U.S. Supreme Court strikes down Vermont law on First Amendment grounds

In a 6-3 decision issued June 23, 2011, the United States Supreme Court struck down a Vermont law which restricted the ability of pharmaceutical companies to obtain information about what type of drugs doctors were prescribing to patients. The information is used by drug companies to more effectively market their products to doctors. Sorrell v. IMS Health, Inc. 564 U. S. ____ (2011) . At issue was the constitutionality of Vermont’s attempt to regulate the use of information “mined” from prescription records.

When prescriptions are filled at retail pharmacies certain information is generated: the patient’s name, the name of the prescribing doctor, the type/dosage/quantity of the drug prescribed and the date filled. These records are “mined” by data gathering companies who then sell the information to private companies, law enforcement agencies, research institutions and pharmaceutical companies. Federal and state laws require that information identifying a particular patient be “scrubbed” before the remaining information is sold.

Pharmaceutical companies are the largest users of data obtained from prescription records. The information allows pharmaceutical companies to target marketing and advertising materials to specific markets and geographical locations. It also allows the companies to identify prescribers by their prescribing habits, thereby allowing pharmaceutical sales reps, called “detailers”, to tailor their sales efforts to individual doctors. Being able to tailor a sales pitch to an individual doctor potentially allows the pharmaceutical company to influence which medicines are prescribed by the doctor, which in turn, has the potential to impact the overall cost of an individual’s health care.

Vermont attempted to address concerns raised by the “data mining” of prescription information in 2007 when the legislature passed the “Act Relating to Increasing Transparency of Prescription Drug Pricing and Information.” The law attempted to regulate the sale or use of “prescriber-identifiable” information for marketing or advertising purposes unless the prescriber (ie., the doctor writing the prescription) consented (also known as “opting in”) to use of the information. The overall intent of the law was to protect public health, protect prescriber privacy and reduce health costs.

In August, 2007, two data mining companies filed a lawsuit against the State of Vermont in federal district court. The data mining companies argued, among other things, that Vermont’s law impermissibly restricted their right of free speech. Vermont argued that the law regulated the data mining companies’ conduct, not speech. Vermont argued further that even if the law were viewed as a restriction of speech, the speech being regulated was of a commercial nature which is not fully protected under the Constitution.

The tests used to determine if a law violates the Constitution depends in large part upon the right that is being infringed. “Commercial speech” unlike “political speech” has been generally subjected to what is known as “intermediate scrutiny.” As a general rule, commercial speech can only be limited by the State if the limitation is in support of a substantial governmental interest, directly advances the governmental interest asserted and is not more extensive than necessary to serve the State’s interest. In this case, Vermont argued that the law met the test of constitutionality.

The federal district court agreed with Vermont. The Court found that while the law did indeed infringe upon the data mining companies’ free speech rights, the State’s interest in cost containment and public health were substantial. The Court concluded that the restrictions on the disclosure of prescription related data was “reasonable in proportion to the State’s interests.”

The data mining companies appealed to the 2nd Circuit Court of Appeals. Arguments were heard in that Court in October, 2009. In November, 2010, a divided Court of Appeals overturned the district Court decision. That Court ruled that Vermont’s law was indeed an impermissible restriction on commercial speech. While Vermont arguably asserted substantial state interests, reasoned the 2nd circuit, the law did not directly advance those interests nor was it “narrowly tailored” to serve that interest.

The case was appealed to the Supreme Court. Oral arguments were heard in April, and the Court issued a decision on June 23, 2011.

The Supreme Court held that Vermont’s statute violates the Constitution’s First Amendment protection of free speech. The court found that the law restricted the content of the speech, and restricted who could speak. The Court held that both those restrictions require what the Court called “heightened scrutiny”, rather than the intermediate scrutiny applied to ordinary commercial speech. Thus while the test was the same: that the state must demonstrate that “the statute directly advances a substantial governmental interest and that the measure is drawn to achieve that interest, ” the Supreme Court held that the State had a greater burden to demonstrate its interest in restricting this type of commercial speech.

The Court found that the statute was not drawn to advance the claimed interests of the state. Vermont argued that the law protected physicians from disclosing their prescription decisions. But the law allows other entities to access that prescription information; it only restricted pharmaceutical companies from obtaining the information without prior doctor consent.

The state then claimed that the statute protected doctors from drug companies trying to persuade them to use their product. In a succinct rebuke to the state, the Supreme Court stated:

“Fear that speech might persuade provides no lawful basis for quieting it.”

Vermont Again, the court found that argument unpersuasive, stating:

“Vermont may be displeased that detailers with prescriber-indentifying information are effective in promoting brand name drugs, but the State may not burden protected expression in order to tilt public debate in a preferred direction.”

The dissent, in an opinion written by Justice Steven Breyer, argued that because this is commercial speech, “heightened scrutiny” is not warranted. Indeed, Justice Breyer argued that the Court had never before used a “heightened scrutiny” standard in reviewing a regulatory scheme that affects commercial speech.

He concluded with a separation of powers argument:

“Because the imposition of “heightened” scrutiny in such instances would significantly change the legislative/judicial balance, in a way that would significantly weaken the legislature’s authority to regulate commerce and industry, I would not apply a “heightened” First Amendment standard of review in this case.”

The two Justices appointed by President Obama split on this decision: Justice Sony Sotomayor joining the majority, with Justice Elena Kagan joining the dissent.

*Hat tip to Attorney Bob Brazil, who wrote most of the first part of this article for the radio show, “Law Matters” on Magic 97.7 prior to the Supreme Court’s decision on June 23rd