Pharm. Research & Mfrs. of Am. v. Williams
| Decision Date | 15 March 2021 |
| Docket Number | CIVIL NO. 20-1497(DSD/DTS) |
| Citation | 525 F.Supp.3d 946 |
| Parties | PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA, Plaintiffs, v. Stuart WILLIAMS, et al., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Joseph R. Guerra, Esq. and Sidley Austin LLP, 1501 K. Street, N.W., Washington, DC 20005, counsel for plaintiff.
Sarah L. Krans, Esq. and Minnesota Attorney General's Office, 445 Minnesota Street, Suite 1800, St. Paul, MN, counsel for defendants.
This matter is before the court upon defendants’ motion to dismiss, plaintiff Pharmaceutical Research and Manufacturers of America's (PhRMA) conditional motion for leave to file a supplemental complaint, and PhRMA's motion for summary judgment. Based on a review of the file, record, and proceedings herein, and for the following reasons, defendants’ motion to dismiss is granted, PhRMA's motion for leave to file a supplemental complaint is denied, and PhRMA's motion for summary judgment is denied.
This dispute arises out of the recently enacted Alec Smith Insulin Affordability Act (Act). Compl. ¶ 1. PhRMA is a nonprofit corporation that represents pharmaceutical companies and serves as the pharmaceutical industry's "principal public policy advocate." Id. ¶¶ 10, 12. Its member companies include Eli Lilly and Company (Lilly), Novo Nordisk Inc., and Sanofi, which collectively manufacture most of the insulin sold in Minnesota and the United States. Id. ¶ 13. Defendants are members of the Board of Pharmacy, named only in their official capacities, who enforce the Act.1 Id. ¶¶ 15.
On April 15, 2020, the governor of Minnesota signed the Act into law to establish insulin safety net programs. Id. ¶ 64. The Act requires manufacturers to provide insulin for free to Minnesota residents who meet certain criteria. Id.; Minn. Stat. § 151.74, subdiv. 1(a). The Act has two programs: the Continuing Safety Net Program and the Urgent Need Program. Compl. ¶ 65.
The Continuing Safety Net Program mandates that manufacturers provide free insulin products to any individual who meets the eligibility criteria.2 Id. Under this program, manufacturers must review applications, determine whether the applicant meets the eligibility criteria, and notify applicants of their decision within ten business days. Id. ¶ 66; Minn. Stat. § 151.74, subdiv. 5(a). If denied, the applicant may appeal to a review panel created by the Board of Pharmacy, which may overrule manufacturers with binding decisions. Compl. ¶ 67; Minn. Stat. § 151.74, subdiv. 8.
If the manufacturer determines an applicant is eligible, it next determines whether to provide the individual with a statement of eligibility. An individual with a statement of eligibility may present it to a pharmacy to obtain free insulin for up to one year. Compl. ¶¶ 68-69; Minn. Stat. § 151.74, subdiv. 5(b). If an eligible applicant does not have private insurance, the manufacturer must provide the individual with a statement of eligibility. Compl. ¶ 69. If an eligible applicant does have private insurance, the manufacturer may determine whether the individual's needs are better met through the manufacturer's co-payment assistance program. Id. ¶ 68. If it determines the manufacturer's assistance program better addresses the individual's needs, the manufacturer "shall inform the individual and provide the individual with the necessary coupons to submit to a pharmacy." Id.; Minn. Stat. § 151.74, subdiv. 5(c). Otherwise, it must provide the individual with a statement of eligibility. Compl. ¶ 68; Minn. Stat. § 151.74, subdiv. 5(b).
When presented an eligibility statement, pharmacies order insulin from the manufacturer, and the manufacturer must "send to the pharmacy a 90-day supply of insulin ... at no charge to the individual or pharmacy." Compl. ¶ 70; Minn. Stat. § 151.74, subdiv. 6(c). The pharmacy is allowed to charge the applicant a co-payment "not to exceed $50 for each 90-day supply" to cover "the pharmacy's costs for processing and dispensing" the insulin. Compl. ¶ 70; Minn. Stat. § 151.74, subdiv. 6(e). The manufacturer does not receive any amount of the co-payment. This process may be repeated throughout a full year of eligibility, and the manufacturer must continue to send "an additional 90-day supply of the product ... at no charge to the individual or pharmacy." Compl. ¶ 71; Minn. Stat. § 151.74, subdiv. 6(f).
The second program is the Urgent Need Program. Compl. ¶ 72. The program requires manufacturers to provide a thirty-day supply of free insulin to individuals who meet eligibility criteria.3 Id.; Minn. Stat. § 151.74, subdiv. 2(a)-(b). When an applicant submits an application with a valid prescription, the pharmacy must dispense a thirty-day supply of insulin to the individual. Compl. ¶ 73; Minn. Stat. § 151.74, subdiv. 3(c).
After dispensing insulin, the pharmacy submits a claim for payment to the manufacturer or the manufacturer's vendor. Compl. ¶ 73; Minn. Stat. § 151.74, subdiv. 3(d). The manufacturer must either "reimburse the pharmacy in an amount that covers the pharmacy's acquisition cost" or else "send to the pharmacy a replacement supply of the same insulin as dispensed in the amount dispensed." Compl. ¶ 73; Minn. Stat. § 151.74, subdiv. 3(d). Pharmacies may collect an insulin co-payment form from the individual in an amount not to exceed thirty-five dollars for the thirty-day supply. Compl. ¶ 74; Minn. Stat. § 151.74, subdiv. 3(e). The manufacturer does not receive any of the co-payment amount. Compl. ¶ 74.
PhRMA claims it will incur significant expenses by giving away free insulin and administering both programs. Id. ¶ 75. Moreover, if a manufacturer does not comply with the programs and other statutory requirements, the Board of MNSure may assess penalties. Id. ¶ 76; Minn. Stat. § 151.74, subdiv. 10(a)-(b).
The Act governs all insulin manufacturers unless one of two exceptions applies. Compl. ¶ 77. First, manufacturers with an "annual gross revenue of $2,000,000 or less from insulin sales in Minnesota" are exempt under the Act. Id.; Minn. Stat. § 151.74, subdiv. 1(c). Second, if the wholesale acquisition cost (WAC) of a manufacturer's insulin product "is $8 or less per milliliter or applicable National Council for Prescription Drug Plan billing unit, for the entire assessment time period, adjusted annually based on the Consumer Price Index," then the product is exempt. Compl. ¶ 77; Minn. Stat. § 151.74, subdiv. 1(d). Neither exception applies to PhRMA's members. Compl. ¶ 78.
On June 30, 2020, PhRMA filed this suit alleging that the Act's programs violate the Takings Clause of the Fifth Amendment. Id. ¶¶ 80-85. PhRMA also asserts that one of the Act's exemptions, if interpreted a certain way, violates the Commerce Clause. PhRMA seeks declaratory and injunctive relief. Defendants now move to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. PhRMA moves for summary judgment and conditional leave to file a supplemental complaint.
A court must dismiss an action over which it lacks subject-matter jurisdiction. Fed. R. Civ. P. 12(h)(3). In a facial challenge under Rule 12(b)(1), the court accepts the factual allegations in the pleadings as true and views the facts in the light most favorable to the nonmoving party. See Hastings v. Wilson, 516 F.3d 1055, 1058 (8th Cir. 2008) ; see also Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990) () (citation omitted).
PhRMA alleges that the Act compels its members to give away insulin without compensation in violation of the Takings Clause. PhRMA seeks an injunction barring the Act's enforcement and a declaration that the Act is unconstitutional, but it does not seek compensation. Consequently, defendants argue that PhRMA's takings claim should be dismissed because the court lacks subject matter jurisdiction. The underlying basis for defendants’ argument is that the United States Supreme Court foreclosed prospective injunctive and declaratory relief for a takings claim under Knick v. Township of Scott, ––– U.S. ––––, 139 S. Ct. 2162, 204 L.Ed.2d 558 (2019).4 PhRMA responds that Knick does not foreclose perspective equitable relief because state law remedies for providing just compensation are inadequate.
The court finds that PhRMA lacks standing to bring a takings claim. "The party invoking federal jurisdiction bears the burden of establishing [standing]." Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). A plaintiff must allege (1) an injury, (2) "fairly traceable to the defendant's alleged conduct," that is (3) "likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). The third prong of standing, redressability, requires plaintiff to show that "it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Lujan, 504 U.S. at 561, 112 S.Ct. 2130.
The Fifth Amendment's Takings Clause prohibits the government from taking "private property ... for public use, without just compensation." U.S. Const. amend. V. "The Fifth Amendment does not proscribe the taking of property; it proscribes taking without just compensation." Williamson Cty. Reg'l Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 194, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), overruled on other grounds by Knick, ––– U.S. ––––, 139 S. Ct. 2162. A takings claim arises when the government takes private property for public use without compensation. Knick, 139 S. Ct. at 2170. The Supreme Court in Knick explained that the appropriate remedy for a government taking is compensation. 139 S. Ct. at 2175-77. Equitable relief is unavailable because...
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