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State says PhRMA doesn’t have standing to challenge constitutionality of Minnesota’s emergency insulin program

The pharmaceutical industry trade group challenged Minnesota’s new law on behalf of insulin makers, saying the program is an illegal taking of private property.
Minnesota Attorney General Keith Ellison
In a 35-page response to claims in a suit by PhRMA, Minnesota Attorney General Keith Ellison points out that the U.S. Constitution doesn’t prohibit the taking of property, but rather bans such takings without just compensation.
REUTERS/Eric Miller

Minnesota has filed a response to a lawsuit challenging the constitutionality of a landmark emergency insulin law, arguing that the suit brought by the pharmaceutical industry is premature and that the group lacks legal standing.

The original suit, filed in federal court in July by PhRMA, the trade and lobbying organization representing the nation’s largest makers of pharmaceutical drugs, claims that Minnesota’s new emergency insulin program constitutes an unlawful taking of private property without compensation — because it requires large insulin makers to both reimburse drug stores who provide emergency supplies of the hormone to diabetics and to offer insulin to low-income patients through companies’ charitable patient assistance programs.

In a 35-page response to that claim [PDF], Minnesota Attorney General Keith Ellison points out that the U.S. Constitution doesn’t prohibit the taking of property, but rather bans such takings without just compensation. And until those things happen, the state argues, PhRMA can’t ask to have the statute overturned.

“The complaint is devoid … of any factual allegations that any insulin has been ‘taken,’ that the alleged ‘takings’ are imminent, or that just compensation remedies are unavailable for such takings,” the state response states. 

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“Even if the Act were to result in a ‘taking’ of insulin as alleged — which Defendants dispute — the Act would not be void for unconstitutionality because the Takings Clause does not prohibit the taking of private property.”

The state’s response also asserts that PhARMA lacks legal standing because — as opposed to the individual insulin makers — the trade group won’t be affected by the new law; the state also argues that the named defendants, the members of the state pharmacy board and the state MNsure board, are immune from such suits. 

As expressed in a passage of the Minnesota law in question, the Alec Smith Emergency Insulin Act, lawmakers believe the requirements for drug companies under the program are not a taking of property but a response to the rapid rise in the price of insulin caused by the industry itself.  Many legislators, especially DFL members of the House and Senate, opposed any tax dollars being spent to resolve the insulin affordability problem since the price charged to patients far exceeds what it costs to produce insulin.

But the state’s legal opinion, for now, is that a violation of the 5th Amendment would come only after PhRMA first asked for and then was denied compensation. That suggests that should the industry seek compensation from the state and be denied, a future lawsuit could be filed against the statute. 

A response to an affordability crisis

Minnesota’s emergency insulin program was passed into law in April 2020, after a year and a half of trying. 

While diabetics had been complaining for several years about the increasing cost of insulin, the 2017 death of Alec Smith put a face and a vivid story behind it. Smith died shortly after his 26th birthday after falling off of his parents’ health insurance. Employed but uninsured, Smith was rationing his remaining insulin until payday. He died of ketoacidosis.

His parents, Nicole Smith-Holt and James Holt, Jr. began raising awareness of the issue and were a regular presence at the state capitol as well as in Washington, D.C. pushing for a plan to get insulin to those who couldn’t afford it.

The program has two distinct parts: an urgent need program and a continuing need program.

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Under the first, diabetics who are uninsured and cannot afford supplies can go to a pharmacy and — after asserting that they are financially eligible— receive a 30-day supply immediately for no more than $35. Pharmacies are to be reimbursed for their supplies from the insulin maker.

The continuing need program allows eligible diabetics to get up to a year’s supply for no more than $50 for a 90-day refill.

James Holt and his wife, Nicole Smith-Holt, speaking to members of the press following the passage of the Alec Smith Emergency Insulin Act on Tuesday.
MinnPost photo by Peter Callaghan
Alec Smith's parents, Nicole Smith-Holt and James Holt, Jr., began raising awareness of the cost of insulin and were a regular presence at the state capitol as well as in Washington, D.C. pushing for a plan to get insulin to those who couldn’t afford it.
Three drug manufacturers — Eli Lily, Novo Nordisk and Sanofi — supply nearly all of the insulin in Minnesota. Under the act, companies would be fined for not taking part in the program: $200,000 per month and increasing to a maximum of $600,000 per month after a year of continued noncompliance.

‘We know that people are using it’

During the debate in the Legislature over the program, the drug companies testified against the bills, arguing they were illegal under the 5th amendment of the U.S. Constitution, which contains what is called the Takings Clause. Yet supporters from both parties said they had unofficial assurances that the industry would not challenge it. And many Republicans believed the law as passed, leveraging the drug companies existing patient assistance programs, was preferable to DFL plans that would have included tens of millions of dollars in fees on large drugmakers. 

But just hours before it was to take effect on July 1, the suit was filed, with PhRMA challenging the law under both the takings clause and the commerce clause of the U.S. Constitution. “If Minnesota believes … 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.”

Cody Wiberg
MinnPost photo by Peter Callaghan
Cody Wiberg
While the suit didn’t seek to immediately enjoin the program from getting underway, it did ask the court to find it unconstitutional and eventually void it.

Cody Wiberg, the executive director of the state board of pharmacy, said he knows from talking to pharmacies that the program is being used. Manufacturers are making reimbursement for 30-day supplies and are enrolling applicants for the continuing need program. Problems so far have been relatively minor, something he said is expected for a new program for which there were just 10 weeks to prepare.

“We know that people are using it, we don’t know yet how many people are using it,” Wiberg said. 

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His board and MNsure are conducting a survey of pharmacists to get more information on usage and the companies must report to the state annually.

It’s unclear how many people could be helped by the programs. Insurance companies have taken action to reduce out-of-pocket costs for diabetics with coverage, and there have been campaigns to find affordable coverage for uninsured people. The insulin makers’ patient assistance programs have also been enhanced, partly due to public and political pressure.

During hearings on the final version of the bill earlier this year, an industry lobbyist said those programs are important and improving. “We acknowledge that our patient assistance program could work better,” said Sharon Lambertson, a deputy vice president for PhRMA. “We do have incredible programs that are offering patients the assistance they need. This bill does acknowledge these programs and create a more comprehensive education and awareness about these programs.”

The state’s response to the PhRMA suit says that the number of diabetics helped by the law vs. those who would be helped by the patient assistance programs could be small. “The manufacturers’ affordability programs actually undercut the alleged imminence of PhRMA’s predicted injury, because they target the same populations that the Act seeks to protect,” the state argues. “No taking claim can arise until some property has actually been taken from the manufacturers. Given their existing affordability programs, it is not clear when the manufacturers will be required to provide insulin under the Act.” 

“As a safety net, the Act is not sure to be utilized if the needs of Minnesota residents with diabetes are adequately met.”

PhRMA is set to reply to the state’s brief later this month, and a summary judgment hearing is scheduled for October 29.