When pharmacies fill a prescription, they record the name and address of the prescriber, the name and dosage of the drug, and the age and gender of the patient. Pharmacies sell this information to data-collection companies, which compile it into reports detailing individual prescribers’ prescription histories. Pharmaceutical companies then purchase these reports from the data-collection companies and use them to target their marketing efforts to the prescribers most likely to prescribe their drugs. Along with an increasing number of other states, the state of Vermont restricts this practice by banning the sale and use of prescriber-identifiable data for the marketing or promotion of pharmaceutical drugs unless the prescriber consents to the use of the data. Late Friday, the Supreme Court granted certiorari in Sorrell v. IMS Health Inc., No. 10-779, to decide whether Vermont’s prescriber-data law violates the First Amendment. 

In Sorrell, three data-collection companies and PhRMA, the industry association for pharmaceutical researchers and manufacturers, challenged the restriction on the ground that limiting their access to and ability to use prescriber-identifiable data unconstitutionally restricts their free-speech rights. In response, Vermont argued that the law does not implicate the First Amendment because it regulates only commercial activity, not speech. Vermont also argued that, even if the law did regulate speech, it would satisfy the First Amendment because it is narrowly tailored to the state’s substantial interest in protecting medical privacy, controlling prescription-drug costs, and promoting public health. The district court agreed with Vermont and upheld the law, but a divided panel of the Second Circuit reversed. Rejecting the analysis employed in two First Circuit decisions that upheld similar laws in Maine and New Hampshire, the Second Circuit held that Vermont’s restriction on the use of prescriber-identifiable data violates the First Amendment. 

The Second Circuit reasoned that the law restricts the flow of information to prescribers and therefore does not merely regulate commercial activity but infringes upon commercial speech, which is afforded constitutional protection under Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980). The court rejected Vermont’s asserted interest in protecting medical privacy because the law applies only to the marketing of pharmaceuticals while permitting the information to be used, without a prescriber’s consent, in numerous other applications, including law enforcement, research, and claims-processing by insurance companies. Because targeted marketing based on prescriber-identifiable data is cost-effective only for brand-name drugs, the court concluded that the true aim of the law was to promote the use of cheaper generic drugs by shielding prescribers from the marketing efforts of brand-name drug manufacturers. Having determined that the promotion of cheaper drugs was the state’s only substantial interest in restricting the use of prescriber-identifiable information, the court held that the law violates two prongs of the Central Hudson test: (1) it does not directly advance the state’s objective but attempts to indirectly influence the prescribing conduct of doctors by restricting the speech of others; and (2) less restrictive means are available to achieve that goal, such as promoting and/or mandating the use of generic drugs.

While defending the Second Circuit’s decision on the merits, both the data-collection companies and PhRMA agreed with Vermont that the Supreme Court should grant certiorari to resolve the conflict between the First Circuit and the Second Circuit. The plaintiff-respondents’ decision to acquiesce in the state’s request for Supreme Court review—a rarity in Supreme Court practice—reflects the obvious importance of the issue to data-collection companies, the pharmaceutical industry, and any other businesses potentially affected by legislative and administrative efforts to limit the transfer of various forms of data. 

Absent extensions, amicus briefs in support of the petitioners will be due on March 1, 2011, and amicus briefs in support of the respondents will be due on March 31, 2011. If you have any questions about the case, please contact Andrew Tauber (+1 202 263 3324) in our Washington, DC office.

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