Sorrell v. IMS – Supreme Court Invalidates Vermont Law Prohibiting Use of Physician Prescription Data by Pharmaceutical Manufacturers

July 26th, 2011 by David Almeida

In Sorrell v. IMS Health Inc., the United States Supreme Court recently struck down a Vermont law that restricts the sale of prescriber-identifying information (“PII”) by pharmacies to data-mining companies, and the use of that information by pharmaceutical manufacturers in marketing to physicians.  The Court’s invalidation of the Vermont law has a number of important implications for pharmaceutical companies and their marketing practices, especially in light of the data-driven digital media environment within which companies necessarily operate.

By way of brief background, pharmacies routinely obtain PII when processing prescriptions.  Many pharmacies sell this information to data miners who analyze the data regarding a physician’s prescribing practices and produce reports on prescriber behavior.  Detailers who promote drugs to doctors for pharmaceutical manufacturers utilize these reports to refine their marketing tactics and to ensure that physicians obtain the most relevant information for their practices.

At issue in Sorrell was a Vermont law that placed specific limitations on the use of a physician’s prescription practices; the law, § 4631(d) of the Vermont Statutes, prohibited pharmacies from selling, licensing or exchanging for value regulated records containing PII.  Further, the law prohibited pharmaceutical manufacturers from using PII in the marketing or promotion of a prescription drug unless the prescriber first consented to its use.  § 4631(e) also set forth a list of exceptions to the restrictions on the sale, disclosure and use of PII; the law, for example, allows PII to be disseminated or used for health care research or to enforce compliance with health insurance formularies or preferred drug lists.

In a 6-to-3 opinion striking down the Vermont law, Justice Anthony Kennedy wrote that that § 4631(d) is subject to heightened judicial scrutiny because it imposes a specific, content-based burden on a protected expression of speech; the sale, disclosure and use of PII.  As the Court explained, the law, on its face, burdens disfavored speech – i.e., marketing – by disfavored speakers – pharmaceutical manufacturers – while allowing for the sale or use of the material under certain favored exceptions that are in accord with the State’s own views.  The Court further observed that the State’s justifications for the restrictions in its law – that it protects medical privacy and improves public health and reduces healthcare costs – failed to pass muster under heightened scrutiny because the law was not narrowly tailored to meet those justifications.  Instead, Vermont had enacted a law making PII available to an almost limitless audience, save one narrow class of disfavored speakers.  As a result, the Court affirmed the Second Circuit Court of Appeals’ decision holding that § 4631(d) violates the First Amendment by burdening the speech of pharmaceutical marketers and data miners without an adequate justification.

Ultimately, the scope of the Court’s Sorrell opinion may be narrowed in one way or another.  The Court left the door open should a state try to enact a law that could withstand heightened judicial scrutiny, suggesting that Vermont could have addressed its concerns through the use of a more coherent policy where the sale or disclosure of such information is limited to only a few narrow and well-justified circumstances.  The Court also made certain to highlight their concern with protecting personal privacy explaining that “the capacity of technology to find and publish personal information, including records required by the government, presents serious and unresolved issues with respect to personal privacy and the dignity it seeks to secure.”

Note also that the Sorrell decision has spurred legislative activity.  Congressman Edward Markey (D.) recently introduced H.Res. 343 to the House of Representatives on July 8, 2011, which, among other things, seeks to adopt a resolution expressing disapproval of the majority opinion in Sorrell.

Regardless of any future changes, the Sorrell decision will have a significant impact on pharmaceutical manufacturers, especially in relation to their marketing practices and communications with prescribing physicians.  The Court’s decision confirms that speech in aid of pharmaceutical marketing is a form of expression protected by the Free Speech Clause of the First Amendment and is an important step towards defending commercial free speech.  The decision supports pharmaceutical manufacturers’ continued use of “prescriber-identifiable” data to assist in marketing practices and to provide important information to physicians regarding various prescription medications. The decision may also provide a basis for pharmaceutical manufacturers, as well as other companies, to defend their use of digital media data in inventive ways to market their products and provide beneficial information to potential customers.

Marina Hoppas, an associate in our Newark office, contributed greatly to this post.

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