Antitrust Law Daily Wrap Up, ANTITRUST NEWS: PhRMA urges Second Circuit to bar indirect purchasers from bringing antitrust claims based on fraudulent drug patents, (Nov 5, 2026)

By Martin A. Steinberg, J.D.

PhRMA argues that expanding indirect-purchaser standing would increase drugmakers’ antitrust exposure and discourage innovation.

The Pharmaceutical Research and Manufacturers of America (PhRMA) urged the Second Circuit to affirm the dismissal of indirect purchasers’ antitrust claims against Celgene Corporation and Bristol Myers Squibb concerning allegedly fraudulently obtained patents covering the cancer drug Pomalyst®. In their amicus brief, PhRMA argued that the third-party payors lack standing to pursue Walker Process monopolization claims because their alleged injuries are remote and speculative, while competitors and direct purchasers are better positioned to sue. The association warned that expanding standing would risk duplicative recovery, weaken First Amendment protections for patent enforcement, and discourage pharmaceutical innovation. It asked the court to clarify that indirect purchasers lack Walker Process standing under federal or state law (Louisiana Health Service & Indemnity Co. v. Celgene Corp., No. 26-1194 (2d Cir. Nov. 3, 2026)).

Background. Celgene Corporation, acquired by Bristol Myers Squibb Company in 2019, manufactures Pomalyst® (pomalidomide), a prescription drug used to treat multiple myeloma and other cancers. Celgene obtained several patents covering the drug, including formulation, polymorph, and method-of-treatment patents. Jerome Zeldis, a Celgene scientist, oversaw the scientific work underlying the patents, while patent attorney Anthony Insogna handled their prosecution before the U.S. Patent and Trademark Office (USPTO). According to PhRMA, Celgene subsequently asserted nine patents in infringement litigation against nine generic drug manufacturers, none of which alleged fraud on the USPTO or succeeded in invalidating the patents.

In September 2023, Louisiana Health Service & Indemnity Company, doing business as Blue Cross and Blue Shield of Louisiana, and its subsidiary HMO Louisiana, Inc., filed a putative antitrust class action against Celgene, Bristol Myers Squibb, and several generic manufacturers. The plaintiffs alleged that Celgene fraudulently obtained patents covering Pomalyst, pursued sham patent litigation against generic competitors, and entered into unlawful settlements that delayed generic competition and kept drug prices artificially high. An amended complaint added Zeldis and Insogna as defendants and asserted monopolization claims under Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965), which permits antitrust liability for knowingly enforcing fraudulently procured patents when the other elements of Sherman Act monopolization are established.

The Southern District of New York dismissed the amended complaint in April 2025. On April 1, 2026, the court denied the plaintiffs' motion for leave to file a second amended complaint, finding that further amendment would be futile. The court concluded that the indirect-purchaser plaintiffs lacked antitrust standing to pursue their Walker Process claims because their alleged injuries were too remote and more directly affected purchasers were better positioned to enforce the antitrust laws. The court also found deficiencies in the plaintiffs' allegations of patent fraud, sham litigation, and unlawful reverse-payment settlements.

Indirect purchasers lack antitrust standing. PhRMA argued that the district court correctly dismissed the indirect purchasers’ Walker Process monopolization claims. According to PhRMA, courts have consistently refused to extend Walker Process standing to indirect purchasers because their alleged injuries are too remote from the challenged conduct. It maintained that the plaintiffs failed to qualify as “efficient enforcers” under the four-factor antitrust standing test established in Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519 (1983), and applied by the Second Circuit.

First, the plaintiffs’ alleged injuries were indirect because Celgene’s purported patent fraud would have initially harmed generic competitors, with any resulting price increases passing through multiple intermediaries before reaching health insurers and other end-payors. Their injuries therefore failed the directness requirement under the “first-step rule.”

Second, generic manufacturers and direct purchasers were better positioned to challenge the alleged misconduct. PhRMA rejected the plaintiffs’ contention that changing pharmaceutical market dynamics made indirect purchasers more motivated to sue, arguing that standing depends on a plaintiff’s relationship to the challenged conduct, not its subjective incentive to litigate.

Third, the plaintiffs’ damages theories were speculative because determining whether fraudulent patent procurement increased their reimbursement costs would require tracing hypothetical pricing and purchasing decisions through multiple levels of pharmaceutical distribution. Fourth, allowing indirect purchasers to sue would complicate damages calculations and create substantial risks of duplicative recovery, inconsistent judgments, and overlapping treble-damages awards.

Federal standing principles govern, PhRMA argues. PhRMA also disputed the plaintiffs’ argument that courts should determine standing under individual state antitrust laws. Although some states authorize indirect-purchaser lawsuits through statutes overriding Illinois Brick Co. v. Illinois, PhRMA maintained that these provisions do not eliminate the requirement to establish standing for claims involving federal patent-related conduct.

The association emphasized that Walker Process represents a narrow exception to the Noerr-Pennington doctrine, which protects legitimate petitioning activity under the First Amendment. It argued that allowing state-law claims to circumvent federal standing limitations would undermine those constitutional protections and expose patentholders to liability for otherwise protected patent enforcement.

No special standing rules. PhRMA rejected the contention that pharmaceutical industry practices justify relaxing traditional antitrust standing requirements. The association argued that the Supreme Court has consistently favored clear, administrable standing rules rather than exceptions based on particular industries or distribution arrangements. Changes in the economic incentives of wholesalers, generic manufacturers, or health insurers do not alter the causal relationship between alleged patent misconduct and downstream purchasers’ injuries. PhRMA maintained that industry changes should be addressed through legislation or public antitrust enforcement, not judicial expansion of private standing.

Expanded liability would discourage pharmaceutical innovation. PhRMA warned that extending Walker Process standing to indirect purchasers would substantially increase pharmaceutical manufacturers’ exposure to treble-damages litigation and discourage legitimate patent enforcement. The association emphasized that developing new medicines requires substantial investment and carries significant financial risks. According to figures cited in the brief, PhRMA members invested more than $900 billion in research and development over the preceding decade, while a cited 2016 study estimated the average cost of developing and obtaining approval for a new medicine at $2.6 billion.

PhRMA argued that predictable patent protections are essential to recovering those investments. Congress recognized the importance of early patent dispute resolution through the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act, which establish mechanisms for resolving patent disputes before generic or biosimilar market entry. Allowing remote downstream purchasers to challenge patent enforcement years later would introduce additional uncertainty, increase litigation costs, discourage settlements, and potentially deter companies from enforcing valid patents. PhRMA therefore urged the Second Circuit to affirm the dismissal and expressly hold that indirect purchasers lack standing to pursue Walker Process claims under either federal or state antitrust law.

The Case is No. 26-1194.

Judge: NA.

Attorneys: Thomas M. Sobol (Hagens Berman Sobol Shapiro LLP) for Louisiana Health Service & Indemnity Company. Gavin John Rooney (Lowenstein Sandler LLP) for Celgene Corporation.

Companies: Louisiana Health Service & Indemnity Company; Celgene Corporation

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