Big Pharma Challenges A.G.’s Explanation to Foil Drug Price Cap Petition

In 2015, payday lenders tried to delay circulation of the payday loan rate cap petition by challenging the Attorney General’s official explanation of the measure. Now the pharmaceutical industry is waging the same dilatory tactic against South Dakotans for Lower Drug Prices‘ initiative petition to cap prescription drug prices in South Dakota.

The documents filed August 31 in Joni Johnson, South Dakota Biotechnology Association, and Pharmaceutical Research and Manufacturers of America vs. Marty. J. Jackley, Case #32CIV12-000189, Scott LaGanga, senior vice president of state advocacy for the Pharmaceutical Research and Manufacturers of America, contends that Attorney General Jackley’s official explanation of the drug price cap ballot measure is illegally insufficient:

PhRMA believes the Attorney General’s Statement regarding the Measure does not satisfy the requirements of SDCL § 12-13-25.1 in that it fails to educate the voters of the purpose, effect, and legal consequences of the initiated measure. Specifically, the Attorney General explanation fails to summarize or even mention the purpose, effect, and legal consequence of Section Five and fails to summarize the effect and legal consequences of Sections One through Four of the initiated measure [link added; Scott LaGanga, affidavit, Johnson/SDBA/PhRMA v. Jackley, 2017.08.31].

Joni Johnson, executive director of the South Dakota Biotechnology Association, lodges the same complaint in her August 31 affidavit.

Attorney General Jackley issued the following explanation of the drug price cap on August 22:

This measure limits the amount that a State agency may pay for a prescription drug. Under the measure, a State agency may not directly or indirectly pay more for a prescription drug than the U.S. Department of Veterans Affairs pays for the same drug.

The measure requires the State Bureau of Administration to enact rules establishing prescription drug prices payable by State agencies [Attorney General Marty Jackley, ballot measure explanation, 2017.08.22].

The statute cited by LaGanga and Johnson requires the Attorney General to achieve the following with his ballot measure explanation:

The explanation shall be an objective, clear, and simple summary to educate the voters of the purpose and effect of the proposed initiative or initiated amendment to the Constitution. The attorney general shall include a description of the legal consequences of the proposed initiative or initiated amendment to the Constitution, including the likely exposure of the state to liability if the proposed initiative or initiated amendment to the Constitution is adopted. The explanation may not exceed two hundred words in length [excerpt, SDCL 12-13-25.1].

We should note first that SDCL 12-13-9.2 gives parties dissatisfied with the Attorney General’s explanation seven days after the delivery of that explanation to the Secretary of State to file their challenge in circuit court. The Secretary of State’s office stamped the A.G.’s explanation Received on August 22. Former legislator, now plaintiffs’ attorney Jon Hansen filed his clients’ writ of certiorari on August 31, two days too late. (Hansen may have confused his old misogynist “women can’t think on weekends” bill with petition law: when “days” means “business days,” petition law says so, as it does in SDCL 12-1-13, which gives individuals challenging nominating petitions “five business days” to file their affidavits.)

Hansen may also have mixed up his legal terms and filed the wrong kind of application. In a response filed Wednesday with the Sixth Circuit, Assistant Attorney General Steven R. Blair notes that SDCL 21-31-1 allows the court to issue a writ of certiorari “when inferior courts, officers, boards, or tribunals have exceeded their jurisdiction.” Blair then contends that the Attorney General “did not act ‘without or in excess of’ his jurisdiction. Respondent Jackley’s inherent discretion in preparing the Explanation for the Measure was clearly within his jurisdictional authority provided under SDCL 12-13-25.1.”

Translation: Writ of certiorari is for whacking officials who do too much, not too little. Clever, Marty!

Those two technicalities may moot all the other legal arguments Hansen and his Redstone Law colleagues and lobby fixtures Eric Matt and Matt McCaulley make on paper and launch in court before Judge Mark Barnett on Tuesday. If not, Team PhRMA’s best argument may be A.G. Jackley’s omission of Section 5 from his explanation. To avoid being excluded from any post-election litigation (as Judge Barnett excluded the sponsors of Initiated Measure 22 from intervening in Republican legislators’ lawsuit to overturn that successful initiative), the drug price cap drafters included this legal protection for themselves:

Section 5. If any provision of this Act is challenged in court, the committee of individuals responsible for circulating the petition to qualify this Act for the ballot are deemed to have a direct and personal stake in defending this Act from constitutional or other challenges. If the Act is challenged, committee members shall be deemed to have legal standing to assert the member’s direct and personal stake by defending the Act’s validity [drug price cap initiative, as received by Secretary of State 2017.08.22].

The plaintiffs expound mightily on the Attorney General’s omission of this minor legal point from his explanation. Hansen notes that since Jackley used only 64 of the 200 words allowed in his explanation, he could have included all 71 words of Section 5 to edify us voters to this “unprecedented” change to “the wellspring of legal rights.”

Of course, Hansen gets a head of himself and warns that Section 5 “guarantees an unknown committee of private litigants” a new right and “allows an unnamed, unnumbered committee of litigants (who are possibly from out-of-state) to step in and defend the Proposed Measure…”

It is ironic that Hansen musters his Republican pals’ rampant fear of outsiders while arguing a lawsuit for an out-of-state plaintiff (LaGanga’s office address is Washington, D.C. and PhRMA is Delaware corporation). Hansen’s fretting is also incorrect: the committee is not unknown, unnamed, or un-South Dakotan. The statement of organization filed August 30, one day before lawyer Hansen filed his late application, declares Sioux Falls resident Clara Hart the chair and treasurer of the committee. She may have other people behind her, but Hansen’s parenthetical speculation has no basis in fact or evidence on the record. And if the drug price passes, if PhRMA sues to stop it, and supporters invoke their Section 5 right to intervene, the court could easily take a strict interpretation and say the only committee members legally entitled to intervene are those listed on the official document creating that committee, the statement of organization (which means, Clara, you’re on your own!).

Of course, Hansen shouldn’t even bother with this standing argument, because, thanks to the Legislature’s interference via 2017 Senate Bill 59, this initiative wouldn’t become law until July 1, 2019, meaning PhRMA could follow R. Blake Curd’s timeline, sue right after election day, and get the drug price cap enjoined and declared unconstitutional a month after the election, before Section 5 could ever kick in to allow Hart her say in court.

The plaintiffs argue that the court should compel Jackley to tell voters about at least one or more “potential effects” of the drug price cap:

The Proposed Measure could (1) raise the price of prescription drugs for those with private insurance if prescription drug suppliers raise prices to recoup losses, (2) lead to drug shortages for vulnerable populations such as the elderly, low-income children, and low-income parents that rely on Medicaid for coverage if prices are set so low that drug companies will not sell drugs to the state Medicaid program, (3) lead to shortages of prescription drugs for state employees reliant on the State of South Dakota’s self-funded health insurance plan if the state is unable to negotiate a low enough price from drug companies, or (4) incentivize individual pharmaceutical companies to stop giving steep rebates and discounts to the Department of Veterans Affairs in order to charge higher prices to state agencies [Jon Hansen, Application for Writ of Certiorari, Johnson/SDBA/PhRMA v. Jackley, 2017.08.31, pp. 12–13].

Hansen here makes the same argument the payday lenders did in 2015, asking the Attorney General to make their political and economic arguments for them on the ballot. Judge Trandahl at the circuit level and Justice Wilbur and our Supremes  rejected that argument from the payday lenders, and they’ll reject it from Big Pharma. Hansen doesn’t even provide industry propaganda to back up his arguments the way the payday lenders did; he just spouts four industry ifs and demands the A.G. write them up for everyone. The court will surely cite its reasoning from the last challenge of an A.G.’s explanation:

As Justice Zinter recognized in his special writing in Schulte, “[p]ublic questions often have substantial political overtones.” 2004 S.D. 102, ¶ 26, 687 N.W.2d at 501 (Zinter, J., concurring) (quoting Gormley v. Lan, 438 A.2d 519, 525- 26 (N.J. 1981)). Likewise, “there can be substantial dispute as to what the true purpose of an amendment is; indeed there may be many ‘true purposes.’” Gormley, 438 A.2d at 525. It is simply not for this Court or the circuit court to require the Attorney General to include every practical or possible effect of each initiated measure. “We cannot be concerned with what the Attorney General should have said or could have said or might have said or what is implied or suggested by what he did say. Rather we must focus on the language chosen[.]” Schulte, 2004 S.D. 102, ¶ 18, 687 N.W.2d at 500. From our review of the Attorney General’s ballot explanation, the Attorney General did not abuse his discretion, and the explanation is adequate under SDCL 12-13-25.1 [Justice Lori Wilbur, Ageton v. Jackley, 2016 S.D. 29, South Dakota Supreme Court, 2016.03.30].

The petition sponsors aren’t letting Big Pharma’s legal trickery hold them back: they are collecting signatures now on a petition authorized by the Secretary of State for circulation. And at this point, they shouldn’t wait: the days are getting shorter, and the deadline to submit petitions is November 6. They shouldn’t give up circulation time for a frivolous lawsuit that will likely fail.

Related Campaign Finance Trivia: Suing Jackley is surely not personal for PhRMA: they gave his PAC $1,500 in 2016. Jon Hansen gave Jackley $350; McCaulley gave Jackley $250. We’re all friends here….


5 Responses to Big Pharma Challenges A.G.’s Explanation to Foil Drug Price Cap Petition

  1. Porter Lansing

    Hear, hear Schulte. The AG explanation isn’t required to list every scenario or address every threat brought by a party who believes they may be impacted by a future regulation.

  2. Donald Pay

    This is why you need to get rid of the front-end bureaucratic nonsense. All of it is just a way to hinder and prevent people from using the initiative. It’s all unconstitutional because it makes it nearly impossible for grassroots people to use this constitutional provision without lots of money. Scrap all of it. The AG’s opinion is totally superfluous. The language of the initiative is right in front of you. If you can’t understand it, which would be the case for most legislators who are too dumb to figure much of anything out, don’t sign, but get out of the way of the people.

  3. You make a good point, Donald. The central idea of initiative is that we are smart enough to write, understand, and decide public policy. If we want the attorney general’s explanation, we can ask for it. Perhaps we should challenge the requirement that circulators hand out the A.G.’s explanation on the grounds of compelled speech.

  4. Donald Pay

    You bet. The AG’s explanation is compelled speech, an unconstitutional interference in the people’s right to petition for redress of grievances and an unconstitutional intrusion of the executive branch into the legislative function of the initiative. Then add to that the unconstitutional use of the judicial branch to tinker with an already unconstitutional interference in order to delay a petition for redress of grievances and the people’s constitutional right to initiative.

    The whole bureaucratic nonsense set up from 2000 on is mostly unconstitutional. The LRC is a legislative office that should be able to be used by citizens, but other than that most of the crap they’ve dirtied up the initiative process with should be dumped.

    How much would our history differ if the King’s Counsel got to “explain” the Declaration of Independence before the signatures were collected? You can’t find anything more unAmerican than that AG explanation.

  5. Well, I need to take out an initiative petition in 2019, or maybe get Clara Hart to file for injunctive relief against the AG-handout requirement!