Health Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Indirect purchasers unable to show Celgene illegally maintained market power, (Apr 14, 2025)

By Jeffrey H. Brochin, J.D.

Even though Plaintiffs lacked standing to bring their Walker Process claims, the court nevertheless detailed how their pleadings alleging fraud on the PTO lacked particularity, and, how they failed to show that Celgene’s lawsuits constituted sham litigation.

The federal district court in New York City has granted a motion to dismiss filed by Celgene Corporation and its parent company Bristol Myers Squibb in an antitrust lawsuit brought by health insurers and myeloma patients who claimed that Celgene violated the Sherman Antitrust Act by achieving market monopoly via fraud on the U.S. Patent and Trademark Office (PTO), and by way of sham litigation resulting in unlawful reverse payments. However, as indirect purchasers, the Plaintiffs were less ‘directly harmed’ and therefore lacked standing to bring the antitrust action. But even if they had standing, their claims as to alleged fraud on the PTO and as to alleged sham litigation, were both rejected by the court (Louisiana Health Service & Indemnity Co. v. Celgene Corp., No. 1:23-cv-07871-ER (S.D.N.Y. Apr. 8, 2025)).

A major health benefits manager and an individual living with multiple myeloma were customers of pharmacies which initially purchased pomalidomide—a drug used in the treatment of multiple myeloma and sold under the brand name Pomalyst—from Celgene. They filed suit against Celgene claiming that the manufacturer obtained a market monopoly for Pomalyst by way of fraud on the PTO as to several patents, and, by way of sham litigation consisting of patent infringement lawsuits against generic drug manufacturers. The fraud on the PTO was based on both alleged misrepresentations and omissions as to method of treatment, method of use, formulation, and dosage which were submitted after examiners had initially rejected their applications.

The Plaintiffs alleged that Celgene, once having procured the patents, knowingly filed four “waves” of sham lawsuits between May 4, 2017 and March 10, 2020, against all nine Pomalyst generics that submitted paragraph IV certification letters. Although the lawsuits claimed to be over patent infringement, the Plaintiffs claimed they were actually part of a scheme to prevent competition in the market for generic Pomalyst.

Walker Process Antitrust Standing. The court noted that private plaintiffs seeking to enforce Section 2 of the Sherman Act must satisfy the standing requirement of Sections 4 and 16 of the Clayton Act, which require an antitrust plaintiff to prove (1) that it suffered a special kind of antitrust injury, and that (2) it is a suitable plaintiff to pursue the alleged antitrust violations and thus is an efficient enforcer of the antitrust laws. Whether a plaintiff is an “efficient enforcer” depends on the following four factors: (1) the directness or indirectness of the asserted injury; (2) the existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement; (3) the speculativeness of the alleged injury; and (4) the difficulty of identifying damages and apportioning them among direct and indirect victims so as to avoid duplicative recoveries.

Celgene contended that according to the “first-step rule,” the Plaintiffs’ injuries were derivative and too remote to be considered as having suffered a direct injury. They further contended that the Plaintiffs, as customers of pharmacies which initially purchased Pomalyst from Celgene, were several steps removed from the PTO and litigation conduct they were challenging. The court agreed, finding that the various factors weighed against Plaintiffs being efficient enforcers: their injuries were derivative and too remote; there were more efficient alternate enforcers, such as the generics; and the Plaintiffs’ theory of indirect injury necessarily involved intermediaries and intervening factors creating an “accompanying uncertainty” and requiring the court to speculate about how each intermediary would have behaved had none of the patents issued. Accordingly, the court concluded that the Plaintiffs failed to allege that they were “efficient enforcers” having antitrust standing to bring Walker Process fraud claims against Celgene.

Walker Process fraud allegations. Despite the lack of standing ruling, the court proceeded to analyze the Walker Process claims as to fraud on the PTO, noting that such allegations must meet the heightened pleadings standards of Rule 9(b) by identifying the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO. Upon reviewing the allegations as to each of the subject patents, the court found that although the Complaint alleged multiple fraudulent representations regarding Celgene’s responses to the rejections, it failed to explain how those responses were material to the final amendments, which the patent examiner ultimately approved. Instead, in conclusory fashion, the Complaint merely alleged that the amendment and response was intended to deceive the examiner into withdrawing prior rejections, overlooking previous public disclosures and prior art, and believing that the unexpected results were a lawful basis to allow the claims. However, without more, those allegations did not sufficiently allege how the approved final application would not have issued but for the responses. Accordingly, the court found that the Plaintiffs failed to plausibly plead Walker Process fraud in Celgene’s procuring of any of the patents.

Sham litigation. Although under the Noerr—Pennington doctrine, litigation (as well as concerted efforts incident to litigation) may not serve as a basis for an antitrust claim. However, an exception exists under the doctrine for litigation that is brought as sham litigation. In order to bring a sham litigation claim, a plaintiff must plausibly plead that the litigation was: (1) ‘objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits’; and (2) subjectively motivated by a desire to ‘interfere directly with the business relationships of a competitor,’ through the use of the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon.

Here, the court could not conclude that Celgene’s infringement actions against the Pomalyst generic first filers were objectionably baseless, such that “no reasonable litigant could realistically expect success on the merits.” Rather, because the lawsuits were ultimately resolved with settlements, they had outcomes favorable for Celgene: every suit challenged by the Plaintiffs reached a settlement and consent judgment that preserved the viability and validity of Celgene’s patents and allowed Celgene to retain a significant portion of its patent rights, and therefore the lawsuits could not be deemed a sham.

Based on the forgoing, the court granted Celgene’s motion to dismiss failure to state a claim pursuant to Section 2 of the Sherman Act.

The Case is No. 1:23-cv-07871-ER.

Judge: Ramos, E.

Attorneys: Thomas Matthew Sobol (Hagens Berman Sobol Shapiro LLP) for Louisiana Health Service & Indemnity Co. Gavin J. Rooney (Lowenstein Sandler LLP) for Celgene Corp.

Companies: Louisiana Health Service & Indemnity Co.; Celgene Corp.

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