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