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Why so many people at the Capitol are so pissed off about the drug industry’s lawsuit against Minnesota’s new emergency insulin program

Minnesota’s insulin affordability plan had been sold as a compromise with the drug industry. That made the filing of the lawsuit galling to some, including Gov. Tim Walz, who said when told of PhRMA’s suit: “What the hell?”

James Holt, right, said during Wednesday's press conference that his family is outraged by the lawsuit. Son Jamisen Holt and Nicole Holt-Smith are at left.
James Holt, right, said during Wednesday's press conference that his family is outraged by the lawsuit. Son Jamisen Holt and Nicole Holt-Smith are at left.
MinnPost photo by Peter Callaghan

From the day they introduced it to the day it passed the Minnesota Legislature, backers of a bill to provide insulin to diabetics who can’t afford the hormone said it wouldn’t draw a lawsuit from drug makers.

Citing assurances from unnamed industry executives, those proponents of the bill, which relies on the companies’ existing patient assistance program charities instead of substantial fees on drug companies, was less of a lawsuit magnet. In April, the DFL-controlled Minnesota House approved the bill by 111-22. The Senate responded with a vote of 67-0.

They were wrong.

On Tuesday night, just hours before the Alex Smith Insulin Affordability Act was to take effect, the Pharmaceutical Research and Manufacturers of America — the industry trade group better known as PhRMA — filed suit to get the new law declared unconstitutional.  “A state cannot simply commandeer private property to achieve its public policy goals,” states the suit, which names the Minnesota Board of Pharmacy and MNsure as defendants. “Because the Act takes private property for public use without paying just compensation, it is unconstitutional and should be enjoined.” 

Walz’s reaction: ‘What the hell?’

Minnesota’s plan, brokered by Republicans in the state Senate, relies on existing patient assistance programs run by pharmaceutical companies like Eli Lilly, Sanofi and Novo-Nordisk. Only if the companies refused to participate in the program do they face fees or fines: $200,000 per month for six months, and increasing to $400,000 per month for the next six. After a year of non-participation, fines go to $600,000 a month.

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The suit does not ask for a temporary injunction against the act taking effect, and Gov. Tim Walz and Lt. Gov. Peggy Flanagan stressed at a press conference on Wednesday that the program was still available for those who need it.  A 90-day supply can be received either through a pharmacy or directly from the manufacturer’s patient assistance program. No more than a $50 copay can be charged for that three month supply. Those same diabetics can then apply for longer-term supplies by verifying income eligibility through MNsure.

Walz called Wednesday “one of the most enjoyable days” as governor because the new law resulted from the advocacy of diabetics and their families. The law is named for Alec Smith, who died three years ago after rationing his insulin after aging off his parent’s health insurance. Walz declared Wednesday “Alec Smith Day” in Minnesota. His parents, Nicole Smith-Holt and James Holt, Jr., accepted the proclamation from Walz.

But the lawsuit put something of a damper on the celebration. The plan had been sold as a compromise with the industry, and advocates had to swallow hard to accept it, making the news of the suit galling to some. Flanagan found out about the suit Tuesday night via social media and told Walz about it the same night. His reaction: “What the hell?”

On Wednesday, Flanagan said of the drug industry: “They may continue fighting, but so will we. And we have the advantage of being right.”

Gov. Tim Walz
MinnPost photo by Peter Callaghan
Gov. Tim Walz called Wednesday “one of the most enjoyable days” as governor because the new law resulted from the advocacy of diabetics and their families.
James Holt said his family is outraged by the lawsuit, but said he thinks it was filed because other states were looking at Minnesota as a potential model for similar programs. “They’re scared,” Holt said. 

State Sen. Matt Little
State Sen. Matt Little
Sen. Matt Little, DFL-Lakeville, said the industry has only itself to blame for the law since they are the ones who continued to impose large increases in the price of insulin, which created the unaffordability problem. He also had a message for the industry in their fight against advocates like Alec Smith’s parents and Concordia University student Alexis Stanley, all of whom were instrumental in getting the legislation passed. “I do not like your odds.”

And Attorney General Keith Ellison said he will fight the lawsuit. “Today — the very day that our state finally put Minnesotans’ lives ahead of drug companies’ profits — Big Pharma is telling Minnesotans that their obscene profits come before your lives,” he said. “My office and I will defend it with every resource we have.”

Industry: insulin price increases aren’t our fault

The lawsuit challenges the law under both the takings clause and the commerce clauses of the U.S. Constitution. “If Minnesota believes that, despite the insulin manufacturers’ affordability programs, there is a need for further action to help some Minnesota residents obtain insulin, it could have created a state‐run program in which it purchases insulin from PhRMA’s members and distributes it to residents in need,” the suit states. “But instead of using public funds to address a matter of public concern, Minnesota chose to enact a law that effects per se takings of the manufacturers’ property without compensation, so that the state can achieve its policy objectives at no expense to its taxpayers.

“In addition to being forced to give away their insulin for free according to the state’s terms, manufacturers will also incur significant expenses in developing and administering the Continuing Safety Net Program and Urgent Need Program.”

The suit also blames health plans and pharmacy benefit managers for cost increases of insulin and other drugs and seeks to have the industry’s legal costs covered by the state.

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Both Democrats and Republicans criticized the industry’s decision to file suit. “PhRMA is missing the mark by wasting time and money on this lawsuit. Minnesotans would be far better off if the pharmaceutical industry would focus on fairness in pricing,” said Sen. Michelle Benson, R-Ham Lake, the chair of the Senate’s Health and Human Services Finance and Policy Committee. “You shouldn’t have to be a powerful government or a special interest group to have access to fair prices. All Minnesotans want to be treated fairly.”

Senate Majority Leader Paul Gazelka also said he was disappointed with the suit. “Senate Republicans remain committed to providing emergency insulin for those in crisis no matter what happens with this poorly timed lawsuit,” the East Gull Lake Republican said.

And Little took issue with one of suit’s key arguments:  “The cost of producing insulin is so low that to say this is taking is gonna be really tough for them,” he said.

Did PhRMA mislead lawmakers?

DFL Rep. Mike Howard of Richfield dubbed the industry “soulless” for filing suit and said he thinks PhRMA misled the Senate GOP backers of the compromise that eventually became the law. “Everything about this process has shown that there is ill intent by the pharmaceutical industry,” he said. “They have not been honest; they have not been clear; they have not been straightforward; they have not been willing to come before a committee to show their face. The reason that things are confusing is by design.”

Yet the industry did raise constitutional issues with the program when it testified on the program in March. “The majority of our concerns would be around clarifying any constitutional issues we have,” Sharon Lamberton, deputy vice president for PhRMA, said at the time. “We are concerned with how manufacturers would be compensated for the insulin product, which would be a takings clause of the 5th amendment concern.”

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Before that meeting, Sen. Scott Jensen, R-Chaska, said he was comfortable that the industry would let the proposal become law without challenge, largely because it didn’t impose huge licensing fees — around $38 million per year — to fund it, as the version of the program proposed by House DFLers did. “The pharmaceutical manufacturers don’t like the bill, they may even today be opposing the bill,” Jensen said before the first hearing on the compromise bill. “But they will come along and they are saying yes to this. This is not something where we’ll have to say, ‘Oh my stars it’ll end up in court.’”

State Sen. Scott Jensen
State Sen. Scott Jensen
On Wednesday, Jensen said: “I think we knew there was a risk. But we’d done so much stakeholder work that I thought everyone was comfortable. As they saw movement toward the Senate bill, they made it very clear this was their preference,” Jensen said. “The intensity of their concern was very mild and was popping up less and less often. I felt that at the table we’d reached a high comfort level.”

Jensen now thinks the Legislature should look at changing the program to limit its takings clause implications. One idea – which he said on Saturday would be contingent on a negative outcome of the litigation – would be to use other funds for the 30-day emergency program, which now requires the industry to compensate or provide insulin to pharmacies to replace what was distributed to diabetics. Jensen proposed using the health care access fund, which is paid for via a tax on health care providers and said he is asking Senate staff to prepare language.

But such a proposal is unlikely to win support in the DFL-controlled House and Walz, given their belief that any costs should be borne by the industry that made insulin unaffordable.

Lija Greenseid, an advocate who is the mother of a diabetic daughter, said she favors imposing a fee on the industry for that portion of the program.

Greenseid said she believed Jensen and Sen. Eric Pratt, R-Prior Lake, who first proposed using the patient assistance programs as the basis for the state’s plan, when they told her they were convinced the Senate’s version would not be challenged in court. “I think Sen. Jensen needs to be held accountable, either for some miscommunication from PhRMA or that it was all about politics; they needed to sweep this away in an election year,” she said. “If that was the plan, it backfired because this looks very bad.”

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Little was even more critical of the Senate GOP’s management of the issue. “I believe there’s a possibility here that we have to face that (PhRMA) told GOP members they wouldn’t sue on this because their argument — that it was unconstitutional — was actually stronger against the Senate version” of the proposal. 

The license fee that House DFL members had proposed to fund the program is legal and constitutional, Little said. “They wanted to avoid a license fee because they knew they couldn’t beat that in court,” he said of insulin makers. “I think we have to face the reality that they did this on purpose.”