The Department of Attorney General gave oral argument before the Michigan Supreme Court (MSC) last week in Michigan Attorney General Dana Nessel’s application to appeal an order preventing her department’s investigation of Eli Lilly and Company’s insulin pricing practices.
Eli Lilly has used two past decisions of the MSC to assert the Michigan Consumer Protection Act (MCPA) is inapplicable to its sale of insulin, those being the decisions in Smith v. Globe Life Ins. Co. and Liss v. Lewiston-Richards, Inc. The Supreme Court agreed to hear arguments for reversing those decisions, which the Attorney General asserts are not supported by a plain reading of the law.
The Smith and Liss decisions preclude state investigation of suspected illegal business practices when the target business sells products or services authorized for sale by a law administered by a state or federal agency, irrespective of allegations pertaining to how they conduct that business. This flawed and broad interpretation of a narrow exemption within the MCPA shields many corporations from any state scrutiny of even the most egregiously unfair alleged business conduct.
Were the Michigan Supreme Court to reverse the decisions in Smith (1999) and Liss (2007), the Michigan Consumer Protection Act would once again apply as intended, as evident by the law's own title, and the state would regain significant authority to defend consumers from deception and price gouging. Because of the Smith and Liss decisions, the MCPA has been held to no longer apply to the kinds of transactions Michiganders engage in every day—like buying automobiles, building or repairing their homes, dealing with telecommunications providers, and buying any kind of prescription medication. A reversal of these decisions would restore a robust state defense of Michigan consumers.
“Since the Smith and Liss decisions, the Department of Attorney General has often been powerless to use the Michigan Consumer Protection Act to investigate or hold accountable deceptive business agents if they are shielded by professional or occupational licenses,” Nessel said. “This misapplication of the law has left countless consumers without proper recourse against predatory practices, like the surging prices for essential medication. Reversing these decisions would not only enable us to investigate allegations of insulin price gouging but also restore the MCPA’s power to protect Michigan consumers across the marketplace. It is my hope that the Court rules in favor of the many Michiganders who fall victim to deceptive commercial operators.”
In January 2022, Nessel launched an investigation into Eli Lilly, one of the nation’s three largest drug-manufacturing companies producing insulin. The action sought to use the MCPA to investigate various aspects of Lilly’s pricing practices related to life-saving medications used by diabetics. Nessel also filed a companion Complaint for Declaratory Judgment, asking the court to declare that the exemption in section 4 of the MCPA does not prohibit an investigation into Eli Lilly’s insulin pricing. But Eli Lilly used the Smith and Liss decisions to obtain an order stating that the MCPA does not apply to its insulin sales, thus halting the investigation.
In July of 2022, Ingham Circuit Court Judge Wanda M. Stokes granted Eli Lilly’s motion for summary disposition, holding that the Smith and Liss decisions preclude application of the MCPA to Lilly’s sale of insulin medications because the general practice of selling insulin is authorized by the Food and Drug Administration (FDA).
A claim of appeal was filed with the Court of Appeals (COA) along with a bypass application to the MSC. The MSC denied the bypass application but asked the COA to expedite the appeal. The COA upheld the lower court’s decision, leading to the Attorney General's filing with the MSC in August of 2023. Earlier this year, the MSC asked for supplemental briefing related to the Smith and Liss decisions and expressed the intention to hear the arguments presented Thursday.
The attorney general’s application is not based on the merits of whether Eli Lilly has violated the MCPA, but rather on the attorney general’s authority to investigate possible violations under the MCPA when Eli Lilly is generally authorized to sell insulin medications by the FDA but is bound by no FDA regulations regarding the pricing of those medications.
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