PEOPLE OVER PROFITS: HOW MINNESOTA TOOK ON BIG PHARMA TO TACKLE THE INSULIN AFFORDABILITY CRISIS

By: Hannah Oliason, Volume 105 Staff Member

 Every cell, tissue, and organ in your body depends on water to survive.[1] But imagine a scenario in which your water bill cost upwards of $300 per month. In addition, your water quality must be tested daily which costs you $200 per month. Lastly, to maintain the water pipes in your home, you pay an additional $900 per month. In total, you pay nearly $17,000 annually for your water supply. This nightmare scenario is the life of a Type 1 diabetic who has no choice but to fork over thousands of dollars each year for insulin, test strips, and pump supplies.[2] To Type 1 diabetics, insulin is like water; they depend on it daily and will eventually die without it. But unlike water, insulin is dangerously unaffordable.

This was not always the case. When Canadian researchers first discovered insulin in 1921, they generously sold their patent to the University of Toronto for just one dollar.[3] Recognizing its lifesaving potential, the University allowed manufacturers to produce insulin without paying any royalties.[4] Sadly, their altruistic legacy failed to live on in today’s insulin market which is dominated by three pharmaceutical companies: Eli Lilly, Sanofi, and Novo Nordisk.[5] Experts estimate that these manufacturers can profitably produce and sell insulin to diabetic patients for just $11 per month; but currently, one vial of insulin retails for about $300 in the United States.[6] These high profit margins make the pharmaceutical industry “one of the most profitable sectors in modern times,” with “annual profits that are double the average of other Fortune 500 companies.”[7]

Pharmaceutical companies argue that increasing the price of insulin is necessary to foster drug innovation, but patient advocates say such innovation has been “small and incremental” with insulin.[8] Indeed, the cost of insulin, which has gone up by 1,200 percent since the 1990s,[9] is clearly disproportional to any added benefit newer insulin formulations provide to diabetic patients.[10] In fact, while Big Pharma executives take home tens of millions annually,[11] Type 1 diabetics are dying because they cannot afford their insulin.[12] This national crisis has pinned consumers against Big Pharma and pressured state and federal legislators to intervene.

I. MINNESOTA’s RESPONSE TO THE INSULIN AFFORDABILITY CRISIS 

In April of 2020, the Minnesota Legislature passed the Alec Smith Insulin Affordability Act, named after a young Minnesotan with Type 1 diabetes who tragically died because his insulin was too expensive.[13] The Act’s two primary components address emergent and long-term needs of insulin-dependent Minnesotans.[14] The emergency component allows “eligible individuals in urgent need of insulin [to] go to their pharmacy once in a 12-month period and receive a one-time, 30-day supply of insulin for a $35 co-pay.”[15] The long-term component requires “insulin manufacturers to offer a 90-day supply for no more than $50,” for eligible Minnesotans who earn less than 400 percent of federal poverty guidelines.[16] If insulin manufacturers fail to comply with the Act, they face penalties of $200,000 per month for the first year of non-compliance, and $600,000 per month for every year thereafter.[17]

The Act was the product of significant bipartisan cooperation,[18] with one Republican legislator calling it “a wonderful example of how Minnesotans can move politicians beyond partisan gridlock.”[19] It was set to take effect just three months after its passage, but celebration at the Minnesota State Capitol was cut short when a lawsuit by the Pharmaceutical Research and Manufacturers of America (PhRMA)[20] left lawmakers on both sides of the aisle dumbfounded.[21]

A. Big Pharma Pushes Back

 On June 30, 2020, just hours before the Alec Smith Insulin Affordability Act was set to take effect, PhRMA sued members of the Minnesota Board of Pharmacy and the Board of MNsure in federal court for declaratory and injunctive relief.[22] According to PhRMA, the Act violated the Takings Clause of the Fifth and Fourteenth Amendments by taking insulin manufacturers’ private property without paying just compensation.[23] Additionally, PhRMA argued that the Act violated the Commerce Clause by substantially burdening interstate commerce.[24]

Defendants countered that PhRMA’s claims were not ripe for adjudication.[25] The crux of defendants’ argument was that a “taking” had not technically occurred since “it is impossible to know in advance if or when the manufacturers will provide insulin under the Act, the amount or type of insulin that they will provide, or the amount of the manufacturer’s loss, if any.”[26] Defendants also rejected PhRMA’s Commerce Clause argument as “wholly dependent” on its failed Takings Clause argument.[27]

Most compelling were defendants’ public policy arguments. For instance, Eli Lilly, Sanofi, and Novo Nordisk often increase their prices “in lockstep,” thereby reducing competition and incentives to lower cost.[28] They also “engage in ‘patent evergreening,’ the process of garnering repetitive patents on the same drugs for incremental changes to prolong the patent life and extend the monopoly on insulin products.”[29] These anti-competitive practices cast doubt on PhRMA’s claim that Eli Lilly, Sanofi, and Novo Nordisk are raising prices to help “foster drug innovation.”

B. A Victory for Minnesota and Type 1 Diabetics Everywhere

 On December 8, 2020, Judge David S. Doty of the U.S. District Court for the District of Minnesota heard arguments on defendants’ motion to dismiss and PhRMA’s motion for summary judgment.[30] In a decision that will undoubtedly save lives, Judge Doty agreed with defendants: since just compensation remedies are already available in Minnesota, PhRMA lacked standing to bring a takings claim and, furthermore, PhRMA’s failed Takings Clause argument was fatal to its Commerce Clause argument.[31] Thus, on March 15, 2021, Judge Doty dismissed the lawsuit and upheld the Alec Smith Insulin Affordability Act,[32] a major victory for Minnesotans and Type 1 diabetics everywhere.

Despite this victory, the fight is not over as an appeal is currently pending in the 8th Circuit.[33] Nevertheless, legislators in at least 36 states introduced insulin affordability bills in the last two years,[34] and type 1 diabetics will continue pushing for accessible and affordable insulin. Thanks to the tireless work of diabetes advocates,[35] Minnesota legislators,[36] Governor Walz and Lt. Governor Flanagan,[37] and the reasoned analysis of Judge Doty,[38] Alec’s law can embolden other states to take on Big Pharma and tackle the insulin affordability crisis. After all, in Alec Smith’s mother’s own words, “[p]rofits should never come before the lives of people.”[39]

 

[1] Nutrition and Healthy Eating, Mayo Clinic, https://www.mayoclinic.org/healthy-lifestyle/nutrition-and-healthy-eating/in-depth/water/art-20044256#:~:text=About%2015.5%20cups%20(3.7%20liters,fluids%20a%20day%20for%20women [https://perma.cc/USN2-RMZL] (last visited Mar. 21, 2021).

[2] Type 1 diabetes “is a chronic condition in which the pancreas produces little or no insulin,” the hormone that allows glucose to enter the body’s cells and produce energy. Type 1 Diabetes, Mayo Clinic, https://www.mayoclinic.org/diseases-conditions/type-1-diabetes/symptoms-causes/syc-20353011 [https://perma.cc/FHC4-ZUU8] (last visited Mar. 2, 2021). Type 1 is a rarer form of diabetes in which the pancreas stops producing insulin altogether, possibly due to genetics, viruses, or some combination thereof. Id. There is no way to prevent it and no known cure. Id. The values of $300, $200, and $900 per month were calculated from the medical bills of a Type 1 diabetic personally known to the author.

[3] Defendants’ Memorandum Supporting Dismissal and Opposing Summary Judgment at 3, Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 0:20-cv-01497-DSD-DTS (D. Minn. Nov. 5, 2020), Docket No. 66 [hereinafter Defendants’ Memorandum I].

[4] Id.

[5] Complaint at 6, Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 0:20-cv-01497-DSD-DTS (D. Minn. June 30, 2020), Docket No. 1.

[6] Defendants’ Memorandum I, supra note 3, at 3.

[7] Fran Quigley, Tell Me How It Ends: The Path to Nationalizing the U.S. Pharmaceutical Industry, 53 U. Mich. J.L. Reform 755, 758–59 (2020).

[8] Valerie Bauman, Minnesota Sued Over New Law Providing Free Insulin to the Poor, Bloomberg L. (July 1, 2020, 3:56 PM), https://news.bloomberglaw.com/pharma-and-life-sciences/minnesota-sued-over-new-law-providing-free-insulin-to-the-poor [https://perma.cc/3YRJ-VG4N].

[9] Defendants’ Memorandum I, supra note 3, at 3.

[10] Bauman, supra note 8.

[11] See Patrick Thomas, Ever Heard of Iqvia? Its CEO Made $38 Million, Wall St. J. (June 12, 2018, 5:13 PM), https://www.wsj.com/articles/ever-heard-of-iqvia-its-ceo-made-38-million-1528801200 [https://perma.cc/D2KJ-ZTQD] (noting that the median pay for 25 pharmaceutical, biotechnology and life-science CEOs was $16.08 million in 2018). Eli Lilly’s CEO made $15.84 million in 2018. Id.

[12] See Quigley, supra note 7 (telling stories of several individuals who died because they could not afford their insulin).

[13] Jessie Van Berkel & Stephen Montemayor, Minnesota Legislature Passes Emergency Insulin Bill After ‘Long and Arduous Road’, Star Trib. (Apr. 14, 2020, 6:37 PM), https://www.startribune.com/minnesota-legislature-passes-emergency-insulin-bill-after-long-and-arduous-road/569638622/ [https://perma.cc/5LDK-FNNT].

[14] Id.

[15] Id.

[16] Deena Winter, Emergency Insulin Bill Going to Governor After House, Senate Passage, Minn. House of Reps. (Apr. 14, 2020, 2:42 PM), https://www.house.leg.state.mn.us/sessiondaily/Story/15226 [https://perma.cc/VN2X-B3GL].

[17] Complaint, supra note 5, at 23.

[18] See Minnesota House Passes Alec Smith Insulin Affordability Act, Minn. House of Representatives (Apr. 14, 2020), https://www.house.leg.state.mn.us/members/profile/news/15518/29389 [https://perma.cc/QB4W-KANE] (noting the Act passed the House on a 111-22 vote and the Senate on a 67-0 vote).

[19] Governor Walz Signs Alec Smith Insulin Affordability Act, Off. of Governor Tim Walz & Lt. Governor Peggy Flanagan (Apr. 15, 2020), https://mn.gov/governor/news/?id=1055-428439 [https://perma.cc/2FKW-SLPD] (quoting former Sen. Scott Jensen (R-Chaska)).

[20] PhRMA is a pharmaceutical industry trade group that represents the interests of Eli Lilly, Sanofi, and Novo Nordisk. Complaint, supra note 5, at 5–6.

[21] Brian Bakst, Walz Lauds New Insulin Affordability Law, Blasts Big Pharma for Suing, MPR News (July 1, 2020, 2:54 PM), https://www.mprnews.org/story/2020/07/01/pharmaceutical-industry-sues-to-block-minnesota-insulin-law [https://perma.cc/48L4-TN8Q] (noting that Governor Walz and other advocates “were told repeatedly that the industry would not sue over the compromise, bipartisan legislation.”); see also Jessie Van Berkel, Pharmaceutical Industry Group Sues to Stop Minnesota’s New Insulin-Aid Program, Star Trib. (July 1, 2020, 11:58 PM), https://www.startribune.com/phrma-sues-to-stop-state-s-new-insulin-affordability-program/571582452/ [https://perma.cc/4D32-E4ND] (quoting Senate Majority Leader Paul Gazelka (R-East Gull Lake), who said “Senate Republicans remain committed to providing emergency insulin for those in crisis no matter what happens with this poorly timed lawsuit.”).

[22] Complaint, supra note 5, at 1.

[23] Id. at 2 (“A state cannot simply commandeer private property to achieve its public policy goals. The Takings Clause of the Fifth Amendment of the U.S. Constitution prohibits states from attempting to solve societal problems in this draconian manner. Because the Act takes private property for public use without paying just compensation, it is unconstitutional and should be enjoined.”).

[24] The Act provides an exemption for manufacturers that charge a Wholesale Acquisition Cost (WAC) of no more than $8 per milliliter of insulin. Id. at 27–28. Since WAC is a national list price and cannot be changed in one state alone, PhRMA argues that the exemption is really a regulation on “the price of transactions that occur entirely outside Minnesota between out-of-state insulin manufacturers and out-of-state wholesalers.” Id.

[25] Defendants’ Memorandum Supporting Motion to Dismiss at 3, Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 0:20-cv-01497-DSD-DTS (D. Minn. Jun. 30, 2020), Docket No. 16 [hereinafter Defendants’ Memorandum II] (“[PhRMA’s] claims for equitable relief are foreclosed because just compensation remedies are available if the Act’s requirements do effect a taking.”).

[26] Defendants’ Memorandum I, supra note 3, at 12.

[27] Defendants Memorandum II, supra note 25, at 33.

[28] Defendants’ Memorandum I, supra note 3, at 4.

[29] Id.

[30] Minute Entry for Proceedings Held Before Judge David S. Doty, Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 0:20-cv-01497-DSD-DTS (D. Minn. June 30, 2020), Docket No. 79 [hereinafter Minute Entry]; see also Andy Monserud, Judge Hears Big Pharma Case Against Minnesota Insulin Program, Courthouse News (Dec. 8, 2020), https://www.courthousenews.com/judge-hears-big-pharma-case-against-minnesota-insulin-program/ [https://perma.cc/6Z9L-WYRR] (summarizing the hearing).

[31] Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 20-1497, 2021 WL 963760, at *3–4 (D. Minn. Mar. 15, 2021).

[32] Id. at *1.

[33] Notice of Appeal to 8th Circuit as to Order, Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 0:20-cv-01497-DSD-DTS (D. Minn. Mar. 30, 2021), Docket No. 85.

[34] Amy Martyn, States are Trying to Cap the Price of Insulin. Pharmaceutical Companies are Pushing Back, NBC News (Aug. 15, 2020, 6:00 AM), https://www.nbcnews.com/news/us-news/states-are-trying-cap-price-insulin-pharmaceutical-companies-are-pushing-n1236766 [https://perma.cc/P3WS-NLGX].

[35] Amici curiae for the defense included T1 International, Minnesota #insulin4all, Nicole Smith-Holt, Nathan Loewy, Cindy Boyd, Abigail Hansmeyer, Mid-Minnesota Legal Aid, and the National Health Law Program. See Brief for T1 International et al. as Amici Curiae Supporting Defendants, Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 0:20-cv-01497-DSD-DTS (D. Minn. June 30, 2020), Docket No. 78 (listing signatories).

[36] The primary sponsors of the bill were Rep. Michael Howard (DFL-Richfield) and former Sen. Scott Jensen (R-Chaska). Torey Van Oot, ‘We’ve Got a Deal’: Minnesota Lawmakers Work Out Affordable Insulin Program, Star Trib. (Apr. 7, 2020, 7:18 PM), https://www.startribune.com/we-ve-got-a-deal-minnesota-lawmakers-work-out-affordable-insulin-program/569452392/ [https://perma.cc/V3DV-2ALE]. For a full list of sponsors, see HF 3100, Off. of the Revisor of Statutes, https://www.revisor.mn.gov/bills/bill.php?b=House&f=HF3100&ssn=0&y=2019 [https://perma.cc/U24M-SYZR] (last visited Mar. 21, 2021); SF 3164, Off. of the Revisor of Statutes, https://www.revisor.mn.gov/bills/bill.php?f=SF3164&y=2020&ssn=0&b=senate [https://perma.cc/2PRG-JD2T] (last visited Mar. 21, 2021).

[37] See Governor Walz Signs Alec Smith Insulin Affordability Act, supra note 19 (“Governor Walz and Lt. Governor Flanagan have been actively involved in the legislative process to pass Alec’s bill.”).

[38] See generally Pharm. Rsch. and Mfrs. of Am. v. Williams, No. 20-1497, 2021 WL 963760 (D. Minn. Mar. 15, 2021).

[39] Tiffany Stanley, Life, Death and Insulin, Wash. Post. Mag. (Jan. 7, 2019), https://www.washingtonpost.com/news/magazine/wp/2019/01/07/feature/insulin-is-a-lifesaving-drug-but-it-has-become-intolerably-expensive-and-the-consequences-can-be-tragic/ [https://perma.cc/NGJ7-HCVW].