Minnesota Governor Tim Waltz signed legislation this spring to force drug manufacturers to hand over insulin for free to patients whose income is below 400 percent of the federal poverty level. Blasting pharmaceutical companies for “soul-less” “greed,” Waltz and his legislative allies framed the new Insulin Act as an act of compassion for people who need insulin and cannot afford it. Yet the Act makes no provision for paying the companies whose insulin is seized.
The Act (Minn. Stat. § 151.74) forces pharmaceutical companies that earn more than $2 million from insulin sales in Minnesota to come up with a “patient assistance program” whereby patients who fall below certain income thresholds are entitled to receive free insulin through their pharmacies, for which the drug makers are not paid. Manufacturers are exempt from the requirement, however, if they lower their “wholesale acquisition price” (WAC) of insulin below $8 per milliliter.
Pharmaceutical Research and Manufacturers of America (PhRMA), a trade organization made up of dozens of medicine makers, filed a federal lawsuit in June arguing that the Act violates the Fifth Amendment’s guarantee of just compensation. They also argue that it violates the interstate commerce clause because the exemption for companies that reduce their WAC represents an effort to compel drug companies across the country to reduce their prices—which violates the rule that states may not regulate commerce beyond their borders. “Indeed,” they note in their complaint, “the WAC is a national list price that manufacturers charge their wholesale customers for their products and thus cannot be changed in one state alone.”
The state moved to dismiss on various procedural grounds, including that the case is unripe because no actual seizures of insulin have yet occurred. “The Act is not sure to be utilized if the needs of Minnesota residents with diabetes are adequately met,” it argues. But this is unpersuasive, given that the alternative ways for residents’ needs to be “met” are those mandated by the same statute being challenged. The state’s ripeness argument essentially contends that a case against one unconstitutional part of the law cannot proceed, since another unconstitutional part of the law might apply instead.
PhRMA moved for summary judgment in a brief filed October 1, arguing that the uncompensated taking of insulin is essentially indistinguishable from the uncompensated taking of raisins that the Supreme Court addressed in Horne v. USDA in 2015. That case emphasized that the federal government’s seizure of raisins (pursuant to New Deal-era agriculture laws) should be viewed not as a mere “regulation” that reduced the value of farmers’ crops; rather, it was an outright seizure of personal property. The same is true of the insulin: the government is simply confiscating the insulin for transfer to third parties.
The Goldwater Institute supported PhRMA’s takings argument in a friend-of-the-court brief that argues also that the Insulin Act is positively immoral. While courts are obviously not responsible for settling moral arguments, the state’s portrayal of itself as acting out of compassion warranted a discussion of why the injury the Act imposes on drug-makers is actually a form of “pseudo-compassion”—an effort to help the poor not out of one’s own pocket, but out of the pockets of others, many of them just as needy as the beneficiary of the Insulin Act.
The Act accomplishes this by inflicting an injustice upon companies that are regularly demonized in the media. “It is contrary to both moral principle and constitutional law,” the Institute argues, “to rationalize the confiscation of anybody’s property—whether a poor farmer or a wealthy corporation—by vilifying the victim and using that as an excuse to treat his or her rights and interests as being of lesser weight…. Forcing these companies to provide insulin at no cost means they must make up their costs elsewhere—and they must inevitably do so by raising prices on these other products.”
The case is PhRMA v. Williams, et al., No. 0:20-cv-01497-DSD-DTS (D. Minn.)