PhRMA sues over insulin law

The pharmaceutical industry’s trade group is suing in federal court to block implementation of Minnesota’s Alec Smith Insulin Affordability Act.

A complaint was filed Tuesday in Minnesota’s U.S. District Court by the Pharmaceutical Research and Manufacturers of America (PhRMA). The suit names members of the state boards of Pharmacy and MNsure as defendants.

The suit seeks a court declaration that the law is unconstitutional and a permanent injunction against its enforcement. It does not, however, seek an immediate temporary restraining order blocking the law’s implementation while the case moves forward. The law went into effect on July 1.

“Unfortunately, this law is unconstitutional, overlooks common sense solutions to help patients afford their insulin and, despite its claims, still allows patients to be charged at the pharmacy for the insulin that manufacturers are required to provide for free,” PhRMA’s General Counsel James C. Stansel said in a press release Tuesday.

The law, signed by the governor earlier this year, was named for a 26-year-old Minnesotan who came up $300 short of the $1,300 he needed to pay for his monthly insulin prescription. He died trying to ration his supply to make it last until payday.

As amended in conference committee, the bill passed 111-22 in the House and 67-0 in the Senate on April 14. Gov. Tim Walz signed it the next day.

The law allows diabetics with less than seven days’ insulin to pay up to $35 to a pharmacy for a 30-day supply. Pharmaceutical companies are then required to reimburse pharmacies for costs of the drug.

Families with incomes at 400% of federal poverty guidelines or less can qualify for 90-day supplies for up to $50, under terms of the law.

The bill’s House author, Rep. Michael Howard, DFL-Richfield, touted his bill as a lifesaver. “And the insulin manufacturers, who have profited mightily while the price has soared, will have a role to solve this crisis,” he told lawmakers on the House floor.

“It is downright inspiring,” Walz said upon signing the bill. “This hard-fought law will provide much-needed relief to Minnesotans struggling to afford their insulin.”

At a press conference Wednesday afternoon celebrating the law’s enactment, Alec Smith’s mother, Nicole Smith Holt, called PhRMA’s lawsuit “a tragedy.” She said that GOP state senators convinced her to support a compromise version of the bill that watered down some provisions.

“We had been told that insulin manufacturers would not challenge the final bill,” she said. “We were told by the Senate bill authors that the insulin companies would fight the DFL plan and would have had the bill tied up in courts. Well, look what happened in the final, 11th hour of the bill going live.”

Several Republicans weighed in Wednesday, expressing disappointment in the PhRMA suit. Senate Majority Leader Paul Gazelka, R-East Gull Lake, called it “poorly timed.”

“We are very disappointed with the drug manufacturers’ lawsuit against the Alec Smith Affordable Insulin Act after so much work went into a compromise bill assuring no Minnesotan would have to go without insulin,” Gazelka said.

The industry did warn lawmakers that they might challenge the law in court. In a Feb. 13 letter to legislators, they said the law, which was then moving through committee, raised constitutional concerns. The industry urged legislators to focus instead on programs like better diabetes management for Minnesotans.

In a written statement, Sen. Michelle Benson, R-Ham Lake, chair of the Senate Health and Human Services Committee, said the upper chamber “made every effort to reduce the risk” of litigation. Like Gazelka, she expressed disappointment in the industry.

“PhRMA is missing the mark by wasting time and money on this lawsuit,” Benson said. “Minnesotans would be far better off if the pharmaceutical industry would focus on fairness in pricing. You shouldn’t have to be a powerful government or a special interest group to have access to fair prices.”

Walz, speaking at Wednesday’s press conference, said he was surprised at the suit’s filing. “It was my impression the entire time, and was conveyed to me, that [PhRMA] was acceptable with this and would let this stand.”

He said he thinks the litigation was filed simply “to muddy the waters.”

Takings clause

In Tuesday’s two-count complaint, the trade group says the Minnesota law violates the U.S. Constitution’s 5th Amendment “Takings Clause.” The clause states that “private property [shall not] be taken for public use, without just compensation.”

The trade group says the law also violates the Commerce Clause, found in Article 1 of the U.S. Constitution, which reserves to Congress powers to regulate trade. The clause prohibits “states from enacting laws that impose substantial burdens on interstate commerce,” the complaint says.

The complaint mentions Smith, the law’s namesake, just once and only in reference to the law’s title. It does not otherwise describe the case that served as the legislative inspiration for the bill. Howard said that during the time it took to pass the law, more than a year, a few other Minnesotans also died trying to ration insulin.

The complaint does, however, detail voluntary efforts that the drug’s primary manufacturers—Eli Lilly and Co., Novo Nordisk Inc., and Sanofi—have taken to help the poor afford the drug through rebates and discounts.

For example, the complaint says, diabetics can call the Lilly Diabetes Solution Center, a hotline staffed by medical professionals, to connect with various affordability options. “Patients with an urgent need can access an immediate supply of their Lilly insulin,” the complaint says.

Lilly also recently launched a program that allows Americans, even those with no insurance, to purchase a monthly prescription for $35 co-pay. Novo Nordisk and Sanofi have similar programs, according to the complaint.

The suit was filed by attorneys from Minneapolis-based Greene Espel P.L.L.P. and Washington, D.C.-based Sidley Austin, L.L.P. It maintains that the Minnesota law removes property from the pharma companies and gives it away, with no compensation to its rightful owners.

“Until they are sold,” the complaint says, “those products are the private personal property of PhRMA’s members that manufacture them. The requirement that PhRMA’s members give away their personal property for free constitutes a per se taking of private property.”

The law includes no provisions or mechanisms for compensating the companies for their property loss, the complaint says. “The act’s implications are staggering,” the complaint says.

“If Minnesota can appropriate privately manufactured insulin for distribution to its residents without paying any compensation—let alone just compensation—to the manufacturers, states can compel manufacturers to dispense other medications for free as well,” the complaint says.

In fact, the suit contends, states could equally commandeer any products for residents to advance public policy goals. The Takings Clause was adopted to prevent just such situations, the suit contends.

Public concerns about high out-of-pocket costs for insulin, the complaint says, often stem from consumers’ lack of health insurance, or because their plans require large co-payments to obtain the drugs.

“Minnesota could have taken various lawful steps to address this concern,” the complaint says. “What Minnesota chose to do, however, is to order pharmaceutical manufacturers to give insulin to state residents, on the state’s prescribed terms, at no charge to the recipients and without compensating the manufacturers in any way.”

That’s illegal, the trade group’s lawyers maintain in their complaint: “A state cannot simply commandeer private property to achieve its public policy goals.”