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State wins legal challenge to Minnesota’s insulin affordability program

In a ruling issued this week, U.S. District Court Judge David Doty dismissed a suit brought by PhRMA that sought to have the legislation declared unconstitutional. 

Insurance companies have taken action to reduce out-of-pocket costs for diabetics with coverage. The insulin makers’ patient assistance programs have also been enhanced, partly due to public and political pressure.
Insurance companies have taken action to reduce out-of-pocket costs for diabetics with coverage. The insulin makers’ patient assistance programs have also been enhanced, partly due to public and political pressure.
REUTERS/Carlo Allegri

Minnesota has successfully defended a legal challenge to its insulin affordability legislation. 

For now, at least.

In a ruling issued this week, U.S. District Court Judge David Doty dismissed a lawsuit brought by the Pharmaceutical Research and Manufacturers of America, the trade group known as PhRMA, which sought to have Minnesota’s legislation, passed last spring, disallowed as an unconstitutional taking of private property.

Doty ruled that there had been no taking when the suit was filed, since the program had not yet begun. He also ruled that the companies would first have to show that they had sought compensation for the alleged taking and been unsuccessful. And that would have to be decided in state court, not in federal court, under state compensation law. 

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“Despite the availability of compensation, PhRMA seeks injunctive and declaratory relief,” Doty wrote. [PDF] “PhRMA is foreclosed from seeking equitable relief because it may bring an action seeking just compensation.”

The dismissal means that this suit cannot be revived, though it doesn’t preclude a different suit from being brought later.

Attorney General Keith Ellison
REUTERS/Eric Miller
Attorney General Keith Ellison
“The judge did not refute our argument that the law is unconstitutional,” said Nick McGee, senior director of public affairs for PhRMA. “Instead, he decided that the constitutional claim should be brought in state court, not federal court. We disagree and continue to believe that the claim may be brought in federal court.  We are reviewing the decision and considering our next steps.”

John Stiles, deputy chief of staff for Attorney General Keith Ellison, acknowledged that while the state made the argument that the case was premature — not ripe, in legal terms — that wasn’t the basis for Doty’s ruling. “The Court held that PhRMA lacks standing to bring claims for equitable relief because the manufacturers can seek compensation in state court for any takings,” Stiles said in a statement. “The Attorney General will continue to vigorously defend any future challenges to the act.”

For now, however, the program remains in effect, as it has been since July 1.

Minnesota’s insulin program, passed as The Alec Smith Insulin Affordability Act, is named for a man who died at age 26 while trying to ration his insulin supply, which happened after he became too old to be covered under his parent’s health insurance.

Advocated by Smith’s parents, Nicole Smith-Holt and James Holt, and other diabetics and their family members, the law set up a system under which insulin makers would provide free insulin to those who lacked insurance or couldn’t afford their own supply. The law also allowed diabetics to make an urgent need request through a pharmacy or a request for ongoing supplies, or both. Companies that failed to take part would face fines.

A study released last week by the state Board of Pharmacy found that the three major suppliers of insulin in Minnesota — Novo Nordisk, Eli Lilly and Sanofi — are all taking part in the program and have provided insulin “to as many as 465 residents,” the report stated. “The total value of the insulin received by residents was $2,148,564.74.”

But the day before the law was to take effect in 2020, PhRMA filed a federal court challenge. “A state cannot simply commandeer private property to achieve its public policy goals,” stated the suit, which named 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.”

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The suit angered Gov. Tim Walz and the lawmakers, who crafted the law because they thought they had an unstated agreement that the drug companies wouldn’t sue after having convinced the state to not impose massive licensing fees to pay for the program. Instead, the state plan dovetailed with existing patient assistance plans operated by the companies via charitable foundations.

PhRMA lobbyists had not committed publicly to accepting the bill and testified that the manufacturers thought it was unconstitutional.

Nicole Smith-Holt, James Holt, Jr
MinnPost photo by Peter Callaghan
Advocated by Alec Smith's parents, Nicole Smith-Holt and James Holt, and other diabetics and their family members, the law set up a system under which insulin makers would provide free insulin to those who lacked insurance or couldn’t afford their own supply.
As part of the suit, Attorney General Keith Ellison’s office told Doty that the takings claim was invalid because no property had been taken when the suit was filed. “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 argued.

The state also argued that if the drug makers and insurance companies were doing what they had pledged to do — make insulin more affordable — use of the new law would be minimal.

“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 argued. “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.” 

Insurance companies have taken action to reduce out-of-pocket costs for diabetics with coverage. 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 in 2019, 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.”

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Cody Wiberg, executive director of the Minnesota Board of Pharmacy, welcomed the court ruling. “Today’s decision means that Minnesotans can continue receiving insulin through the program, rather than having to ration insulin or going without it entirely,” Wiberg said.

So did Rep. Mike Howard, DFL-Richfield, one the prime sponsors of the law, which is named for the son of two of his constituents, Nicole Smith-Holt and James Holt. “Ultimately, this righteous victory illustrates the power of a mother’s love and band of mighty Minnesotans who never stopped fighting for justice in the name of Alec Smith,” he said.