Association for Accessible Medicines v. Ellison
Filing
42
ORDER. IT IS HEREBY ORDERED THAT: 1. Plaintiff's motion for a preliminary injunction 14 is GRANTED. 2. Defendant, and all of his officers, agents, servants, employees, and attorneys, and all persons in active concert or participation wit h him, are ENJOINED from enforcing, or taking any other action under, Laws of Minnesota 2023, ch. 57, art. 2 §§ 2223, 2526, to be codified at Minn. Stat. §§ 62J.84162J.842, 62J.84462J.845, against any of plaintiff's members, or any of the members' agents, privies, or licensees, based on any member's sale of generic or off-patent drugs outside of Minnesota. 3. Defendant's motion to dismiss 23 is GRANTED IN PART and DENIED IN PART as follows: a. The mo tion is GRANTED as to plaintiff's third and fifth causes of action, and those claims are DISMISSED WITHOUT PREJUDICE. b. The motion is DENIED in all other respects. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion) Signed by Chief Judge Patrick J. Schiltz on 12/4/2023. (CLG)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
ASSOCIATION FOR ACCESSIBLE
MEDICINES,
Case No. 23‐CV‐2024 (PJS/JFD)
Plaintiff,
v.
ORDER
KEITH ELLISON, in his official capacity
as Attorney General of the State of
Minnesota,
Defendant.
William M. Jay and Benjamin T. Hayes, GOODWIN PROCTER LLP; David L.
Hashmall and Brandon J. Wheeler, FELHABER LARSON, for plaintiff.
Nicholas J. Pladson, Noah Lewellen, and Jason T. Pleggenkuhle, MINNESOTA
ATTORNEY GENERAL’S OFFICE, for defendant.
Plaintiff Association for Accessible Medicines (“AAM”) is a trade association that
represents manufacturers and distributors of generic and biosimilar medicines. AAM
brings this action to challenge a new Minnesota law that regulates the price of generic
and off‐patent prescription drugs (“the Act”). See Laws of Minnesota 2023, ch. 57, art. 2
§§ 22–27, to be codified at Minn. Stat. §§ 62J.841–62J.846.
This matter is before the Court on AAM’s motion for a preliminary injunction
and the State’s motion to dismiss AAM’s complaint for failure to state a claim. For the
reasons that follow, AAM’s motion is granted and the State’s motion is granted in part
and denied in part.
I. BACKGROUND
A. The Act
The Act, which took effect on July 1, 2023, see Minn. Stat. § 645.02, regulates the
price of generic and off‐patent prescription drugs.1 Specifically, the Act provides as
follows:
No manufacturer shall impose, or cause to be imposed, an
excessive price increase, whether directly or through a
wholesale distributor, pharmacy, or similar intermediary, on
the sale of any generic or off‐patent drug sold, dispensed, or
delivered to any consumer in the state.
Minn. Stat. Ann. § 62J.842, subd. 1. An “excessive price increase” is defined
mathematically as a certain dollar and percentage increase over various benchmarks.
See id. subd. 2.
Notably, the provision applies only to manufacturers, not to anyone else in the
supply chain. See id. subd. 1 (stating that “[n]o manufacturer shall impose” an excessive
price increase (emphasis added)). Another provision states that “[i]t is not a violation of
1
The record does not seem to reflect why the Minnesota Legislature targeted only
generic and off‐patent drugs, and not all drugs. One possible explanation is that the
Federal Circuit has previously held that a similar price‐control law directed at patented
drugs was preempted by federal patent law. See Biotechnology Indus. Org. v. Dist. of
Columbia, 496 F.3d 1362, 1374 (Fed. Cir. 2007).
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this section for a wholesale distributor or pharmacy to increase the price of a generic or
off‐patent drug if the price increase is directly attributable to additional costs for the
drug imposed on the wholesale distributor or pharmacy by the manufacturer of the
drug.” Id. subd. 3. Although this latter provision seems to imply that it would be “a
violation of this section” for a distributor or pharmacy to increase the price of a generic
drug when that increase was not “directly attributable” to an increase imposed by a
manufacturer, the parties seem to agree that the Act does not regulate prices charged by
anyone but manufacturers. In short, the focus of the Act is not on what Minnesota
consumers pay, but on what manufacturers charge.
The state health commissioner is responsible for notifying the attorney general
and the relevant manufacturer of any price increase that the commissioner believes is
excessive under the Act. Minn. Stat. Ann. § 62J.844, subd. 1. Various other
commissioners, agency officials, and state pharmacy‐benefit contractors may also
provide notice. See id. On receipt of such notice, the manufacturer must submit certain
information relevant to costs and pricing to the attorney general, who may investigate
whether a violation has occurred. See id. subd. 2. The Act provides for a civil penalty of
up to $10,000 per day for each violation of § 62J.842. See id. subd. 3(a)(6). Finally, the
Act imposes a $500,000 penalty on any manufacturer who withdraws a generic or off‐
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patent drug from sale or distribution within Minnesota for the purpose of avoiding the
prohibition on excessive price increases in § 62J.842. See Minn. Stat. Ann. § 62J.845.
B. The Prescription Drug Market
Pharmaceutical manufacturers are the start of the drug‐supply chain. Compl.
¶ 23. Manufacturers typically sell to large national wholesale distributors, who, in turn,
resell to retail pharmacies, hospitals, and other healthcare facilities. Compl. ¶ 23.
Generic and biosimilar manufacturers typically sell their products to wholesale
distributors pursuant to pre‐negotiated, long‐term bulk contracts that cover a range of
products for resale nationwide. Compl. ¶ 24. The vast majority of such sales occur
outside of Minnesota. Compl. ¶ 26. None of AAM’s generic or biosimilar
manufacturer‐members are located in Minnesota. Compl. ¶ 26. Similarly, the three
largest wholesale distributors—who collectively control over 90% of the market—are all
incorporated and headquartered outside of Minnesota. Compl. ¶ 26. In short, almost
no one regulated by the Minnesota Act is actually present in Minnesota.
Manufacturers do not control the prices at which wholesalers or retailers sell
their products, nor do they control where the products are ultimately resold. Compl.
¶ 24. Nevertheless, manufacturers have the most influence over prices because they
establish a baseline price called the “wholesale acquisition cost” (“WAC”). Lewellen
Ex. B at 3, 19. The prices at which wholesalers buy drugs from manufacturers—and the
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prices at which wholesalers sell drugs to retailers—are based on the WAC. Lewellen
Ex. A at 11, 23; id. Ex. B at 3, 19.
For a drug to be sold or otherwise distributed in Minnesota, the manufacturers
and wholesalers at every step of the distribution chain must be licensed by the state.
Minn. Stat. § 151.252, subd. 1(g); Minn. Stat. § 151.47, subd. 1a(f); Minn. R. 6800.1400,
subp. 3. The annual licensure process for manufacturers appears to consist of filing a
fairly basic form application and paying a relatively small fee. Minn. Stat. § 151.065;
Howard Decl. ¶ 9 & Ex. B.
II. PRELIMINARY INJUNCTION
A. Standard of Review
In reviewing a motion for a preliminary injunction, a court must consider four
factors: (1) the movant’s likelihood of success on the merits; (2) the threat of irreparable
harm to the movant if the injunction is not granted; (3) the balance between that harm
and the harm that granting the injunction will inflict on the other parties; and (4) the
public interest. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en
banc).
“Ordinarily, the movant must show only a ‘fair chance’ of success on the merits.”
Eggers v. Evnen, 48 F.4th 561, 565 (8th Cir. 2022) (citation omitted). But a party seeking
to enjoin the implementation of a state statute must meet a higher standard by showing
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that it is likely to succeed on the merits. See Planned Parenthood Minn., N.D., S.D. v.
Rounds, 530 F.3d 724, 731–32 (8th Cir. 2008) (en banc). “A preliminary injunction is an
extraordinary remedy, and the burden of establishing the propriety of an injunction is
on the movant.” Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003) (citation omitted).
B. Likelihood of Success
In its first cause of action, AAM alleges that the Act is unconstitutional under the
dormant Commerce Clause because it directly regulates transactions that take place
wholly outside of Minnesota. The Court finds that AAM is likely to succeed on this
claim.
The Commerce Clause grants Congress the power to regulate interstate
commerce. U.S. Const. art. I, § 8, cl. 3. This grant of power to Congress also “contains a
further, negative command, one effectively forbidding the enforcement of certain state
economic regulations even when Congress has failed to legislate on the subject.” Nat’l
Pork Producers Council v. Ross, 598 U.S. 356, 368 (2023) (cleaned up). This negative
command—known as the dormant Commerce Clause—limits state power in various
ways. Among other limitations, the dormant Commerce Clause prohibits states from
directly regulating out‐of‐state transactions. See Edgar v. MITE Corp., 457 U.S. 624,
640–43 (1982) (plurality opinion); see also Pork Producers, 598 U.S. at 376 n.1 (noting that
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Edgar “spoke to a law that directly regulated out‐of‐state transactions by those with no
connection to the State”).
Recently, in Pork Producers, the Supreme Court clarified that a state law does not
necessarily violate the dormant Commerce Clause merely because its regulation of in‐
state activity has out‐of‐state effects. Pork Producers, 598 U.S. at 371–76. The State does
not dispute, however, that Pork Producers did not change the rule that a state may not
directly regulate transactions that take place wholly outside the state and have no
connection to it. See id. at 376 n.1 (distinguishing Edgar because the law at issue in Pork
Producers did not directly regulate out‐of‐state transactions); Hr’g Tr. 24–26 [ECF
No. 39]. The State likewise concedes that the Act directly regulates extraterritorial sales
of drugs. Hr’g Tr. 9. The only issue, then, is whether those transactions have a
sufficient connection to Minnesota to give the Minnesota Legislature authority to
regulate them.
As the Court noted at oral argument, the operative language in § 62J.842 is
somewhat odd. It prohibits manufacturers from imposing (or causing to be imposed)
“an excessive price increase, whether directly or through a wholesale distributor,
pharmacy, or similar intermediary, on the sale of any generic or off‐patent drug sold,
dispensed, or delivered to any consumer in the state.” (Emphasis added.) If § 62J.842
simply prohibited excessive price increases on the “sale” of any generic drug “sold” in
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the state, one could plausibly read it as applying only to in‐state sales. But the
additional language referring to drugs “dispensed” or “delivered” within the state
suggests that the initial “sale” that the Act regulates does not have to be the sale of a
drug in Minnesota.
In response to the Court’s queries, the State confirmed that this language subjects
manufacturers to liability as a result of sales that take place wholly outside of
Minnesota—say, the sale of a drug by a manufacturer in Colorado to a national
distributor in New Jersey—so long as the drug in question is eventually “sold,
dispensed, or delivered” by anyone to any consumer in Minnesota. Hr’g Tr. 3–5. The
State further confirmed that this is true even if, say, the Colorado manufacturer has no
control whatsoever over what is done with its drugs after they are sold to the New
Jersey distributor. Hr’g Tr. 6. The State likewise confirmed that this is true even if the
Colorado manufacturer does not know whether drugs its sells to the New Jersey
distributor will ever make their way to Minnesota. Hr’g Tr. 6. Indeed, the State
indicated that the Act imposes liability on manufacturers whose drugs wind up in
Minnesota even if the manufacturer has done everything in its power to prevent its
drugs from being resold in Minnesota. Hr’g Tr. 30–32.
The State contends that the Minnesota Legislature can impose liability on such
manufacturers because the Act is not triggered unless and until a drug that the
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manufacturer sells outside of Minnesota somehow makes its way to Minnesota.
According to the State, that means that the manufacturer’s initial sale outside of
Minnesota (such as the Colorado manufacturer’s sale to the New Jersey
distributor)—even though it has no connection whatsoever to Minnesota at the time it
occurs—will acquire a sufficient connection to Minnesota when someone else (even
someone far down the supply chain, acting outside of the control or knowledge of the
manufacturer or the distributor to whom the manufacturer sold the drug) sells,
dispenses, or delivers the drug to any consumer in Minnesota.
The Court cannot find any support for the notion that the dormant Commerce
Clause permits Minnesota to directly regulate a sale that occurs in another state simply
because the product eventually makes its way into Minnesota. To the contrary, such an
expansive notion of an individual state’s power to regulate commerce occurring in
other states was rejected by Styczinski v. Arnold, 46 F.4th 907 (8th Cir. 2022), in which the
Eighth Circuit held that a Minnesota law regulating out‐of‐state bullion transactions
violated the dormant Commerce Clause.
The statute at issue in Styczinski regulated “Minnesota transactions,” which it
defined as transactions:
(1)
by a dealer that is incorporated, registered, domiciled,
or otherwise located in Minnesota;
(2)
by a dealer representative at a location in Minnesota;
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(3)
between a dealer and a consumer who lives in
Minnesota; or
(4)
between a dealer and a Minnesota consumer when
the transaction involves:
(i)
delivering or shipping a bullion product
to an address in Minnesota;
(ii)
delivering to or shipping from a
precious metal depository on behalf of a
Minnesota resident; or
(iii)
making payment to a consumer or
receiving a payment from a consumer at
an address in Minnesota, unless the
transaction occurs when the consumer is
at a business location outside of
Minnesota.
Id. at 910 (quoting Minn. Stat. § 80G.01, subd. 5a). The Eighth Circuit found the statute
invalid because “it applies Minnesota law to commerce wholly outside of Minnesota,”
such as, for example, a “transaction anywhere in the world between a bullion trader
and a Minnesota resident.” Id. at 913. Despite the fact that the statute regulated only
transactions involving a Minnesota resident, the Eighth Circuit regarded the
transactions as having an insufficient Minnesota connection to pass muster under the
dormant Commerce Clause.
Here, the Minnesota connection is even weaker. Whereas the statute in Styczinski
regulated only transactions that involved a dealer or resident who had a connection to
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Minnesota, the Act in this case applies to out‐of‐state drug transactions between parties
that have no connection whatsoever to Minnesota. The only requirement for such a
transaction to be subject to the Act is that somehow, someday, in some way, someone
who is not a party to the transaction must sell, dispense, or deliver the drug to any
consumer in Minnesota. Under Styczinski, the Act’s regulation of transactions with such
an attenuated connection to Minnesota clearly violates the dormant Commerce Clause.
The State contends that, because manufacturers must be licensed in Minnesota in
order for their drugs to be distributed here, manufacturers know that their drugs will
eventually be distributed in Minnesota. But the one does not follow from the other.
AAM offers evidence that its members sell most of their products in bulk via negotiated
multi‐drug contracts and do not control where the drugs are resold. Galownia Decl.
¶¶ 4–5; see also de Gavre Decl. ¶¶ 4–5. In other words, the evidence indicates that,
while the manufacturers may know, in the abstract, that some of their drugs may wind
up in Minnesota, they do not know which of their drugs will do so. Given that Styczinski
found that out‐of‐state sales to actual Minnesota residents did not have a sufficient
connection to Minnesota to be regulated by the Minnesota Legislature, the Court does
not understand how a non‐Minnesota manufacturer’s knowledge that some of the
drugs that it sells to a non‐Minnesota distributor may someday find their way into
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Minnesota could be sufficient to validate Minnesota’s direct regulation of that out‐of‐
state sale.
The State points to Cotto Waxo Co. v. Williams, 46 F.3d 790 (8th Cir. 1995), and
Swanson v. Integrity Advance, LLC, 870 N.W.2d 90 (Minn. 2015), as examples of cases
supporting a more expansive view of the connection between a state and an out‐of‐state
transaction. Both of these cases are easily distinguishable, however, as both cases
involved laws that directly regulated only in‐state sales. See Cotto Waxo, 46 F.3d at 794
(explaining that the law at issue did not have an impermissible extraterritorial reach
because it “is indifferent to sales occurring out‐of‐state” and “Cotto Waxo is able to sell
to out‐of‐state purchasers regardless of Cotto Waxo’s relationship to Minnesota”);
Integrity Advance, 870 N.W.2d at 92 (explaining that the law at issue applied if the
borrower was a Minnesota resident and completed the transaction while physically
located in Minnesota). By contrast, while the Act at issue here is not triggered until
there is a sale or distribution in Minnesota, the Act directly regulates—and, in fact,
attaches potentially astronomical liability to—conduct that occurs wholly outside of
Minnesota between parties with no connection to Minnesota.
Finally, the State compares the Act to the law upheld in Pork Producers. Again,
however, Pork Producers is readily distinguishable. The California law at issue in Pork
Producers prohibited business owners and operators from “knowingly engag[ing] in the
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sale within the state of . . . [w]hole pork meat that the business owner or operator knows
or should know is the meat of a covered animal who was confined in a cruel manner.”
Cal. Health & Safety Code § 25990(b)(2) (emphasis added); Pork Producers, 598 U.S.
at 365–66, 376 n.1 (explaining that § 25990(b)(2) “regulates only products that companies
choose to sell ‘within’ California”).
Here, by contrast, the State admits that the Act directly regulates upstream sales
that take place wholly outside of Minnesota and imposes liability on those engaged in
those sales, even though neither the sales nor the contracting parties have any
connection to Minnesota. The State contends that the laws are nevertheless comparable
because the offending conduct in Pork Producers—animal cruelty—occurs outside of
California. The crucial difference, however, is that the California law does not attempt
to impose liability on out‐of‐state actors for engaging in out‐of‐state conduct; instead, it
regulates in‐state actors who engage in in‐state conduct (specifically, in‐state sales of
meat that has been produced in a certain way).
Although the Minnesota Act is not comparable to the California law at issue in
Pork Producers, the Act does closely resemble the Maryland law found invalid in
Association for Accessible Medicines v. Frosh, 887 F.3d 664 (4th Cir. 2018). True, the
Maryland law could be triggered without an actual sale or distribution of a drug in
Maryland, as long as the drug was “made available for sale” in Maryland. Id. at 671
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(noting that the Maryland law’s “plain language allows Maryland to enforce the Act
against parties to a transaction that did not result in a single pill being shipped to
Maryland”). In that sense, the Maryland law appears to have a slightly broader reach
than the Act, which is not triggered until a drug is “sold, dispensed, or delivered to any
consumer” in Minnesota.
As the Fourth Circuit went on to explain, however, “[e]ven if the Act did require
a nexus to an actual sale in Maryland, it is nonetheless invalid because it still controls
the price of transactions that occur wholly outside the state.” Id. This is so, the Fourth
Circuit said, because “[t]he Act, by its own terms, is not fixated on the price the
Maryland consumer ultimately pays for the drug. Instead, the lawfulness of a price
increase is measured according to the price the manufacturer or wholesaler charges in
the initial sale of the drug”—sales which, the parties agreed, nearly always took place
outside Maryland. Id.
That is exactly how the Act works here. Although the Act is not triggered until a
sale or distribution occurs in Minnesota, “the lawfulness of a price increase is measured
according to the price the manufacturer or wholesaler charges in the initial sale of the
drug” and “the conduct the Act targets is the upstream pricing and sale of prescription
drugs.” Id. As a result, just as in Frosh, the Act “effectively seeks to compel
manufacturers . . . to act in accordance with [Minnesota] law outside of [Minnesota].”
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Id. at 672; see also Pharm. Rsch. & Mfrs. of Am. v. Dist. of Columbia, 406 F. Supp. 2d 56,
68–71 (D.D.C. 2005) (holding that a similar law violated the dormant Commerce Clause
and rejecting the argument that the requirement of a downstream sale in the District
was a sufficient connection), aff’d sub nom. Biotechnology Indus. Org. v. Dist. of Columbia,
496 F.3d 1362 (Fed. Cir. 2007).
The Court also finds significant the fact that the Act imposes a $500,000 penalty
on manufacturers who try to avoid the risk of incurring liability under the Act by
prohibiting their drugs from being sold or distributed in Minnesota. See Minn. Stat.
Ann. § 62J.845. This provision reinforces the impermissible extraterritorial nature of the
Act, as it puts manufacturers between a rock and a hard place: As noted, a
manufacturer could be subjected to liability for wholly out‐of‐state sales based on the
decisions and actions of others over whom it has no control, yet it must incur a
significant financial penalty if it chooses to avoid this state of affairs by (for example)
selling only to distributors who promise not to distribute its drugs in Minnesota.
(Apparently, the manufacturer will still be subject to liability for any distribution of its
drugs in Minnesota that nevertheless occurs through no fault of the manufacturer.) The
extraterritorial reach of the Act is therefore nearly unavoidable, as the only sure way for
a manufacturer to avoid liability is to either stop selling drugs altogether or to sell all of
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its drugs—including the vast majority that will never reach Minnesota—only at prices
that comply with the Act.
Moreover, the fact that the Act penalizes manufacturers for choosing not to
engage in commerce in Minnesota in order to avoid the Act is fundamentally at odds
with dormant Commerce Clause jurisprudence, which often relies on the principle that
anyone who wishes to avoid being subject to a state’s economic regulation can simply
avoid doing business in that state. See Pork Producers, 598 U.S. at 384 (plurality opinion)
(noting that the plaintiffs had the choice to withdraw from the California market if they
wished to avoid the challenged law); id. at 364 (noting that “[c]ompanies that choose to
sell products in various States must normally comply with the laws of those various
States” (emphasis added)). The Minnesota Legislature was unwilling to give
manufacturers that freedom.
The Court therefore concludes that AAM is likely to prevail on its claim that the
Act violates the dormant Commerce Clause insofar as it applies to out‐of‐state sales of
drugs.
C. Threat of Irreparable Harm
Two of AAM’s members offer evidence that, due to increased manufacturing
costs, supply shortages, and other factors, they intended to raise prices on certain drugs
in a manner that would violate the Act. Galownia Decl. ¶¶ 8–16; de Gavre Decl.
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¶¶ 8–16. Due to the threat of incurring liability under the Act, the members have
decided not to proceed with the intended price increases. Galownia Decl. ¶¶ 11, 16;
de Gavre Decl. ¶ 16. There is no dispute that the financial injuries that the members
will suffer as a result of forgoing the intended price increases are not recoverable from
the State or anyone else. These members are therefore facing a threat of irreparable
harm.2 See Iowa Utils. Bd. v. FCC, 109 F.3d 418, 426 (8th Cir. 1996) (“The threat of
unrecoverable economic loss, however, does qualify as irreparable harm.”).
The State characterizes this threat as speculative and unsupported. In particular,
the State contends that the members have offered no evidence that the factors they cite
(such as increased costs) require price increases that would violate the Act. It is not
clear to the Court why that matters, however. The fact remains that, according to the
2
The State argues that one of these AAM members, Teva Pharmaceuticals USA,
Inc. (“Teva”), is not currently licensed in Minnesota and therefore distribution of Teva’s
drugs in Minnesota would violate Minnesota law no matter the price. In response,
however, Teva points out that (1) one of the drugs whose price it intended to increase is
manufactured at a foreign facility, Galownia Decl. ¶ 8, and the licensing requirement
therefore does not apply, see Howard Decl. ¶ 9, Ex. B at 1 (stating an exception to the
licensing requirement “if the manufacturer is located outside of the United States or its
territories”), and (2) the other drug whose price it intended to increase is manufactured
at a facility operated by a Teva subsidiary that, at least according to AAM’s briefing, is
licensed in Minnesota, Galownia Decl. ¶ 13; Savage Decl. ¶¶ 1–2. (The Court notes that,
although there does not appear to be record evidence of the subsidiary’s licensure, the
State does not seem to dispute that it is licensed. The Court likewise notes that, while
the State points out that “manufacturing” includes packaging and labeling, ECF No. 36
at 4 n.4, the State does not contend that Teva performs those functions for the drugs at
issue.)
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evidence before the Court, the members are refraining from implementing planned
price increases to avoid incurring liability under the Act. Whether or not such price
increases are the result of increased costs, supply shortages, or other factors is simply
irrelevant to the members’ potential liability under the Act. Moreover, even if a lower
price increase that complied with the Act would cover any increased manufacturing
costs, such a course of action would still result in irreparable harm in the form of
unrecoverable lost revenue.
The State also contends that the members cannot show a threat of irreparable
harm absent a showing that enforcement is imminent. See Morales v. Trans World
Airlines, Inc., 504 U.S. 374, 382 (1992) (“In suits such as this one, which the plaintiff
intends as a ‘first strike’ to prevent a State from initiating a suit of its own, the prospect
of state suit must be imminent, for it is the prospect of that suit which supplies the
necessary irreparable injury.”). The Supreme Court has recognized, however, that a
plaintiff has standing to “bring a preenforcement suit when he has alleged an intention
to engage in a course of conduct arguably affected with a constitutional interest, but
proscribed by a statute, and there exists a credible threat of prosecution thereunder.”
Susan B. Anthony List v. Driehaus, 573 U.S. 149, 160 (2014) (citation and quotation marks
omitted). And the Supreme Court has applied this principle in the context of granting
injunctive relief pending final disposition of the case. See, e.g., Roman Cath. Diocese of
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Brooklyn v. Cuomo, 141 S. Ct. 63, 68 (2020) (per curiam) (citing Susan B. Anthony List); see
also Rogers Grp., Inc. v. City of Fayetteville, 629 F.3d 784, 785, 789–90 (8th Cir. 2010)
(affirming preliminary injunction in preenforcement suit alleging that a municipality’s
ordinance was beyond its powers under state law and finding a sufficient threat of
irreparable harm where the plaintiff “admit[ted] that the Quarry currently operated at a
level the Ordinance permitted” but “testified that the Ordinance would prevent the
Quarry from expanding”).
D. The Balance of Harms and the Public Interest
The remaining Dataphase factors are essentially a wash. While AAM offers
evidence that two of its members are facing a threat of irreparable harm, the magnitude
of that threatened harm is unclear. At the same time, although the Court does not
doubt that, as a general matter, Minnesota consumers face harm from excessive price
increases on generic medication, the record on this issue is not well developed; in
particular, it is far from clear how much of this harm the Act would prevent, given that
it does not regulate price increases by anyone in the supply chain but manufacturers,
and given that it does not regulate the price charged to Minnesota consumers.
With respect to the public interest: On the one hand, “it is always in the public
interest to protect constitutional rights.” Carson v. Simon, 978 F.3d 1051, 1061 (8th Cir.
2020) (per curiam) (citation omitted). On the other hand, “governmental policies
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implemented through legislation or regulations developed through presumptively
reasoned democratic processes are entitled to a higher degree of deference and should
not be enjoined lightly.” Planned Parenthood Minn., N.D., S.D., 530 F.3d at 732 (citation
omitted).
In sum, AAM has established that it is highly likely to succeed on the merits, and
likelihood of success on the merits is “[t]he most important of the Dataphase factors.”
Shrink Mo. Gov’t PAC v. Adams, 151 F.3d 763, 764 (8th Cir. 1998); see also Sleep No. Corp. v.
Young, 33 F.4th 1012, 1016 (8th Cir. 2022) (“the third factor—probability of success—is
the most significant”). Because AAM is likely to prevail, and because AAM has
established at least some threat of irreparable harm, the Court will grant AAM’s motion
for a preliminary injunction.
E. Security
Under Fed. R. Civ. P. 65(c), “[t]he court may issue a preliminary injunction or a
temporary restraining order only if the movant gives security in an amount that the
court considers proper to pay the costs and damages sustained by any party found to
have been wrongfully enjoined or restrained.” AAM asks that it not be required to post
security, ECF No. 22, and the State has not objected to that request. Accordingly, the
Court will not require AAM to post security. See Richland/Wilkin Joint Powers Auth. v.
U.S. Army Corps of Eng’rs, 826 F.3d 1030, 1043 (8th Cir. 2016) (“Courts in this circuit have
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almost always required a bond before issuing a preliminary injunction, but exceptions
have been made where the State has not objected to the failure to require a bond or
where the damages resulting from a wrongful issuance of an injunction have not been
shown.” (citation omitted)).
III. MOTION TO DISMISS
A. Standard of Review
In reviewing a motion to dismiss for failure to state a claim under Fed. R. Civ.
P. 12(b)(6), a court must accept as true all of the factual allegations in the complaint and
draw all reasonable inferences in the plaintiff’s favor. See Perez v. Does 1–10, 931 F.3d
641, 646 (8th Cir. 2019). Although the factual allegations need not be detailed, they
must be sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). The complaint must “state a claim to relief that is
plausible on its face.” Id. at 570.
B. Analysis
As the Court has found that AAM is likely to succeed on the merits of its first
cause of action, the Court will deny the State’s motion to dismiss that claim. Likewise,
the Court will deny the State’s motion to dismiss AAM’s fourth cause of action, which
alleges that the Act runs afoul of the dormant Commerce Clause under the balancing
test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).
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The State argues that, under Pork Producers, a plaintiff must allege discrimination
against interstate commerce to state a plausible Pike claim. The Court does not agree.
The hopelessly fractured nature of the opinions in Pork Producers makes the holding of
the case difficult to identify, but a majority of the Justices acknowledged that the “Court
has left the courtroom door open to [Pike] challenges premised on even
nondiscriminatory burdens.” Pork Producers, 598 U.S. at 379 (cleaned up); see also id.
at 392 (Sotomayor and Kagan, JJ., concurring in part) (“Pike claims that do not allege
discrimination or a burden on an artery of commerce are further from Pike’s core. As
THE CHIEF JUSTICE recognizes, however, the Court today does not shut the door on
all such Pike claims.”); id. at 395–96 (Roberts, Alito, Kavanaugh, and Jackson, JJ.,
concurring in part and dissenting in part) (“As a majority of the Court acknowledges,
‘we generally leave the courtroom door open to plaintiffs invoking the rule in Pike, that
even nondiscriminatory burdens on commerce may be struck down on a showing that
those burdens clearly outweigh the benefits of a state or local practice.’” (citation
omitted)).
The State contends that, under Pork Producers, the only nondiscrimination claims
that remain viable are those challenging alleged burdens on the instrumentalities of
interstate commerce (such as trains and trucks). If that were true, though, the Supreme
Court could have issued a very brief opinion affirming the dismissal of the plaintiffs’
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complaint in Pork Producers, as the plaintiffs expressly disavowed any claim of
discrimination, id. at 370–71, and as the plaintiffs were not challenging any burden on
the instrumentalities of interstate commerce. Instead, a majority of the Court agreed
that the plaintiffs had failed to state a claim under Pike, but they disagreed as to why,
with a plurality opining that the plaintiffs had failed to plausibly plead a substantial
burden on interstate commerce, id. at 383–87, and with three justices opining that Pike
does not allow courts to strike down laws that regulate only in‐state sales of ordinary
consumer goods, id. at 380–83. Ultimately, however, a majority agreed on the more
abstract premise that the plaintiffs’ claim failed because the Pike line of cases has never
“prevent[ed] a State from regulating the sale of an ordinary consumer good within its
own borders on nondiscriminatory terms.” Id. at 391.
As discussed above, this case differs from Pork Producers in a crucial respect:
Unlike the California law at issue in Pork Producers, the Minnesota Act at issue here
directly regulates out‐of‐state transactions. Indeed, based on AAM’s allegations, it
appears that the vast majority of the transactions that the Act regulates occur outside of
Minnesota. In the Court’s view, these facts give rise to a plausible claim under Pike, and
nothing in Pork Producers suggests otherwise. And because AAM has pleaded a
plausible Pike claim, the Court will permit AAM’s due‐process claim to proceed, as that
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claim appears similar to AAM’s Pike claim, and the Court would prefer to assess both
claims on a full record.
The Court will, however, dismiss AAM’s third and fifth causes of action. In its
third cause of action, AAM alleges that the Act violates the Constitution’s horizontal
separation of powers. But the Court is unaware of any case applying this concept as a
standalone cause of action separate from other express constitutional provisions. The
third cause of action is therefore dismissed. AAM’s fifth cause of action is also
dismissed, as it simply cites 42 U.S.C. §§ 1983 and 1988 and requests various forms of
relief, and thus it duplicates other claims.
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein,
IT IS HEREBY ORDERED THAT:
1.
Plaintiff’s motion for a preliminary injunction [ECF No. 14] is GRANTED.
2.
Defendant, and all of his officers, agents, servants, employees, and
attorneys, and all persons in active concert or participation with him, are
ENJOINED from enforcing, or taking any other action under, Laws of
Minnesota 2023, ch. 57, art. 2 §§ 22–23, 25–26, to be codified at Minn. Stat.
§§ 62J.841–62J.842, 62J.844–62J.845, against any of plaintiff’s members, or
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any of the members’ agents, privies, or licensees, based on any member’s
sale of generic or off‐patent drugs outside of Minnesota.
3.
Defendant’s motion to dismiss [ECF No. 23] is GRANTED IN PART and
DENIED IN PART as follows:
a.
The motion is GRANTED as to plaintiff’s third and fifth causes of
action, and those claims are DISMISSED WITHOUT PREJUDICE.
b.
The motion is DENIED in all other respects.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: December 4, 2023
s/Patrick J. Schiltz
Patrick J. Schiltz, Chief Judge
United States District Court
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