Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Dozens of BCBS entities obtain dismissal of TranS1 spinal fusion antitrust complaint, (Jul 7, 2026)

By Justin Marcus Smith, J.D.

Among other pleading difficulties, the complaint did not make it clear whether the market was for a spinal procedure or for a product used in the procedure.

The owner of all rights to a spinal fusion procedure could not proceed with an antitrust action against dozens of Blue Cross Blue Shield (BCBS) entities for denial of coverage because the complaint did not clearly define the product market and the rights-holder’s role in it, held the federal district court in Philadelphia, Pennsylvania. As for alleged conformity with a model policy of the Blue Cross Blue Shield Association (BCBSA) and the “Uniformity Rule,” the court found the allegations fell short of raising a reasonable expectation that discovery would reveal direct evidence of conspiracy. However, the allegations were enough to plead an agreement through circumstantial evidence of parallel conduct as alleged to be manifest in more or less uniform adherence to a common policy. The allegation that multiple policies contained consistent misinterpretations of medical literature suggested common action. That was enough to overcome other specific pleading deficiencies that might have otherwise been fatal in light of another case in the circuit that similarly pertained to BCBS entities; however, the court said it could not make a factual determination of medical mischaracterization at this stage. The complaint also failed to allege unreasonableness of the alleged restraint of trade. The court dismissed the complaint without prejudice on the basis that privity is not required under Illinois Brick to pursue an antitrust suit in the Third Circuit, in contrast to a recent Sixth Circuit decision (Trans1, LLC v. Blue Cross Blue Shield Association, No. 2:25-cv-01422-KBH (E.D. Pa. Jul. 1, 2026)).

Background. TranS1, LLC, owner of all rights to the AxiaLIF spinal fusion procedure, sued the BCBSA and 59 of its members and licensees across the U.S. (collectively, the Blue Plans). The Blue Plans operate as a Blue Cross entity within a designated local region. They insure about one in three Americans in a network that includes about 96% of hospitals and 92% of doctors.

Although BCBS of New Jersey and two other Blue Plans initially made positive reimbursement decisions for AxiaLIF, all Blue Plans denied coverage after 2015. The 2016 Medical Policy of HCSC (HCSC policy), which various HCSC division Blue Plans use, stated that AxiaLIF is “considered experimental, investigational, and/or unproven.” According to the complaint, AxiaLIF has been approved by the United States Food and Drug Administration (FDA) since 2004. The HCSC policy also cited the FDA MAUDE database for purported adverse events, albeit many of them are allegedly duplicative or concern a two-level variation of the procedure. TransS1 asserted that the HCSC policy continued to inaccurately describe the medical literature through 2024. Other Blue Plans allegedly use “near verbatim language” about AxiaLIF in their coverage policies.

In March 2025, TransS1 filed a complaint alleging that the BCBSA and the Blue Plans distorted the market for spinal fusions and substantially reduced demand for AxiaLIF through a collusive anticompetitive agreement. TransS1 claimed group boycott violation of Section 1 of the Sherman Antitrust Act; violation of Section 4 of the Clayton Act; and concerted refusal to deal in violation of Section 1 of the Sherman Antitrust Act and Section 4 of the Clayton Act.

BCBS and the Blue Plans moved to dismiss for failure to state a claim, TransS1 opposed, and the Blue Plans filed a notice of supplemental authority following the Sixth Circuit determination in Academy of Allergy & Asthma in Primary Care v. Amerigroup Tennessee, Inc., 155 F.4th 795 (6th Cir. 2025). The Blue Plans proposed three reasons for dismissal: (1) failure to plead the existence of an agreement, whether by direct or circumstantial evidence; (2) failure to plead a cognizable product market; and (3) lack of standing because Trans1 is an indirect seller with only speculative injury.

The court held oral argument on June 2, 2026. The court said it applied the Third Circuit three-part analysis to the Blue Plans’ motion to dismiss for failure to state a claim. The three-part analysis involves (1) identifying the elements of the claim; (2) reviewing the complaint to strike conclusory allegations; and (3) looking at the well-pleaded components of the complaint and evaluating whether the complaint sufficiently alleges all identified elements of the claim.

Agreement existence. TransS1 argued that binding associational rules were evidence of an agreement, but the court found its “Uniformity Rule” allegations fell short of alleging a competition-restricting policy, to be proved by direct evidence, as shown in Relevent Sports, LLC v. United States Soccer Fed’n, 61 F.4th 299, 307 (2d Cir. 2023), cert. denied, 144 S. Ct. 1391 (2024)). However, the complaint survived in light of circumstantial allegations.

Essentially, TransS1 alleged the Blue Plans all agreed to adhere, in a uniform manner, to the coverage directives of the BSBSA Model Policy established by the BCBSA Medical Policy Panel (Panel). The Blue Plans argued here that TranS1 did not allege the when, where, or why the Panel adopted the alleged rule. The court analyzed that Relevent Sports distinguished between two types of Section 1 cases involving trade organizational rules. The first type alleges that a policy or rule serves a plan to restrain competition, requiring additional allegations to show that such a plan exists. The second type alleges that a policy or rule is the agreement itself, essentially self-evident without a need for additional allegations.

TranS1 pleaded the second type of Relevent Sports complaint, but even though TranS1 alleged regular meetings in Chicago and a general point in time when the Blue Plans stopped reimbursing AxiaLIF, the court found the allegations fell short of raising a reasonable expectation that discovery would reveal direct evidence of conspiracy.

Turning to circumstantial evidence, the court noted that in cases of concentrated markets, as here, the first two kinds of plus factors, i.e., motive and actions contrary to interest, are de-emphasized because they largely restate interdependence. The Blue Plans argued TranS1 pleaded neither parallel conduct nor sufficient plus factors. The Blue Plans AxiaLIF policies differed in language and reasoning. Even if coverage denial was sufficiently parallel, the Blue Plans said there was no reasonable inference of conscious parallel action. They said the use of standard industry terms of art, like “investigational” or “unproven,” was not enough to infer conscious parallelism, nor was a mere motive to save costs enough. The Blue Plans continued that TranS1 did not allege specifics about same behavior over time or that the Blue Plans behaved differently than other insurers.

TranS1 argued it alleged the same facts the Third Circuit found sufficiently circumstantial of an agreement in LifeWatch Servs. Inc. v. Highmark Inc., 902 F.3d 323, 333 (3d Cir. 2018). The court noted “numerous similarities.” LifeWatch likewise alleged that BCBSA and five Blue Plans impermissibly conspired to deny coverage of telemetry monitors, by agreeing to substantially comply with the model policy, congruent with the “Uniformity Rule.” The LifeWatch court acknowledged a pleading of parallel conduct through near total uniformity in adoption of the model policy and use of similar or identical language to deny coverage.

The court agreed that TranS1 pleaded parallel conduct congruent with the Uniformity Rule. The complaint asserted near total uniformity of coverage denial, through use of similar or identical language to deny coverage. LifeWatch held that the use of “similar” coverage denial language was enough, albeit the LifeWatch complaint went a step further by quoting a recommendation in the model policy that insurers deny telemetry monitor coverage. The court found that TranS1’s allegations of “several highly similar” Blue Plan policies issued around the same time sufficiently pleaded parallel conduct. The court rejected the Blue Plans’ argument that the parallel conduct had an “obvious alternative explanation” insofar as they see AxiaLIF as “experimental,” but the court said the fact that three Blue Plans initially approved coverage and then changed course by 2015 contradicted that alternative explanation.

Although the TranS1 allegations of plus factors fell short of LifeWatch in two key respects, the court ruled they were not fatal. The first shortfall was that TransS1 did not offer any allegation about how the Blue Plans enforced uniformity. Second, TranS1 did not allege that other commercial insurers cover AxiaLIF and that independent boards had overturned the denial of coverage determinations. Even taking those two shortfalls into account, the TranS1 allegations otherwise went beyond LifeWatch by asserting that multiple policies contained consistent misinterpretations of medical literature. That suggested common action. The Blue Plans attached the relevant medical literature to their motion to dismiss, arguing they did not mischaracterize it. The court said it could consider the documents because the complaint was based on them, but it could not make a determination of medical mischaracterization at this stage. The allegations were thus sufficient to plead an agreement through circumstantial evidence.

Market definition. Next, the court found the complaint failed to sufficiently allege that TransS1’s injury was the kind the antitrust laws were designed to redress. The Blue Plans argued for dismissal because the complaint failed to allege a plausible product market insofar as single-level LF-S1 spinal fusion is a medical procedure, not a medical device. The Blue Plans additionally argued TranS1 was not a consumer or competitor in the market because it did not allege it performs the procedures or that the Blue Plans would ordinarily be reimbursing TransS1 for them.

The court agreed with the Blue Plans that the complaint did not make it clear whether the market was for a spinal procedure or for a product used in the procedure. TranS1 alleged it owned all rights to the procedure and associated medical devices, but it did not facially conduct the procedure, and there were not enough facts alleged to explain the relationships between TranS1, the surgeons who perform the procedure, and the insurers. Ultimately, TranS1 failed to establish how it was a facial competitor in the market. If the court were to view TranS1 as a supplier, suppliers do not typically suffer antitrust injury for reduced competition in the downstream market. Mere byproducts of the anticompetitive effects of a restraint, “collateral damage,” are insufficient to show antitrust injury.

The court also said TranS1 failed to allege the third, fourth, and fifth factors of Associated Gen. Contractors v. Carpenters, 459 U.S. 519 (1983). It was not clear how directly or indirectly coverage denials affected TranS1. The complaint alleged that providers, hospitals, and patients relied on insurers for reimbursement of spinal fusions, but TranS1 did not include itself in that list. In contrast to the allegations in LifeWatch, it never alleged a direct contractual relationship with any Blue Plan.

Last, the court said that TranS1 failed to allege unreasonableness of the alleged agreement to restrain trade. TranS1 urged that it alleged per se illegality such that it did not need to plead relevant market, but the court disagreed. TranS1 may not need to define a relevant market precisely, but that did not mean it was entirely excused from defining one. Moreover, while group boycotts are generally treated as unlawful per se, that is limited to cases in which firms boycott suppliers or customers to discourage them from doing business with a competitor. As in LifeWatch, TranS1 did not allege this type of group boycott.

Amendment. The court disagreed with the Blue Plans that the lack of a direct relationship between TranS1 and the Blue Plans called for dismissal with prejudice under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The court said privity is not required to pursue an antitrust suit, albeit the Sixth Circuit recently held that strict contractual privity is required to recover lost sales. See Academy of Allergy & Asthma in Primary Care v. Amerigroup Tennessee, Inc., 155 F.4th at 815. An amended complaint would need to correct the product market definition deficiencies and the TranS1 role as competitor or consumer, but it remained possible that TranS1 could allege antitrust standing.

The Case is No. 2:25-cv-01422-KBH.

Judge: Hodge, K.

Attorneys: Alexander L. Kaplan (Susman Godfrey L.L.P.) for Trans1, LLC. Daniel Ottaunick (Cravath, Swaine & Moore LLP) for Blue Cross Blue Shield Association.

Companies: Trans1, LLC; Blue Cross Blue Shield Association

Cases: Antitrust PennsylvaniaNews GCNNews