Pharma. Res. & Mfrs. of Am. v. Williams

Full title: PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA, Plaintiff, v. Stuart…

Court: United States District Court, D. Minnesota

Date published: Feb 8, 2024

715 F. Supp. 3d 1175 (D. Minn. 2024)

Opinion

Case No. 20-cv-1497 (DSD/DTS)

2024-02-08

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA, Plaintiff, v. Stuart WILLIAMS, et al., Defendants.

Benjamin M. Mundel, Pro Hac Vice, Joseph R. Guerra, Pro Hac Vice, Sidley Austin LLP, Washington, DC, John M. Baker, Katherine M. Swenson, Mark L. Johnson, Greene Espel PLLP, Minneapolis, MN, for Plaintiff. Angela Behrens, Sarah L. Krans, Gregory R. Merz, Katherine Hinderlie, Richard Dornfeld, Leah M. Tabbert, Office of the Minnesota Attorney General, Saint Paul, MN, for Defendants Stuart Williams, Stacey Jassey, Mary Phipps, Andrew Behm, James Bialke, Amy Paradis, Rabih Nahas, Samantha Schirmer, Kendra Metz. Douglas P. Seaton, James V. F. Dickey, Upper Midwest Law Center, Golden Valley, MN, Timothy Sandefur, Pro Hac Vice, Goldwater Institute, Phoenix, AZ, for Amicus Goldwater Institute. Jeremy Charles Marwell, Pro Hac Vice, Vinson & Elkins LLP, Washington, DC, David M. Aafedt, Thomas H. Boyd, Winthrop & Weinstine, PA, Minneapolis, MN, for Amici National Association of Manufacturers, The Chamber of Commerce of the United States of America. Barnett I. Rosenfield, Mid-Minnesota Legal Aid, Minneapolis, MN, Catherine McKee, Pro Hac Vice, National Health Law Program, Chapel Hill, NC, Wayne Turner, Pro Hac Vice, National Health Law Program, Washington, DC, for Amici T1International, Minnesota #insulin4all, Nicole Smith-Holt, Nathan Loewy, Cindy Boyd, Abigail Hansmeyer, Mid-Minnesota Legal Aid, National Health Law Program.

DAVID T. SCHULTZ, United States Magistrate Judge

Benjamin M. Mundel, Pro Hac Vice, Joseph R. Guerra, Pro Hac Vice, Sidley Austin LLP, Washington, DC, John M. Baker, Katherine M. Swenson, Mark L. Johnson, Greene Espel PLLP, Minneapolis, MN, for Plaintiff.

Angela Behrens, Sarah L. Krans, Gregory R. Merz, Katherine Hinderlie, Richard Dornfeld, Leah M. Tabbert, Office of the Minnesota Attorney General, Saint Paul, MN, for Defendants Stuart Williams, Stacey Jassey, Mary Phipps, Andrew Behm, James Bialke, Amy Paradis, Rabih Nahas, Samantha Schirmer, Kendra Metz.

Douglas P. Seaton, James V. F. Dickey, Upper Midwest Law Center, Golden Valley, MN, Timothy Sandefur, Pro Hac Vice, Goldwater Institute, Phoenix, AZ, for Amicus Goldwater Institute.

Jeremy Charles Marwell, Pro Hac Vice, Vinson & Elkins LLP, Washington, DC, David M. Aafedt, Thomas H. Boyd, Winthrop & Weinstine, PA, Minneapolis, MN, for Amici National Association of Manufacturers, The Chamber of Commerce of the United States of America.

Barnett I. Rosenfield, Mid-Minnesota Legal Aid, Minneapolis, MN, Catherine McKee, Pro Hac Vice, National Health Law Program, Chapel Hill, NC, Wayne Turner, Pro Hac Vice, National Health Law Program, Washington, DC, for Amici T1International, Minnesota #insulin4all, Nicole Smith-Holt, Nathan Loewy, Cindy Boyd, Abigail Hansmeyer, Mid-Minnesota Legal Aid, National Health Law Program.

MEMORANDUM OPINION & ORDER

DAVID T. SCHULTZ, United States Magistrate Judge.

INTRODUCTION

The issue before this Court is defining the proper scope of discovery, normally a relatively routine task. Not so here. Plaintiff Pharmaceutical Research and Manufacturers of America (PhRMA) alleges that a Minnesota state statute requiring that certain of its members provide free insulin to qualifying individuals is an unconstitutional per se physical taking without compensation. PhRMA seeks a declaratory judgment and an injunction. Discovery, it says, should be quite limited.

Defendants, state officials charged with enforcing the statute, disagree. Pointing to its affirmative defenses, Defendants seek broad-ranging discovery that, they predict, will take two years to complete. Their prediction is accurate; their premise is not. Because the affirmative defenses they assert are legally inapplicable, the scope of

proper discovery in this case is narrow. For the reasons discussed below the Court will limit the discovery to the matters and time frame set forth in its accompanying scheduling order.

FACTS

I. The Alec Smith Insulin Affordability Act

This dispute concerns the Alec Smith Insulin Affordability Act (the Act). Minn. Stat. § 151.74. Signed into law on April 15, 2020, the Act was designed to combat an "insulin affordability crisis" that has resulted in the loss of multiple lives. See The Alec Smith Story, MN INSULIN SAFETY NET PROGRAM (Jan. 25, 2022), https://www.mninsulin.org/. The Act establishes two programs under which drug manufacturers must provide free insulin to qualifying Minnesota residents. Minn. Stat. § 151.74, subdiv. 1(a).

A. The Continuing Safety Net Program

The Continuing Safety Net Program requires manufacturers to provide free insulin to qualified applicants for up to one year. Id. § 151.74, subdiv. 4(a). To qualify, an individual must: (1) be a Minnesota Resident; (2) have a family income equal to or less than 400% of the federal poverty level; (3) not be enrolled in MinnesotaCare or medical assistance; (4) not be eligible for federally funded healthcare or drug benefits through the Department of Veterans Affairs; and (5) have no insurance coverage under which he or she can obtain a thirty-day supply of insulin for no more than $75 out of pocket. Id. § 151.74, subdiv. 4(b). Alternatively, an individual who meets requirements (1)-(3), is enrolled in Medicare Part D, and has spent $1,000 on prescription drugs in the current calendar year is also eligible. Id. § 151.74, subdiv. 4(c).

Individuals who wish to participate in the program apply to the manufacturer or their healthcare provider. Id. § 151.74, subdiv. 4(d). If deemed eligible, an applicant will receive a statement of eligibility he or she can present to their pharmacy and receive free insulin for up to one year. Id. § 151.74, subdiv. 5(b). If deemed ineligible, applicants may appeal that determination to the Minnesota Board of Pharmacy (Board). Id. § 151.74, subdiv. 8. Manufacturers must provide statements of eligibility to eligible individuals with no private insurance. Id. § 151.74, subdiv. 5(b). However, if an eligible individual has private insurance and a manufacturer determines its assistance program better meets the individual's needs, "the manufacturer shall inform the individual and provide the individual with the necessary coupons to submit to a pharmacy." Id. § 151.74, subdiv. 5(c). In this circumstance, the individual's co-payment may not exceed $50 for a ninety-day supply of insulin. Id.

To obtain insulin pursuant to this program, an individual presents his or her statement of eligibility to the pharmacy, who then orders the insulin from the manufacturer. Id. § 151.74, subdiv. 6(c). The manufacturer must provide the insulin at no charge to the individual or pharmacy. Id. The pharmacy may charge the individual a co-payment "not to exceed $50 for each 90-day supply," but no portion of this payment reverts to the manufacturer. Id. § 151.74, subdiv. 6(e). The individual may repeat this process throughout the year of eligibility and may apply to renew his or her eligibility for the following year(s). Id. § 151.74, subdiv. 5(b).

B. The Urgent Need Program

The Urgent Need Program requires manufacturers to provide a thirty-day supply of insulin free to eligible individuals. Id. § 151.74, subdiv. 3. Eligible individuals

under this program are: (1) Minnesota residents; (2) not enrolled in MinnesotaCare or medical assistance; who (3) have no insurance coverage under which they can obtain a thirty-day supply of insulin for no more than $75 out of pocket; (4) have not received insulin under the Urgent Need Program in the last twelve months; and (5) have less than a seven-day supply of insulin remaining and need insulin "to avoid the likelihood of suffering significant health consequences." Id. § 151.74, subdiv. 2(a)-(b).

To receive insulin pursuant to the Urgent Need Program, an individual presents an application to the pharmacy, along with a valid insulin prescription. The pharmacy dispenses a thirty-day supply to the individual, then submits a claim to the manufacturer (or the manufacturer's vendor) who must either "reimburse the pharmacy in an amount that covers the pharmacy's acquisition cost," or send a free supply of insulin to replace the insulin dispensed to the individual. Id. §§ 151.74, subdiv. 3(b), 151.74, subdiv. 3(d). The pharmacy may charge the individual a co-payment "not to exceed $35 for the 30-day supply," but no portion of this co-payment reverts to the manufacturer. Id. § 151.74, subdiv. 3(e).

C. The Act's Coverage

The Act applies to insulin manufacturers who either (1) generate gross revenue of $2,000,000 or more from insulin sales in Minnesota; or (2) set the wholesale acquisition cost (WAC) of their insulin at or above "$8 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." Id. § 151.74, subdiv. 1(c)-(d). If either of these provisions does not apply to a manufacturer, it may submit a request for an exemption to the Board, with supporting documentation. Id. § 151.74, subdiv. 1(c).

If a manufacturer fails to comply with the Act, the Board may assess a penalty of $200,000 per month of noncompliance, increasing to $400,000 per month after six months, and to $600,000 per month after one year of noncompliance. Id. § 151.74, subdiv. 10(a). Separately, the Board may assess the same penalties if manufacturers either fail to provide a hotline for individuals or fail to list the eligibility requirements for their assistance programs on their websites. Id. § 151.74, subdiv. 10(b).

By February 15th of each year, each manufacturer must report to the Board the number of Minnesota residents who received insulin under the Act's two programs in the preceding calendar year, the number of Minnesota residents who participated in the manufacturer's patient assistance program in the preceding calendar year (and the number of applicants found ineligible), and the value of insulin provided under each of these programs. Id. § 151.74, subdiv. 13(a). The Board reports this data to the legislature, along with information regarding any administrative penalties assessed against each manufacturer. Id. § 151.74, subdiv. 13(b). In 2022, for example, manufacturers reported that 347 individuals participated in the Act's programs, receiving insulin valued at $264,106 based on the drugs' WAC. Assessing Satisfaction with the Minnesota Insulin Safety Net Program, MN DEP'T OF HEALTH (Oct 27. 2023), https://www.health.state.mn.us/data/economics/docs/insulinreport.pdf.

II. Procedural History

Pharmaceutical Research and Manufacturers of America (PhRMA) is a nonprofit corporation that engages in public policy advocacy for the pharmaceutical industry. Dkt. No. 1 ¶¶ 10, 12. PhRMA brings this action on behalf of three of its members, Eli Lilly and Company, Novo Nordisk Inc.,

and Sanofi, who collectively manufacture most of the insulin sold in Minnesota. Id. ¶ 13. Defendants are members of the Minnesota Board of Pharmacy charged with enforcing the Act. Id. ¶ 15.¹

1 PhRMA also named MNsure board members as defendants in this lawsuit, but the parties stipulated to dismiss those individuals after determining they were not involved in enforcing the Act. Dkt. No. 21.

The day before the Act went into effect, June 30, 2020, PhRMA filed this action alleging the Continuing Safety Net and Urgent Need Programs violate the Takings Clause of the Fifth Amendment to the United States Constitution. According to PhRMA, compelling manufacturers to provide free insulin to Minnesota residents without providing just compensation is an unconstitutional per se physical taking of private property for public use. Id. ¶¶ 81-85. PhRMA also alleges that Subdivision 1(d) of the Act, which conditions the applicability of the Act on manufacturers charging a WAC of $8 or more per milliliter, violates the Dormant Commerce Clause if "interpreted to afford insulin manufacturers the 'option' of avoiding the unconstitutional taking" by regulating transactions that occur entirely outside the state of Minnesota. Id. ¶¶ 86-89. PhRMA seeks only declaratory and injunctive relief because, it alleges, the continuous series of inverse condemnation proceedings necessary to redress the injury is not an adequate or available remedy. Id. ¶ 85.

The Board moved to dismiss PhRMA's Complaint for lack of subject matter jurisdiction and failure to state a claim on which relief could be granted, arguing: (1) its members were immune from suit; (2) PhRMA lacked Article III standing because it had not yet suffered an injury in fact; (3) PhRMA lacked associational standing because its takings claim requires "ad hoc, factual inquiries" into each aggrieved party; (4) the claim was not ripe for adjudication; and (5) equitable relief was not an appropriate remedy for a takings claim. Dkt. Nos. 12, 16.

PhRMA opposed the Board's motion to dismiss, arguing: (1) state officials in their official capacities are not immune from suit under Ex Parte Young; (2) the injury to PhRMA's members threatened by the Act was sufficient to establish standing; (3) PhRMA has associational standing because "ad hoc, factual inquiries" are only necessary in cases alleging regulatory takings, not per se physical takings; (4) the claim was ripe for adjudication because the injury to the manufacturers was impending; and (5) equitable relief is necessary to redress the injury because there is no adequate mechanism for the manufacturers to obtain just compensation. Dkt. No. 27.

PhRMA also moved for summary judgment, arguing that the Act is plainly unconstitutional because it effects a "clear physical taking" of personal property without just compensation. Dkt. Nos. 14, 27 at 45-50. PhRMA conceded, however, that its Dormant Commerce Clause claim was rendered moot by the Board's acknowledgement it would not rely on the Act's exemption in Subdivision 1(d) to defend against the takings claim. Dkt. No. 72 at 9 n.1.

The district court granted the Board's motion to dismiss and denied as moot PhRMA's motion for summary judgment. Dkt. No. 81. The court determined it lacked subject matter jurisdiction because PhRMA failed to request relief likely to redress its alleged injury. Id. at 7-12. According to the district court, PhRMA was foreclosed from seeking equitable relief because inverse condemnation actions available in state court were adequate to remedy the alleged taking. Id. at 9. Therefore, PhRMA failed to meet the redressability

prong necessary to satisfy Article III standing. Because it lacked subject matter jurisdiction, the court declined to address the Board's other claims involving associational standing, sovereign immunity, and ripeness. Id. at 8 n.4. PhRMA appealed the decision to the Eighth Circuit. Dkt. No. 85.

The Eighth Circuit reversed the district court, finding PhRMA did have Article III standing to seek equitable relief because "[a]n inverse condemnation action to reimburse a manufacturer for each discrete alleged taking is incapable of compensating the manufacturers for the repetitive, future takings that will occur under the Act's requirements." Pharm. Rsch. & Manufacturers of Am. v. Williams, 64 F.4th 932, 945 (8th Cir. 2023). Therefore, the remedy of equitable relief is available to PhRMA and, if granted, could redress the alleged injury. Id.

The Eighth Circuit also found that PhRMA has associational standing to sue on behalf of the manufacturers. "An association has standing to bring suit on behalf of its members when (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization's purpose; and (3) neither the claim asserted nor the relief requested requires the participation in the lawsuit of each of the individual members." Id. at 947 (quoting Kuehl v. Sellner, 887 F.3d 845, 851 (8th Cir. 2018)). The Board had argued the takings claim requires individual member participation because the Court must make an "ad hoc, factual inquir[y]" into the impact of the Act on each manufacturer. Dkt. No. 16 at 15-20. The Eighth Circuit determined, however, that an "ad hoc, factual inquir[y]" is only necessary in regulatory takings cases, in which a court weighs the "economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action" to determine whether a taking has occurred. Williams, 64 F.4th at 947 (quoting Horne v. Dep't of Agric., 576 U.S. 350, 360, 135 S.Ct. 2419, 192 L.Ed.2d 388 (2015)). In contrast, to determine whether a per se physical taking has occurred, the "essential question" is simply whether "'the government has physically taken property for itself or someone else,'" without considering other factors. Id. (quoting Cedar Point Nursery v. Hassid, 594 U.S. 139, 141 S.Ct. 2063, 2072, 210 L.Ed.2d 369 (2021)). Because PhRMA only alleged the Act effected a per se physical taking, the Eighth Circuit determined that individual manufacturer participation was unnecessary. Id. at 948. Thus, it held, PhRMA can adequately represent its members bound by the Act. Id. at 947-48.

Additionally, the Eighth Circuit determined that sovereign immunity did not bar PhRMA's suit. The Board had argued the Eleventh Amendment, under which states are generally immune from suit for money damages, also barred suits against its members because a favorable outcome for PhRMA would effectively result in "'payment of funds from the State's treasury.'" Id. at 949 (quoting Ladd v. Marchbanks, 971 F.3d 574, 581 (6th Cir. 2020)). Because PhRMA had established that it had no adequate remedy at law and requested only declaratory and injunctive relief, however, the Eighth Circuit held sovereign immunity did not bar PhRMA's suit. Id. at 950. The Eighth Circuit declined to consider the merits of PhRMA's takings claim and remanded the case for the district court to resolve that issue.

The Eighth Circuit's decision is law of the case. See Arizona v. California, 460 U.S. 605, 618, 103 S.Ct. 1382, 75 L.Ed.2d 318 (1983) ("[W]hen a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case."). The decision

conclusively establishes that PhRMA has associational standing (as to its members who are subject to the Act), that PhRMA may seek equitable relief on behalf of those members (whose individual participation in the lawsuit is unnecessary), that sovereign immunity does not bar PhRMA's suit, and that an "ad hoc, factual inquiry" regarding the impact of the Act on each manufacturer is not necessary in this case. Williams, 64 F.4th at 947-950. In light of this decision, the question remaining before this Court is whether the Act effects a per se taking of private property for public use² without just compensation in violation of the Fifth Amendment. Dkt. No. 1 ¶¶ 80-85.

2 PhRMA does not contest that the Act's programs do not constitute a public use. Dkt. No. 27 at 10.

After remand, PhRMA again moved for summary judgment. Dkt. No. 93. According to PhRMA, no additional discovery was necessary to resolve its takings claim because, as the Eighth Circuit affirmed, allegations of per se physical takings do not require a court to analyze factors other than whether the government has physically appropriated property without providing just compensation. Dkt. No. 95 at 29 (citing Williams, 64 F.4th at 947). In response, the Board filed a Rule 56(d) "motion" asking the district court to deny or continue PhRMA's motion for summary judgment in anticipation of discovery.³ Dkt. No. 109. The Board argued discovery is necessary to determine PhRMA's continued associational standing to maintain the action, to garner facts essential to its affirmative defenses, and to challenge PhRMA's claim for injunctive relief. Id. The district court summarily denied PhRMA's motion for summary judgment without prejudice until discovery was completed. Dkt. No. 114.

3 Rule 56(d) merely requires the filing of a declaration or affidavit without the necessity of a formal motion. Nonetheless, the Board filed a formal motion.

The Board then answered PhRMA's Complaint, asserting two affirmative defenses to PhRMA's takings claim—that the Act abates a public nuisance and that it imposes a reasonable burden on manufacturers in exchange for the benefit of a Minnesota manufacturer's license. Dkt. No. 117 at 10-11. In addition, the Board has asserted that the Act is not a taking because it properly balances the economic benefits and burdens of the Act's public purpose.

III. The Discovery Plans

After the Court denied PhRMA's second summary judgment motion, the undersigned ordered the parties to prepare a Rule 26(f) report regarding the appropriate scope of discovery. Dkt. No. The Rule 26(f) report revealed fundamental disagreement as to that scope. Accordingly, at the Rule 16 Conference, the Court ordered the parties to meet and confer again, exchange affirmative discovery plans and objections thereto, and brief the Court on the merits of their disagreement. Dkt. No. 122. On November 17, 2023, the Court heard argument on the proper scope of discovery in this case. Dkt. No. 132.

According to the Board, this case involves complex issues that require a "longer than typical discovery period." Id. at 10. It therefore proposes very broad discovery into such areas as how the Act works in practice; insulin sales and pricing practices in Minnesota, the United States, and around the world; the manufacturers' gross and net revenues; the benefits and burdens of a Minnesota drug manufacturer's license; the harm the Act has caused PhRMA and its members; the harm the insulin affordability crisis has caused the

public; insulin affordability studies and lawsuits; the manufacturers' insulin affordability programs; and communications and publications regarding insulin or diabetes, and lobbying efforts related to the Act or similar legislative proposals. Dkt. No. 128-1; see Exhibit A. The Board proposes an eighteen-month period of discovery and specifically requests "unlimited third-party discovery," presumably from the insulin manufacturers. Dkt. No. 119 at 7.

In contrast, PhRMA argues the case raises very discrete issues for which it proposes a narrow scope of discovery. Id. at 9. It proposes three months to complete discovery that focuses on whether the Act causes a per se physical taking and whether the three PhRMA members remain subject to the Act. Id. Accordingly, PhRMA's proposed discovery seeks information regarding how the Act has worked in practice, to whom it has been applied, how much free insulin has been provided under the Act, the Board's enforcement of the Act, and reviews, surveys and studies of the Act and possible modifications to it. Dkt. No. 128-3; see Exhibit B.

ANALYSIS

I. Rule 26(b)(1)

Federal Rule of Civil Procedure 26(b)(1) governs the scope of discovery. It entitles parties to obtain discovery regarding non-privileged matters that are both relevant to a party's claim or defense and proportional to the needs of the case. In determining whether a discovery request is proportional to the needs of the case, a court considers the importance of discovery in resolving the issues and the burden or expense of the discovery request relative to its likely benefit. Id. If the court determines proposed discovery exceeds the scope permitted by Rule 26(b)(1), it may impose limitations. Fed. R. Civ. P. 26(b)(2)(C).

II. Rule 12(f)

Federal Rule of Civil Procedure 12(f) allows a court to sua sponte strike redundant or immaterial matter, including defenses, from a pleading. Though striking a portion of a pleading is generally disfavored, courts retain broad discretion to do so when appropriate. See Donelson v. Ameriprise Fin. Servs., Inc., 999 F.3d 1080, 1091-92 (8th Cir. 2021). A court ordinarily will not strike a defense unless it lacks a logical connection to the subject matter of the litigation and may cause significant prejudice to the objecting party. See Braun v. Walz, No. 20-cv-331, 2021 WL 871217, at *1 (D. Minn. Mar. 9, 2021) (citing 5C Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. § 1382 (3d ed.)). "[I]rrelevant affirmative defenses prejudice plaintiffs where they result in increased time and expense of trial, including the possibility of extensive and burdensome discovery." Staton v. N. State Acceptance, LLC, No. 1:13-cv-277, 2013 WL 3910153, at *2 (M.D.N.C. July 29, 2013); see also WM Capital Management, Inc. v. Stejksal, No. 15 C 8105, 2016 WL 6037851, at *1 (N.D. Ill. Oct. 14, 2016) (striking a defense may be appropriate "where doing so would significantly affect the scope of discovery"). Striking a defense is also appropriate when the defense is foreclosed by prior controlling decisions. See United States v. Dico, Inc., 266 F.3d 864, 879-80 (8th Cir. 2001).

III. Proposed Categories of Discovery

The Board proposes discovery in six broad areas: (1) whether the Act constitutes a taking; (2) whether PhRMA continues to have associational standing; (3) whether the Act abates a public nuisance; (4) whether the Act is a voluntary exchange for the benefit of a drug-manufacturer license; (5) whether the Act is a public program that adjusts economic benefits

and burdens; and (6) whether injunctive relief is an appropriate remedy. Dkt. No. 119 at 5; Dkt. No. 126 at 2. PhRMA agrees to discovery regarding (1) and (2), but objects to discovery in categories (3), (4), (5), and (6). The Court addresses each of the disputed categories below.

A. Background on The Takings Clause

The Fifth Amendment Takings Clause prohibits the taking of private property for public use without just compensation. "When the government physically acquires private property for a public use, the Takings Clause obligates the government to provide the owner with just compensation." Cedar Point Nursery, 594 U.S. 139, 141 S.Ct. at 2066 (citing Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 321, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002)). Such physical takings are subject to a per se rule: "The government must pay for what it takes." Id. A regulatory taking, as distinct from a physical taking, occurs when the government imposes regulations that restrict an owner's ability to use his or her property. Id. When a use restriction "goes too far," according to the factors set forth in Penn Central Transportation Company v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978), it becomes a taking of private property for which the government must compensate the owner for the burden imposed by the regulation. See also Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 67 L.Ed. 322 (1922).

To bring a takings claim, a plaintiff must first establish a valid interest in the property. A property holder cannot claim an interest in property that violates a pre-existing limitation on ownership, as defined by state law. See Cedar Point Nursery, 594 U.S. 139, 141 S.Ct. at 2079 (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1028-29, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992)). If the governmental action simply enforces a pre-existing limitation on that property, the government does not effect a taking because the property owner had no legal right to use the property in such a way in the first place. Id.

In this case the Board argues that the Act merely enforces pre-existing limitations on the manufacturers' property interests —abatement of a public nuisance and the imposition of a reasonable burden in exchange for receiving the benefit of a license. Dkt. No. 117 at 10-11. PhRMA argues that the nuisance and license defenses are legally inapplicable here because they only apply to regulatory takings, not per se physical takings. Dkt. No. 95 at 16-21. No court has found a license or nuisance defense to excuse a per se physical taking, and it remains an open question whether these defenses even apply in per se physical takings cases. See Placer Min. Co. v. United States, 98 Fed. Cl. 681, 685-86 (2011) ("[T]he question of Lucas' applicability to physical takings is still an open one.").⁴ This Court need not determine definitively whether the nuisance and license exceptions may ever apply to a per se physical taking because

4 Lucas found that the government may assert limitations upon a landowner's title without effecting a taking if those limitations pre-exist the landowner's title and align with background principles of property law. Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1028-29, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992) ("[W]e assuredly would permit the government to assert a permanent easement that was a pre-existing limitation upon the land owner's title ... Any limitation so severe cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership.").

neither defense constitutes a valid preexisting limitation on the manufacturers' property interests in the circumstances of this case.

B. The Board's Nuisance Defense

The Board argues that the Act's free insulin programs do not constitute a taking because "PhRMA's members maintained and permitted a public nuisance that the Act seeks to abate." Dkt. No. 117 at 10. Specifically, the Board argues that PhRMA's members have "caused and maintained" an insulin-affordability crisis through their monopolistic pricing practices, which constitutes a public nuisance. Dkt. No. 110 at 10-11. The Board notes that courts have upheld nuisance restrictions as pre-existing limitations on property ownership, the abatement of which does not constitute a taking. See, e.g., Mugler v. Kansas, 123 U.S. 623, 668, 8 S.Ct. 273, 31 L.Ed. 205 (1887) ("[P]rohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or appropriation of property."); Cedar Point Nursery, 594 U.S. 139, 141 S.Ct. at 2079 ("[T]he government owes a landowner no compensation for requiring him to abate a nuisance on his property, because he never had a right to engage in the nuisance in the first place."). The alleged nuisance must be more than "inconsistent with the public interest." Lucas, 505 U.S. at 1031, 112 S.Ct. 2886. Rather, there must be "background principles of nuisance and property law that prohibit the use[]." Id. For the reasons discussed below the Court finds that the nuisance abatement defense does not apply in this case.

To begin, application of the nuisance abatement theory to a per se physical takings case is literally unprecedented. See Placer Min. Co., 98 Fed.Cl. at 685-86. The Board has not cited and this Court has not found any decision, let alone a binding precedent, applying abatement of a nuisance as a defense to a per se physical taking, as distinct from a regulatory taking.⁵

5 In John R. Sand & Gravel Co. v. United States, 60 Fed.Cl. 230, 235 (2004), the Court of Federal Claims commented that "the background principles exception to takings liability discussed in Lucas can apply to both regulatory and physical takings cases." However, the court did not apply the nuisance defense to a per se physical taking in that case, and the Court of Federal Claims has since then questioned whether the doctrine applies to allegations of per se physical takings. See Placer Min. Co., 98 Fed.Cl. at 685-86.

The Board cites Grater v. Damascus Twp. Trustees, 614 F. Supp. 3d 591 (N.D. Ohio 2022), aff'd sub nom. Grater v. Damascus Twp., Ohio Trustees, No. 22-3616, 2023 WL 3059080 (6th Cir. Apr. 24, 2023) as a case in which a court applied the nuisance exception to a per se physical taking. But Grater is inapposite. Grater maintained a junkyard on his property in violation of a zoning ordinance. The township removed the junk pursuant to a state statute, after declaring a nuisance and compensating Grater $171,770 for the junk it removed. Thus, the Grater case is not on point for two reasons. First, this case cannot justify an uncompensated physical taking because Grater was compensated $171,770 for the property taken. Second, the circumstances in Grater do not amount to a per se physical taking of private property for public use. The township was imposing a pre-existing limitation on Grater's property by physically removing (and recycling) the junk because Grater refused to do so. Here, the government is physically appropriating the manufacturers' private property and giving it to others, not enforcing a pre-existing nuisance law or property restriction. Moreover, even if a nuisance defense were theoretically applicable to a per se physical taking, it is not available here because the Board has failed to identify a legally recognized nuisance under Minnesota law. Nuisance is a creation of state law. See Indep. Cnty. v. Pfizer, Inc., 534 F. Supp. 2d 882, 890 (E.D. Ark. 2008), aff'd sub nom. Ashley Cnty., Ark. v. Pfizer, Inc., 552 F.3d 659 (8th Cir. 2009) (finding that courts apply the law of the forum state to public nuisance claims). Minnesota law defines a public nuisance as "a condition which unreasonably annoys, injures or endangers the safety, health, morals, comfort, or repose of any considerable number of members of the public." Minn. Stat. § 609.74; see, e.g., Edling v. Isanti Cnty., No. A05-1946, 2006 WL 1806397 (Minn. Ct. App. July 3, 2006) (classifying mining operations causing noise and dust complaints as a public nuisance). In this case the Board does not allege that insulin itself is in any way a nuisance or that its distribution unreasonably endangers public health. To the contrary, the Act itself makes clear that widespread availability of insulin is unqualifiedly a public benefit, not a nuisance. The Board's theory is that the drug manufacturers' "monopolistic pricing practices" (the conduct) has created "an insulin affordability crisis" (the public harm). Though not fully articulated in its briefing to this Court the Board's argument is presumably that "monopolistic pricing practices" are a pre-existing limitation on the drug manufacturers' property interests in the insulin they manufacture. Therefore, the theory would seem to go, when manufacturers transcend this limitation, they create a nuisance that harms the public, which the Act may properly abate.

There are several flaws in this theory. First, the Act does not purport to set a limit on (or otherwise regulate) the price manufacturers may charge Minnesota residents to abate the nuisance of unaffordability. Rather, it takes the manufacturers' property and gives it away free of charge to certain Minnesota residents. The nature of this practice not only illustrates the difference between a regulatory taking and a per se physical taking, it illuminates why no court has applied a nuisance exception in a per se physical takings case—the governmental action (at least in this case) is not an abatement.

In addition, the Board has failed to identify any case in which a court has held that the pricing of lawful product can be a public nuisance. The Board cites Minnesota v. Fleet Farm LLC, 679 F.Supp.3d 825 (D. Minn. 2023), as a case in which this district has recognized a nuisance theory may be applied to the sale of a lawful product. Far from supporting the Board's position in this matter, however, the Fleet Farm decision favors PhRMA's position. In Fleet Farm the State of Minnesota sued defendants for knowingly (or negligently) selling guns to straw purchasers, that is, purchasers who bought guns for persons who could not legally buy or possess them. Id. at 831-32. By doing so, the state alleged, defendants were proliferating illegal firearms, thereby endangering the safety and health of the community. The district court held that the state had plausibly pleaded a claim for public nuisance. Id.

Several key distinctions between Fleet Farm and this case illustrate its inapplicability here. First, the product at issue in Fleet Farm—guns, unlike insulin—are themselves dangerous, particularly in the hands of criminals and miscreants. Second, the practice at issue in Fleet Farm, as distinct from here, did not involve a per se physical taking of Fleet Farm's property, but rather regulation (by injunction and damages) of the illegal conduct at issue— sales to straw purchasers. Id. at 833-34. Third, Fleet Farm was an affirmative action brought by the state against the alleged

nuisance creator to abate the practice of selling guns to straw purchasers. No Fifth Amendment per se taking claim (or even a regulatory taking claim) was raised by the defendant in the case. Fleet Farm is simply inapposite. It is not precedent for the Board's argument that allegedly illegal pricing practices may create a nuisance that can be abated by physically taking the allegedly mis-priced beneficial product.

But, the Board alleges, there is precedent that "monopolistic pricing practices" may constitute an abatable nuisance, citing Territory v. Long Bell Lumber Co., et al., 22 Okla. 890,99 P. 911 (1908). The Board's citation to this authority is problematic for several reasons. A 1908 Oklahoma Supreme Court decision is hardly binding precedent here. Nor is it persuasive. The decision has never been cited, let alone followed, by any Minnesota court. But most important, the Board's citation to it fails to put the decision in its proper legal historical context. The case involved a criminal nuisance complaint by the Territory of Oklahoma against companies who had monopolized the lumber industry in Kingfisher County, Oklahoma.⁶ The Oklahoma Supreme Court affirmed the probate court's issuance of an injunction enjoining the defendants' monopolistic pricing practices as a public nuisance. The court, referencing the myriad different legal theories on which other states had pursued monopolies commented:

6 The case also involved alleged monopolies in the grain and coal industries.

[There are] different remedies which have heretofore been applied to relieve the public of the effect of unlawful combinations restrictive of free competition, and now we are called on to say whether or not [such] combinations ... may be proceeded against in yet an additional way, as for a nuisance ...

Id. at 917-18. In the early development of antitrust law, "monopolies were regarded as nuisances at common law ... that [could] be restrained at the suit of the public [prosecuting] authorities." 10A Wiliam Meade Fletcher, Fletcher Cyc. Corp. § 4972.50 (perm. ed., rev. vol. 2023). The Long Bell Lumber decision belongs to this early tradition of antitrust law, which gained some currency in the period between 1850 and 1930, then seemingly died out. See, e.g., Denver Jobbers' Ass'n v. People, 21 Colo.App. 326, 378-80, 122 P. 404 (1912). The Court has found no Minnesota decision holding that monopolistic pricing creates an abatable public nuisance. But again, even if this doctrine were in current usage under Minnesota law, it does not support the Board's position here. In those cases, even though the monopoly was considered a nuisance the state authorities did not appropriate the property and dispense it to private citizens. The abatement of that nuisance took the form of enjoining the pricing conduct. The Board's theory of nuisance abatement is simply not applicable in this case.

This is not to say that the manufacturers' pricing practices are beyond the reach of the law. Far from it. If (as the State of Minnesota alleges elsewhere) the manufacturers have engaged in unlawful pricing practices, they are potentially subject to civil liability, including injunctive relief, under a variety of legal theories. See Minnesota by Ellison v. Sanofi-Aventis U.S. LLC, No. 3:18-cv-14999, 2021 WL 2201176 (D.N.J. Mar. 12, 2021). In that litigation, the State of Minnesota has alleged that the insulin manufacturers' pricing practices violate state and federal law and seeks damages, civil penalties and injunctive relief enjoining the allegedly unlawful pricing practice. No doubt—as both the Board and PhRMA have admitted— discovery in that case will be broad and far reaching, including fulsome discovery into

the defendants' pricing practices. But that case is not this case. Even if the theory of monopoly nuisance were alive and well today in Minnesota it would not be a legally recognized basis on which the government can physically take a property owner's useful property without compensation. Because this nuisance theory is not a defense in this case it cannot be used to justify the extremely broad discovery the Board seeks here. Even if the price of insulin is "inconsistent with public interest," there is no background principle of nuisance or property law that allows the government to physically appropriate an expensive medication under the guise of abating a nuisance. See Lucas, 505 U.S. at 1031, 112 S.Ct. 2886. A novel application of public nuisance law to the pricing of a legal, beneficial medicine is not a "longstanding background restriction" on the manufacturers' property rights in the medicine that they make. Cedar Point Nursery, 594 U.S. 139, 141 S.Ct. at 2079. Because this alleged defense is not legally applicable in this case and would prejudice PhRMA by substantially expanding the scope of discovery, the Court strikes it from the Board's pleading pursuant to Rule 12(f) and prohibits the broad discovery the Board seeks under this theory. See Braun, 2021 WL 871217, at *1; Fed. R. Civ. P. 12(f), 26(b)(2)(C).

C. The Board's License Defense

The Board argues it is entitled to discovery to demonstrate the Act is not a taking because the manufacturers have agreed to abide by it in exchange for the continued benefit of having a Minnesota manufacturer's license. Dkt. No. 117 at 11. A state law may impose limits on an owner's property rights as a condition for obtaining a license without that limitation amounting to a taking. See Cedar Point Nursery, 594 U.S. 139, 141 S.Ct. at 2079. If the licensing condition imposes a pre-existing limitation on property ownership, the property owner has no interest in the property apart from the condition. Id. The burden imposed by the condition must bear an "essential nexus" and "rough proportionality" to the proposed benefit. Id. (citing Dolan v. City of Tigard, 512 U.S. 374, 391, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994)). For example, requiring a company to disclose its trade secret formula in order to sell a dangerous pesticide is a valid condition when it also provides the exclusive right to sell that pesticide for ten years. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 994, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984). But, "basic and familiar uses of property," such as the right to sell a product in interstate commerce, are "not [] special governmental benefit[s] that the Government may hold hostage, to be ransomed by the waiver of constitutional protection." Horne, 576 U.S. at 366, 135 S.Ct. 2419. Moreover, a burden is not a true condition of a government benefit, rather than a taking, if failure to abide by the condition does not result in loss of the benefit. See, e.g., Valancourt Books, LLC v. Garland, 82 F.4th 1222, 1232-33 (D.C. Cir. 2023) (requiring copyright owners to provide free copies of works was a taking, rather than a condition of retaining copyright, because the owners were subjected to a fine for not complying, not loss of copyright protection). In short, the Government may impose burdens on property ownership without effecting a taking, but only if those burdens are consistent with pre-existing property limitations and provide proportional benefits beyond basic and familiar uses of property.

The Board argues that abiding by the Act is simply a condition of maintaining a drug-manufacturing license in Minnesota. Dkt. No. 66 at 30. However, the Act does not impose a burden consistent with pre-existing property limitations. Prior to the Act, the manufacturers enjoyed and exercised their license to sell insulin in Minnesota. Since the Act went

into effect on July 1, 2020, manufacturers are now required to provide free insulin to maintain the same license, without receiving any additional benefit. Minn. Stat. § 151.74; Minn. R. 6800.1400. The Board has not identified a pre-existing limitation inherent in property ownership that requires owners to forfeit their property at no cost to maintain a license to manufacture, distribute, or sell that property. Minn. R. 6800.1400. The right to manufacture, distribute, or sell a beneficial pharmaceutical in interstate commerce is a basic and familiar use of property that cannot be "ransomed by the waiver of constitutional protection." It is unlike the introduction and exclusive right to sell a new and dangerous pesticide. Horne, 576 U.S. at 366, 135 S.Ct. 2419. Requiring manufacturers to give away their property free of charge as a condition of maintaining their license to manufacture, distribute, or sell legal drugs in Minnesota is not a pre-existing limitation on property ownership because the only benefit given in exchange for this license is the basic and familiar use of the property. See id.

Moreover, adherence to the Act is not a true condition of maintaining a Minnesota drug-manufacturer license because failing to comply with the Act does not revoke the manufacturer's license, it simply results in a fine. See Minn. Stat. § 151.74, subdiv. 10(a); Valancourt Books, LLC, 82 F.4th at 1232-33. Because the Board's license defense is not legally applicable to this litigation, the Court strikes it from the Answer and denies discovery into that defense. See Braun, 2021 WL 871217, at *1; Fed. R. Civ. P. 12(f), 26(b)(2)(C).

D. The Board's Economic Benefit Versus Burden Defense

The Board claims it is entitled to discovery on its theory that the Act is not a taking because it "creates a public program that lawfully adjusts economic benefits and burdens." Dkt. No. 119 at 5. The Board raises this defense in the Rule 26(f) report but has neither pleaded it in its Answer nor referenced it in any subsequent filings. The Court understands that this defense is a reference to Penn Central, which sets forth the factors courts must evaluate in a regulatory takings case, one of which is whether the alleged taking "arises from some public program adjusting the benefits and burdens of economic life to promote the common good." Penn Central Transportation Co., 438 U.S. at 124, 98 S.Ct. 2646. However, Penn Central involves regulatory takings, and PhRMA has only alleged that the Act effects a per se physical taking. As such, the Penn Central factors analysis is legally inapplicable to this case. Moreover, the Eighth Circuit held that an inquiry into the "economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action" is unnecessary to determine whether the alleged per se physical taking has occurred.⁷ Williams, 64 F.4th at 947 (quoting Horne, 576 U.S. at 360, 135 S.Ct. 2419). Therefore, discovery to support this defense is neither relevant nor proportional to the needs of this case.⁸ E. Injunctive Relief Factors

7 Additionally, the Board has not linked any specific discovery requests to this defense.

8 This opinion should not be construed as impugning the motivations underlying the Act nor suggesting that the Act, if constitutional, does not create a public benefit. The Act and its programs are an attempt to address an important public need. Insulin saves lives. Minnesotans living with diabetes should not be deprived of it because it costs too much. The manufacturers' responsibility for the insulin affordability crisis, however, is separately being litigated throughout the country. However, if the programs at issue here are unconstitutional, their beneficial outcomes, the manufacturers assert, do not justify the taking of their property without just compensation. "[A] 'strong desire to improve the public condition' does not allow the government to achieve its goals 'by a shorter cut than the constitutional way of paying for the change.'" Dkt. No. 27 at 10 (quoting Pennsylvania Coal, 260 U.S. at 416, 43 S.Ct. 158). In that case, the state would have other avenues to achieve the desired public benefit, such as proactively compensating the manufacturers for the insulin they provide under the Act.

Finally, the Board argues it is entitled to discovery into the factors the Court will consider in deciding whether PhRMA is entitled to injunctive relief. Injunctive relief is typically unavailable in takings claims because just compensation is the appropriate remedy. See Knick v. Twp. of Scott, Pennsylvania, 588 U.S. 180, 139 S.Ct. 2162, 2164, 204 L.Ed.2d 558 (2019) (finding equitable relief generally unavailable when just compensation provides an adequate remedy at law). If just compensation does not provide an adequate remedy, as has been conclusively determined in this case, a court considers the following factors in determining whether to impose a permanent injunction: "(1) the threat of irreparable harm to the moving party; (2) the balance of harms with any injury an injunction might inflict on other parties; and (3) the public interest." Miller v. Thurston, 967 F.3d 727, 735 (8th Cir. 2020). However, when a deprivation of a constitutional right has been identified "no further showing of irreparable injury is necessary." Marcus v. Iowa Pub. Television, 97 F.3d 1137, 1140-41 (8th Cir. 1996) (citing Elrod v. Burns, 427 U.S. 347, 373, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976) (plurality opinion)); 11A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2948.1 (3d ed. 2023). Additionally, "the balance-of-harm [to other parties] and public-interest factors also need not be taken into account" when "the public interest will [] be served by enjoining the enforcement of the invalid provisions of state law." Bank One, Utah v. Guttau, 190 F.3d 844, 847-48 (8th Cir. 1999) (permanently enjoining a state law that was preempted by a federal statute); see also Odebrecht Constr., Inc. v. Sec'y, Fla. Dep't of Transp., 715 F.3d 1268, 1290 (11th Cir. 2013) ("[T]he public has no interest in the enforcement of ... an unconstitutional statute"). Thus, because this case involves only an allegation of a per se physical taking, the injunctive factors analysis collapses into (or is coterminous with) the question whether a taking has occurred. In short, the Court agrees with PhRMA that the injunctive relief issue can be resolved without discovery into the balance of the harm factors.

To defend against PhRMA's request for injunctive relief, the Board requests extensive discovery into the harm the Act has caused manufacturers, the harm insulin pricing has caused the public, the manufacturers' insulin sales and pricing practices, and their annual gross and net revenues. Dkt. No. 128-1 at 6, 8-10, 12, 15, 18-19, 31, 34, 38, 39. Because the, Eighth Circuit has determined that PhRMA is entitled to seek equitable relief, this discovery is unnecessary. If the district court finds that the Act effects an unconstitutional physical taking, no additional discovery is necessary to enjoin enforcement of the statute. The district court will have identified an unconstitutional statute, causing irreparable harm to the manufacturers, and the public interest will not be served by enforcing it. See Marcus, 97 F.3d at 1140-41; Bank One, Utah, 190 F.3d at 847-48. The district court's decision to enjoin or enforce the unconstitutional statute will be straightforward, unaided by information the Board seeks in discovery. Discovery into the manufacturers' insulin sales and pricing practices, their revenues, and the balance of harm to the manufactures and the public is not relevant or proportional to

the parties' claims or defenses. It therefore exceeds the scope of permissible discovery under Federal Rule of Civil Procedure 26(b)(1).

IV. Scope of Discovery

Given the Court's conclusions, the issues for which discovery is proper are whether and as to whom PhRMA continues to have associational standing to maintain this action and whether the Act constitutes a per se taking of private property for public use.

The Board's discovery plan seeks forty-four categories of information, only eleven of which are relevant and proportional to the issues in this case. Dkt. No. 128-1 at 1-3, 6, 9, 11, 13-16, 33. The remaining thirty-three categories relate to inapplicable defenses or are irrelevant to the narrow issues in this case. Id. at 4-5, 7-8, 10, 12, 17-32, 34-44. Relevant and proportional to PhRMA's associational standing, the Board is entitled to information regarding:

• the identity of PhRMA members who sell insulin in Minnesota (Cat. 1);

• the factual basis to support that PhRMA has associational standing and will maintain that standing in this action (Cat. 2);

• the insulin products sold in Minnesota by product name, manufacturer, and National Drug Code from 2020 to present (Cat. 3);⁹

• the actual or projected WAC per milliliter or applicable National Council for Prescription Drug Plan billing unit for each insulin product manufactured by PhRMA members and sold in Minnesota for 2020 through the present (Cat. 6);¹⁰ and

• the implemented or planned price caps or price reductions on insulin sold by PhRMA members in Minnesota, from 2020 forward (Cat. 9).

9 The Board requests the information in this category from 2009 to the present; however, the Court finds the information only relevant for the years the Act has been in effect, from 2020 to the present.

10 The Board requests the information in this category for 1995, 2000, and 2009 through 2025. The Court finds the information only relevant for the years the Act has been in effect, from 2020 to the present.

Relevant and proportional to whether the Act effects an unconstitutional per se taking, the Board is entitled to discovery regarding:

• how the Urgent Need and Continuing Safety Net Programs under the Act work in practice (Cat. 11);

• payment under Minn. Stat. § 151.74, subd. 3(d), received by insulin manufacturers or their vendors (e.g., claim date, amount, entity making claim, and insulin products for which claim was made) (Cat. 13);

• payments made by insulin manufacturers or their vendors to pharmacies under Minn. Stat. § 151.74, subd. 3(d) (e.g., date, amount, and payee) (Cat. 14);

• replacement insulin sent to pharmacies by insulin manufacturers or their vendors under Minn. Stat. § 151.74, subd. 3(d) (e.g., product name, amount, WAC, and cost to manufacture the replacement insulin, date the insulin was sent, and recipient) (Cat. 15);¹¹

11 The Board also requests information about the average manufacturer price (AMP) and average sale price (ASP) of insulin in this category. Because the WAC is the only relevant calculation in this lawsuit, however, discovery into those figures is not proportional to the needs of the case and beyond the scope of permissible discovery.

• applications for insulin under the Act received by manufacturers (application forms only, no supporting documentation) and any eligibility statements and notifications provided by the manufacturers to continuing-need applicants under the Act (Cat. 16); and

• manufacturers' insulin affordability programs (e.g., implementation of, and planned future changes to programs; contacts from Minnesotans regarding insulin-affordability assistance; data on successful and denied Minnesota applicants; type and amount of assistance provided) (Cat. 33).

PhRMA's discovery plan identifies the following categories of discovery: (1) requests relating to Article III standing and the Takings Clause; (2) requests relating to the Board's defenses; and (3) requests relating to the injunctive factors. Dkt. No. 128-3. PhRMA clarifies, however, that its requests in Categories (2) and (3) are contingent on the Court allowing the Board to seek discovery on such theories. Id. The 8th Circuit has conclusively determined that PhRMA has Article III standing and this Court has determined that no discovery shall be taken as to the stricken defenses or the injunctive factors. Relevant and proportional to PhRMA's associational standing, however, discovery is appropriate into:

• information that Eli Lilly and Company, Novo Nordisk, Inc., and Sanofi (the manufacturers) are subject to the Act in 2023 and were subject to the Alec Smith Insulin Affordability Act, Minn. Stat. § 151.74 (the "Act") in 2020, 2021, and 2022 (Cat. I(A)(1)(a));

• communications with legislature regarding modification of the Act or extension of the Continuing Safety Net Programs beyond December 31, 2024 (Cat. I(A)(2)(k)); and

• the Wholesale Acquisition Cost (WAC) of each insulin product offered for sale in Minnesota (Cat. I(B)(2)).

As to the issue whether the Act effects an unconstitutional taking, discovery is appropriate into:

• whether the manufacturers dispensed insulin to Minnesota residents at no charge in 2020, 2021, 2022 and 2023 under the Act's Urgent Need Program, Minn. Stat. § 151.74. subdiv. 3 (Cat. I(A)(1)(b));

• whether the manufacturers dispensed insulin to Minnesota residents at no charge in 2020, 2021, 2022 and 2023 under the Act's Continuing Safety Net Program, Minn. Stat. § 151.74. subdiv. 6 (Cat. I(A)(1)(c));

• whether the manufacturers complied with the Act in 2020, 2021, 2022, and 2023 (Cat. I(A)(1)(d));

• the insulin provided by the manufacturers pursuant to the Alec Smith Affordability Act (Cat. I(A)(2)(a));

• requests from Minnesota residents or pharmacies for insulin from the manufacturers under the Act (Cat. I(A)(2)(c));

• estimates made by state agencies or legislative offices about use of the Act in prior years or future years, including MNsure's estimates that 13,100 Minnesotans would participate in the Continuing Safety Net Program and 16,600 Minnesotans would participate in the Urgent Need Program in the first year after the Act goes into effect. Minn. Health & Human Servs. Fin. Div., Consolidated Fiscal Note, HF 3100, 91st Leg. (Feb. 18, 2020) (Cat. I(A)(2)(d));

• communications regarding requests by Minnesota residents or pharmacies for insulin under the Act and the quantity and value of insulin provided by the manufacturers under the Act (Cat. I(A)(2)(i));

• the number of individuals who applied for insulin provided by the manufacturer under the Continuing Safety Net Program required by the Act, the number of individuals who were deemed eligible, and the quantity and value of the insulin provided by the manufacturer (Cat. I(B)(3)); and

• the number of individuals who received insulin provided by the manufacturer under the Urgent Need Program established by the Act and the quantity and value of the insulin provided by the manufacturer (Cat. I(B)(4)).

Given the significant reduction in the scope of discovery, the Court gives the parties three months to complete fact discovery limited to 25 interrogatories, 20 requests for admission, 20 document requests, and 4 depositions per side. See Scheduling Order.

CONCLUSION

Courts have broad discretion to define the bounds of proper discovery. Where parties seek information either irrelevant or disproportionate to the needs of a case, a court may impose limitations. Fed. R. Civ. P. 26(b)(2)(C). Further, when a party raises a defense that lacks a logical connection to the subject matter of the litigation and may cause significant prejudice to the opposing party, a court has discretion pursuant to Fed. R. Civ. P. 12(f) to strike that defense from the case. See Braun, 2021 WL 871217, at *1 (citing 5C Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. § 1382 (3d ed.)). Here, the Board asserts three defenses inapplicable to the subject matter of this case. Finally, the Board seeks information relevant to a remedy that requires no fact discovery. For these reasons;

IT IS HEREBY ORDERED:

1. The Court strikes the affirmative defense of nuisance (Affirmative Defense No. 5) from Defendants' Answer, Dkt. No. 117, pursuant to Rule 12(f).

2. The Court strikes the affirmative defense of license (Affirmative Defense No. 6) from Defendants' Answer, Dkt. No. 117, pursuant to Rule 12(f).

3. The Court prohibits discovery into Defendants' benefit versus burden defense pursuant to Federal Rule of Civil Procedure 26(b)(1) as described above.

4. The Court limits Defendants' discovery requests regarding the injunctive relief factors pursuant to Federal Rule of Civil Procedure 26(b)(1) as described above.

5. Plaintiff may seek discovery in categories I(A)(1), I(A)(2)(a), I(A)(2)(c)-(d), I(A)(2)(i), I(A)(2)(k), and I(B)(2)-(4) of its discovery plan, Dkt. No. 128-3.

6. Plaintiff is denied discovery requests in categories I(A)(2)(b), I(A)(2)(e)-(h), I(A)(2)(j), I(A)(2)(l)-(n), I(A)(3), I(B)(1), II, and III of its discovery plan, Dkt. No. 128-3.

7. Defendants may seek to discovery in categories 1-3, 6, 9, 11, 13-16, and 33 of their discovery plan, Dkt. No. 128-1.

8. Defendants are denied discovery in categories 4-5, 7-8, 10, 12, 17-32, and 34-44 of their discovery plan, Dkt. No. 128-1.

EXHIBIT A

Category of Information Party Form of Request* 1. Identity of PhRMA members who sell insulin in Minnesota PhRMA Interrogatory 2. Factual basis to support that PhRMA has standing and will maintain standing in this action PhRMA Interrogatory 3. Insulin products sold in Minnesota by product name, manufacturer, and National Drug PhRMA Interrogatory Code from 2009 to present Manufacturers Document requests 4. Wholesalers that manufacturers sell insulin products to for resale in Minnesota PhRMA Interrogatory Manufacturers Document requests 5. List of entities/individuals in Minnesota that buy insulin directly from the manufacturers PhRMA Interrogatory Manufacturers Document requests 6. Actual or projected WAC per milliliter or applicable National Council for Prescription PhRMA Interrogatory Drug Plan billing unit for each insulin product manufactured by PhRMA members and Manufacturers Document requests sold in Minnesota for 1995, 2000, and 2009 through 2025 7. Increases in insulin prices greater than rate of inflation between 2009 and the present PhRMA Interrogatory Manufacturers Document requests 8. Volume and value, by WAC, AMP, AWP, and ASP, of insulin products annually sold in PhRMA Interrogatory Minnesota for 1995, 2000, and 2009 to present Manufacturers Document requests Wholesalers 9. Implemented or planned price caps or price reductions on insulin sold by PhRMA Interrogatory members in Minnesota, from 2009 forward Manufacturers Document requests 10. Manufacturers' actual or projected annual gross and net revenues for insulin sales in PhRMA Interrogatory Minnesota and the United States, for 1995, 2000, and 2009 to 2025 Manufacturers Document requests 11. How urgent-need and continuing safety-net programs under the Act work in practice PhRMA Interrogatory Manufacturers Deposition Pharmacies 12. Information about insulin manufacturers have provided under the Act's urgent and Manufacturers Document requests continuing-need programs (e.g., product name, amount, price (WAC, AMP, AWP, ASP), manufacturing costs, program provided under, date provided, recipient)

13. Claims for payment under Minn. Stat. § 151.74, subd. 3(d), received by insulin Manufacturers Document requests manufacturers or their vendors (e.g., claim date, amount, entity making claim, and insulin products for which claim was made) 14. Payments made by insulin manufacturers or their vendors to pharmacies under Minn. Stat Manufacturers Document requests § 151.74, subd. 3(d) (e.g., date, amount, and payee) 15. Replacement insulin sent to pharmacies by insulin manufacturers or their vendors under Manufacturers Document requests Minn. Stat. § 151.74, subd. 3(d) (e.g., product name, amount, WAC, AMP, ASP, and cost to manufacture the replacement insulin, date the insulin was sent, and recipient) 16. Applications for insulin under the Act received by manufacturers (application forms only, Manufacturers Document requests no supporting documentation) and any eligibility statements and notifications provided by the manufacturers to continuing-need applicants under the Act 17. Documents used to prepare the Act's required annual reports to the Board of Pharmacy Manufacturers Document requests 18. Amount of just compensation that insulin manufacturers claim they have been denied by Manufacturers Document requests the state for insulin provided under the Act and how that amount was calculated 19. Description and documentation of all harm claimed by manufacturers caused by the Act PhRMA Interrogatory Manufacturers Document requests 20. Attempts to obtain the just compensation that manufacturers claim they are entitled to for PhRMA Interrogatory the alleged takings Manufacturers Admissions Document requests 21. Factual basis for claiming manufacturers would need to bring "a continuous series" of PhRMA Interrogatory inverse-condemnation suits in state court to obtain just compensation for the alleged Manufacturers Admissions takings under the Act (paragraph 85 of complaint) Document requests 22. How manufacturers establish WAC for insulin products PhRMA Interrogatory Manufacturers Document requests 23. Manufacturers' costs of manufacturing, distributing, marketing, promoting, and selling PhRMA Interrogatory all insulin products from 2009 to the present Manufacturers Document requests

24. Communications received or sent by PhRMA or the manufacturers regarding insulin PhRMA Interrogatory pricing or insulin affordability from 2009 to present Manufacturers Document requests 25. Communications between PhRMA and its members about the Act and this litigation PhRMA Interrogatory Manufacturers Document requests 26. Identify all litigation and investigations concerning insulin pricing in which PhRMA or PhRMA Interrogatory the manufacturers have been a party or subject (e.g., name of case, government entity Manufacturers Document requests investigating, and result or current status) 27. Deposition transcripts from all insulin-pricing lawsuits or investigations against Eli Lilly, Manufacturers Document requests Sanofi, and Novo Nordisk taken in the past ten years 28. Organizational-governance information (e.g., organizational chart; board and PhRMA Document requests management meeting materials relating to insulin pricing, affordability, or governmental Manufacturers regulation information from 2009 to present; list of committees or working groups involved in insulin pricing, affordability, governmental regulation; membership agreements with manufacturers; articles of incorporation and bylaws; common interest/joint-defense agreements) 29. Lobbying efforts related to the Act (e.g., communications with lobbyists, legislators, and PhRMA Interrogatory stakeholders; internal documents; efforts to oppose/support Act; communications with Manufacturers Document requests manufacturer members and PhRMA) 30. Lobbying, efforts for other states' legislative proposals that were similar to the Act PhRMA Interrogatory Manufacturers Document requests 31. Research and data regarding insulin pricing, price elasticity of demand for insulin, costs PhRMA Document requests and benefits of manufacturers' affordability programs, health effects of insulin rationing Manufacturers 32. Publications, blogs, press releases, videos created by PhRMA or manufacturers regarding PhRMA Document requests diabetes or insulin Manufacturers 33. Manufacturers' insulin affordability programs (e.g., implementation of, and planned PhRMA Interrogatory future, changes to programs; contacts from Minnesotans regarding insulin-affordability Manufacturers Document requests assistance, data on successful and denied Minnesota applicants; type and amount of assistance provided)

34. Information on manufacturers "other significant voluntary efforts" (paragraph 56 of PhRMA Interrogatory complaint) (e.g., description of efforts; number of Minnesotans obtaining insulin through Manufacturers Document requests these efforts; amounts paid to manufacturers for insulin distributed to Minnesotans through these efforts, along with WAC, AMP, AWP of the insulin) 35. Evidence that patients' out-of-pocket cost is often "much lower than WAC" when PhRMA Interrogatory purchasing insulin in Minnesota, including for residents who are uninsured or have high-deductible Manufacturers Document requests plans (paragraph 48 of complaint) 36. Communications and contracts with PBMs regarding discounts or rebates on insulin PhRMA Interrogatory (paragraph 49 of complaint) Manufacturers Document requests PBMs 37. Cash prices for insulin products sold in Minnesota from 2009 to present Pharmacies Document requests 38. Data on deaths/hospitalizations/ER visits in Minnesota related to diabetes, PhRMA Document requests hyperglycemia, and ketoacidosis Manufacturers Others 39. For insulin products sold in Minnesota, the price benchmarks of the same or similar PhRMA Interrogatory product sold by PhRMA members in certain other countries (e.g., Canada, Mexico, Manufacturers Document requests Australia, and France) 40. Licenses held by manufacturers in other states PhRMA Interrogatory Manufacturers Document requests 41. Benefits of a Minnesota drug manufacturers license PhRMA Interrogatory Admissions 42. Manufacturers' annual gross and net revenue for drug sales in Minnesota 2013 to present Manufacturers Document requests 43. Manufacturers' net worth 2019 to present Manufacturers Document requests 44. Any forecast, analysis or calculation of manufacturers' return on investment for any Manufacturers Document requests insulin product sold in Minnesota

* All discovery requests may be subject to follow up in a deposition. Document requests for third-parties would be through subpoenas.

Definitions

"Act" means the Insulin Safety Net Program, Minn. Stat. § 151.74, enacted in the Alec Smith Insulin Affordability Act. "AMP" means the average manufacturer price as defined by 42 U.S.C. § 1396r-8(k)(1)

"ASP" means the average sales price as defined by 42 U.S.C. § 1395w-3a(c)(1).

"AWP" means the average wholesale price.

"Drug" means drug as defined by Minn. Stat. § 151.01, subd. 5.

"Insulin" means insulin that is self-administered on an outpatient basis.

"Manufacturer" means a manufacturer engaged in the manufacturing of insulin that is self-administered on an outpatient basis.

"PBM" means pharmacy benefit managers.

"WAC" means wholesale acquisition cost as defined by 42 U.S.C. § 1395w-3a(c)(6)(B).

EXHIBIT B

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MINNESOTA

Pharmaceutical Research and Manufacturers of America, Plaintiff,

v.

James Bialke, Ronda Chakolis, Barbara Droher Kline, Michael Haag, Ben Maisenbach, Kendra Metz, Rabih Nahas, Amy Paradis, and John M. Zwier, in their official capacities as members of the Minnesota Board of Pharmacy, Defendants.

Case No. 20-cv-1497-DSD-DTS

PLAINTIFF'S PROPOSED DISCOVERY PLAN

PROPOSED DISCOVERY PLAN OF PLAINTIFF PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA

Plaintiffs reserve the right to conduct third-party discovery to seek the discovery described below, including third-party discovery of other Minnesota parties, including the Board of Pharmacy, MNSure, and the State of Minnesota.

I. Requests Relating to Article III Standing and Takings Clause Claim

A. Defendants/State of Minnesota

1. Requests for Admission [to be updated through date of trial]

a) Request for admission that Eli Lilly and Company, Novo Nordisk, Inc., and Sanofi (the manufacturers) are subject to the Act in 2023 and were subject to the Alec Smith Insulin Affordability Act, Minn Stat. § 151.74 (the "Act") in 2020, 2021, and 2022.

b) Request for admission that the manufacturers dispensed insulin to Minnesota residents at no charge in 2020, 2021, 2022 and 2023 under the Act's Urgent Need Program, Minn Stat. § 151.74. subd. 3.

c) Request for admission that the manufacturers dispensed insulin to Minnesota residents at no charge in 2020, 2021, 2022 and 2023 under the Act's Continuing Safety Net Program, Minn Stat. § 151.74. subd. 6.

d) Request for admission that the manufacturers complied with the Act in 2020, 2021, and 2022 and that the manufacturers have complied with the Act in 2023.

2. Requests for Production/Interrogatories

a) Documents regarding insulin provided by the manufacturers pursuant to the Alec Smith Affordability Act (the Act), including:

(1) Documents identifying the number of individuals who applied for insulin from the manufacturers under the Continuing Safety Net Programs required by the Act, the number of individuals who were deemed eligible, and the quantity and value of the insulin provided by the manufacturers.

(2) Documents identifying the number of individuals who applied for insulin provided by the manufacturers under the Urgent Need Program established by the Act, the number of individuals who were deemed eligible, and the quantity and value of the insulin provided by the manufacturers.

b) Documents related to all insulin provided under the Act.

c) Documents related to all requests from Minnesota residents or pharmacies for insulin from the manufacturers under the Act.

d) Documents relating to any estimates made by state agencies or legislative offices about use of the Act in prior years or future years, including MNSure's estimates that 13,100 Minnesotans would participate in the Continuing Safety Net Program and 16,600 Minnesotans would participate in the Urgent Need Program in the first year after the Act goes into effect. Minn. Health & Human Servs. Fin. Div., Consolidated Fiscal Note, HF 3100, 91st Leg. (Feb. 18, 2020).

e) Documents identifying the Minnesota Board of Pharmacy's costs associated with enforcing the Act in 2020, 2021, 2022, and 2023.

f) Documents identifying any administrative penalties assessed under the Act and the type of violation associated with each administrative penalty assessed under the Act.

g) Documents related to enforcement or interpretation of the Act.

h) Communications regarding the need for the Act and the public interest served by the Act.

i) Communications regarding requests by Minnesota residents or pharmacies for insulin under the Act and the quantity and value of insulin provided by the manufacturers under the Act.

j) Communications regarding enforcement of the Act.

k) Communications with legislature regarding modification of the Act or extension of the Continuing Safety Net Programs beyond December 31, 2024.

l) Communications with Office of the Legislative Auditor regarding the program review requested under the Act at Minn. Stat. 151.74 subd. 14.

m) Communications regarding any surveys conducted by the commissioner of health under the Act, Minn. Stat. 151.74 subd. 15.

n) Communications with third parties regarding the Act.

3. Deposition (if needed)

a) Depositions of individuals with knowledge of substantive answers to discovery above, as well as defendants' documents and information provided in requests for production and interrogatories.

B. The Manufacturers

Plaintiffs also reserve the right to produce evidence and documents and testimony from the manufacturers relating to:

1. Annual gross revenue from insulin in Minnesota for 2020, 2021, 2022, and 2023.

2. The Wholesale Acquisition Cost (WAC) of each insulin product offered for sale in Minnesota.

3. The number of individuals who applied for insulin provided by the manufacturer under the Continuing Safety Net Program required by the Act, the number of individuals who were deemed eligible, and the quantity and value of the insulin provided by the manufacturer.

4. The number of individuals who received insulin provided by the manufacturer under the Urgent Need Program established by the Act and the quantity and value of the insulin provided by the manufacturer.

II. Requests Relating to Defendants' Defenses

It is plaintiffs position that the documents and information defendants are seeking purportedly in support of their three defenses is irrelevant and unnecessary because those defenses are legally invalid. Plaintiff will oppose discovery into these areas under Rule 26. To the extent the Court rules that defendants are entitled to any discovery relating to these defenses, plaintiff will also seek the discovery outlined below. Plaintiff also reserves the right to seek additional discovery based upon new or different defenses asserted by defendants.

A. Nuisance Defense

1. Defendants/State of Minnesota

a) Requests for Production/Interrogatories

(1) Identify all background principles of property law and nuisance law (already in place in Minnesota before June 30, 2020) that rendered the prices the manufacturers charged for their insulin products unlawful or an actionable- nuisance.

(2) Documents relating to any actions taken by defendants or the State of Minnesota regarding insulin prices in the ten years prior to the effective date of the Act.

(3) Documents identifying out-ofpocket costs paid for insulin by individuals in Minnesota.

(4) Documents relating to alternative methods for addressing insulin availability for Minnesota residents, including by regulating insurance coverage and copayments for insulin or providing assistance to insulin patients.

(5) Documents identifying prices for non-insulin products that defendants or other Minnesota officials regard as a nuisance and any actions to abate or redress those nuisances.

(6) Documents relating to state insurance program formularies and prescription drug benefit design, including how insulin products on those formularies were chosen, rebate discussions with PBMs or benefit consultants, rebate pass through to patients.

b) Deposition (if needed)

(1) Depositions of individuals with knowledge of substantive answers to discovery above, as well as defendants' documents and information provided in requests for production and interrogatories.

2. The Manufacturers

Plaintiffs also reserve the right to produce evidence and documents and testimony from the manufacturers relating to:

a) patient assistance program(s) for insulin products, including eligibility criteria and the amount of assistance provided under each program.

B. Licensing Defense

1. Defendants/State of Minnesota

a) Requests for Production/Interrogatories

(1) Identify other licensing schemes in Minnesota that require licensees to provide goods or services to Minnesota residents at no cost to the residents and without compensation from the state as a condition of licensure.

(2) Documents relating to any other licensing scheme in Minnesota that requires licensees to provide goods or services to Minnesota residents at no cost to the residents and without compensation from the state as a condition of licensure.

(3) Documents reflecting identification or consideration of the Act as establishing conditions of licensure.

(4) State all benefits that defendants believe PhRMA's three insulin-manufacturing members derive from the Act and from Minnesota's licensing scheme.

(5) Documents relating to any benefits that defendants believe PhRMA's three insulin-manufacturing members derive from the Act, as well documents relating to the benefits these members receive from the licensing scheme in general.

(6) State the reasons why the Act's requirements that insulin manufacturers provide insulin to Minnesota residents at no charge bear an essential nexus to a legitimate state interest and are roughly proportional to the nature and impact of the manufacturers' licensed activity.

b) Deposition (if needed)

(1) Depositions of individuals with knowledge of substantive answers to discovery above, as well as defendants' documents and information provided in requests for production and interrogatories.

III. Requests Relating to Balance of Harms and the Public Interest

It is plaintiffs position that the documents and information defendants are seeking purportedly to establish that injunctive relief is inappropriate or unwarranted are irrelevant under the standards that govern relief when a constitutional violation is proven. To the extent the Court rules that defendants are entitled to any such discovery, PhRMA will also seek the discovery outlined below.

A. Defendants/State of Minnesota

1. Requests for Production/Interrogatories

a) Communications with third parties concerning the harm to defendants, third parties, or the public interest that would occur if the Act is enjoined.

b) Documents concerning harm to the defendants, third parties, or the public interest that would occur if Act is enjoined.

c) Documents supporting claim of a public health crisis relating to insulin access.

2. Deposition (if needed)

a) Depositions of individuals with knowledge of substantive answers to discovery above, as well as defendants' documents and information provided in requests for production and interrogatories.