In a landmark 4-3 ruling, the Michigan Supreme Court cleared the path for Attorney General Dana Nessel to investigate Eli Lilly's insulin pricing. By overturning the decades-old Smith and Liss precedents, the court narrowed a regulatory exemption that previously shielded licensed businesses from the Michigan Consumer Protection Act. While Nessel celebrated the decision as a victory against predatory pricing, business groups warned it will expose companies to overlapping regulations and abusive litigation.
MCPA regulatory exemption narrowing
- ▪The Michigan Supreme Court established that the regulatory exemption applies only if the specific transaction or conduct alleged to be unlawful was affirmatively authorized by a regulator.
- ▪The Michigan Supreme Court ruled 4-3 to narrow the regulatory-compliance exemption under Section 4(1)(a) of the Michigan Consumer Protection Act.
Smith Liss precedent overruled
- ▪The Michigan Supreme Court overturned the 1999 precedent Smith v. Globe Life Insurance Co. and the 2007 precedent Liss v. Lewiston-Richards, Inc.
- ▪The majority opinion, authored by Judge Noah Hood, found that the Smith and Liss decisions wrongly interpreted the Michigan Consumer Protection Act and rendered it practically unworkable.
Eli Lilly insulin pricing
- ▪The Michigan Supreme Court's ruling does not find that Eli Lilly violated Michigan law, and the case returns to lower courts for further consideration.
- ▪Michigan Attorney General Dana Nessel sought subpoenas in 2022 to investigate Eli Lilly's pricing practices for insulin products including Lispro, Humalog, and Basaglar.
- ▪Eli Lilly argued its operations were exempt from the Michigan Consumer Protection Act because the company is regulated by the Food and Drug Administration and the Michigan Board of Pharmacy.
Regulated industry defense eliminated
- ▪Business groups, including the Michigan Alliance for Legal Reform, warned that eliminating the categorical defense exposes regulated industries to overlapping standards and increased litigation costs.
- ▪The elimination of the broad regulated-industry defense removes a categorical shield that previously protected licensed businesses like nursing homes, construction companies, and pharmaceutical manufacturers.
Attorney General enforcement expansion
- ▪The ruling enables the Michigan Attorney General's office to expand consumer-protection investigations into heavily regulated sectors, including pharmaceutical pricing and financial services.
- ▪Michigan Attorney General Dana Nessel stated the ruling allows state investigators to pursue complaints regarding price-gouging and deceptive contracts that were previously blocked.
Private consumer litigation exposure
- ▪The Michigan Alliance for Legal Reform urged state lawmakers to pass legislation, such as House Bill 5725, to codify the regulatory-compliance exemption.
- ▪Because the narrowed regulatory exemption applies equally to private claims, legal experts expect an increase in private consumer class actions under the Michigan Consumer Protection Act.
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