May 4, 2009
On April 23, 2009, the United States District Court for the District of Vermont upheld the constitutionality of a Vermont statute that prohibits the transfer, sale, or use of prescription information containing prescriber-identifiable information to market or promote a prescription drug. See IMS Health Inc. v. Sorrell, No. 1:07-CV-188 (D. Vt. Apr. 23, 2009). The court ruled that the statute directly advances Vermont’s substantial interest in containing healthcare costs and protecting public health and is narrowly tailored to serve that interest.
Brief Summary of Vermont Law
The “Act Relating to Increasing Transparency of Prescription Drug Pricing and Information”, Vt. Stat. Ann. Tit. 18, § 4631 (the “Vermont Law”), was signed into law by Vermont Governor James Douglas on June 9, 2007. Due to the controversy surrounding the Vermont Law, the state legislature postponed its effective date until July 1, 2009.
The Vermont Law prohibits health insurers, self-insured employers, electronic transmission intermediaries, pharmacies, or other similar entities from selling, licensing, or exchanging for value prescription information that identifies the prescriber of the drug. Moreover, it prohibits those entities from permitting the use of such information to market or promote a prescription drug, unless the prescriber of the drug consents to such practice. Additionally, in a separate provision, the Vermont Law explicitly prohibits pharmaceutical manufacturers and marketers from using prescriber-identifiable information for marketing or promotional purposes unless the prescriber “opts-in” or consents to such use. (This provision is not included in the New Hampshire prescription information law, discussed below.)
Constitutional Challenges to Similar Laws in other States
The Vermont Law parallels the New Hampshire Prescription Information Confidentiality Act (the “New Hampshire Law”), which prohibits the use of prescriber-identifiable prescription information for commercial purposes. The New Hampshire Law, however, broadly prohibits the use of the information for any commercial purpose while the Vermont Law allows prescribers to consent to the use of such information. IMS Health Inc. successfully challenged the constitutionality of the New Hampshire Law in 2007 in the United States District Court for the District of New Hampshire, but the district court’s decision was reversed in November 2008 by the First Circuit Court of Appeals, which ruled that the New Hampshire Law did not violate the First Amendment. See IMS Health Inc. v. Ayotte, 550 F.3d 42 (1st Cir. Nov. 18, 2008).
The Maine legislature enacted a similar statute in 2007 (the “Maine Law”). However, instead of an “opt-in” provision, as in the Vermont Law, the Maine Law allows prescribers to “opt-out” by filing for confidentiality protection. If a prescriber files for confidentiality protection, a pharmaceutical company may not use that individual’s prescriber information for marketing purposes. The United States District Court for the District of Maine held the provision unconstitutional as applied to prescribers only. See IMS Health Corp. v. Rowe, 532 F. Supp. 2d 153 (D. Me. 2007). In light of the Ayotte case, there is a significant likelihood that the First Circuit will reverse the decision of the district court in Rowe.
Rationale of the Sorrell Court for Upholding the Vermont Law
Unlike the First Circuit in Ayotte, which held that the New Hampshire Law restricted conduct and not commercial speech, the district court in Sorrell held that the Vermont Law restricted commercial speech and, therefore, must comply with the First Amendment. Even so, the Sorrell court said that the Vermont Law survived First Amendment intermediate scrutiny because the legislature properly determined that rising health care costs are fueled in part by pharmaceutical companies’ aggressive and expensive marketing practices using prescriber-identifiable data. (Such data shows a health care provider’s prescribing patterns and inclination to prescribe certain drugs.) Additionally, the legislature found that the pharmaceutical industry uses prescriber-identifiable data to market only new, branded drugs, and the increase in such marketing practices correlated with the industry’s increased spending on direct marketing to physicians.
Therefore, the court held that (i) the state’s interests in containing healthcare costs and protecting public health are substantial, (ii) that the Vermont Law advanced the government’s substantial interest in containing costs in a direct and material way, and (iii) the Vermont Law is narrowly tailored to serve the government’s substantial interest by focusing solely on the use of the prescriber-identifiable data for targeted marketing.
Pharmaceutical companies are likely to face increased scrutiny of their usage of prescriber-identifiable prescription information in marketing their drugs. A number of state legislatures, including the Illinois General Assembly, have pending legislation similar to the Vermont Law. The decisions of the Sorrell court and the First Circuit in Ayotte signal that it would be difficult to challenge successfully the constitutionality of such legislation if enacted.
IMS Health Inc. has filed a petition for a writ of certiorari asking the United States Supreme Court to review the First Circuit’s decision in Ayotte. The Supreme Court will likely make a decision whether to grant the writ in June 2009.