaintiffs pleaded sufficient plus factors to support their allegation of a conspiracy. Thus, a federal district court’s judgment dismissing the suit and denying leave to amend was vacated and the case remanded for the district court to grant plaintiffs leave to file their second amended complaint (Mosaic Health, Inc. v. Sanofi-Aventis U.S., LLC, No. 24-598 (2d Cir. Aug. 6, 2025)).

Background. Mosaic Health, Inc. (Mosaic) and Central Virginia Health Services, Inc. (CVHS) are nonprofit healthcare organizations that operate multiple "safety-net" clinics in their respective geographical areas. Section 340B of the Public Health Service Act of 1992 established a drug discount program for qualifying healthcare provider organizations that operate "safety-net" hospitals and clinics that treat populations that are medically underserved.

Defendants Sanofi-Aventis U.S., Eli Lilly and Company and Lilly USA, LLC, Novo Nordisk Inc., and AstraZeneca Pharmaceuticals LP collectively dominate the market for certain high-volume pharmaceuticals used to treat diabetes, a market worth hundreds of millions if not billions of dollars. Inasmuch as diabetic conditions disproportionately affect low-income populations, the diabetes medications manufactured by the defendants constitute a significant percentage of the drugs prescribed in treating the patients of Mosaic and CVHS.

Plaintiffs brought a putative class action alleging violations of the Sherman Act; state antitrust laws, and state common law, through concerted action to restrict drug discounts offered to contract pharmacies like the plaintiffs.

In September 2022, the district court dismissed the Sherman Act and state antitrust claims. The court held that the organizations failed to show that the drug manufacturers engaged in parallel conduct in a context suggesting collusion. In 2024, the district court denied the plaintiffs leave to file a second amended complaint, finding that the proposed second amended complaint again failed to show that the drug manufacturers engaged in parallel conduct that would suggest collusion to limit discounts on diabetes medications. The plaintiffs appealed.

Astra and Illinois Brick do not bar this action. The Second Circuit rejected arguments by the plaintiffs that Astra held that the limits on Plaintiffs to bring Section 340B contract claims as indirect purchasers means Plaintiffs cannot bring Sherman Act claims. This case does not turn on the meaning of Section 340B nor on a determination as to whether Defendants violated Section 340B, reasoned the appellate court. Instead, Plaintiffs seek to enjoin the Defendants’ alleged price-fixing independent of the district court finding that Defendants violated Section 340B.

Further, Astra makes plain that Congress vested authority in the United States Department of Health and Human Services (HHS) to oversee compliance with the Section 340B Drug Discount Program and enforce the ceiling price contracts, not to police antitrust violations. Thus, Defendants’ argument that Plaintiffs’ sole remedy for resolving this dispute is within the administrative scheme overseen by the Health Resources and Services Administration, a unit of HHS, is without merit.

Next, Illinois Brick does not apply here, the Second Circuit determined. In Illinois Brick the Supreme Court barred indirect purchaser claims out of concern for duplicative recoveries and the complexities of tracing overcharges through multiple levels of distribution. But here, Plaintiffs seek damages for revenue loss resulting from lost Section 340B Drug Discount Program savings, not overcharges. They also seek injunctive relief to enjoin the alleged horizontal price-fixing conspiracy under Section 16 of the Clayton Act, which raises no threat of multiple lawsuits or duplicative recoveries.

Parallel conduct. Precedents from the Second and other Circuits show 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. And here, 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.” The timing of these pricing changes were similar enough to support an inference of parallel conduct, the court held. It was inappropriate at the motion to dismiss stage for the district court to explore alternate explanations for these changes.

Plus factors. Antitrust plaintiffs relying on circumstantial evidence, like here, must plead plus factors pointing to a meeting of the minds. The health clinics 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.” Their contention that Defendants acted collectively because if one had acted alone, that Defendant would have been exposed to a greater risk of monetary penalties and exclusion from Medicare and Medicaid, is plausible, according to the Second Circuit. The large amount of communications among Defendants about Section 340B discounts further supports the existence of a conspiracy.

State law claims. On remand, the district court must re-examine the state law antitrust and unjust enrichment claims that it dismissed for the same reasons as it did the Sherman Act claims.

The Case is No. 24-598.

Judge: Pérez, M.

Attorneys: Brian Marc Feldman (Aurelian Law PLLC) and Lauren Mendolera (Harter Secrest & Emery LLP) for Mosaic Health, Inc. and Central Virginia Health Services, Inc. Rajeev Muttreja (Jones Day) for Sanofi−Aventis U.S., LLC. Megan McGlynn Butler (Kirkland & Ellis LLP) for Eli Lilly and Co. and Lilly USA, LLC. Lohr Beck (King & Spalding LLP) for Novo Nordisk Inc.

Companies: Mosaic Health, Inc.; Central Virginia Health Services, Inc.; Sanofi−Aventis U.S., LLC; Eli Lilly and Co.; Lilly USA, LLC; Novo Nordisk Inc.

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