2nd Circuit Rules Ban on Use of Physician Prescribing Information Unconstitutional

December 3, 2010

On Nov. 23, 2010, the 2nd Circuit Court of Appeals held a 2007 Vermont law restricting the sale and use of physician prescribing information for marketing purposes unconstitutional as an impermissible regulation of commercial speech. See IMS Health v. Sorrell, No. 09-1913-cv(L), 09-2056-cv(CON) (2d Cir. Nov. 23, 2009).

Pharmaceutical companies regularly purchase such information from data-mining companies or “data miners” and use the information for sales and informational campaigns directed toward physicians. With the 2007 law, the Vermont legislature attempted to curb pharmaceutical companies’ use of prescribing data for marketing purposes by barring the sale, transmission, or use of prescriber-identifiable information for such purposes unless the prescribing physician consents to such information use.

In the preamble to the statute, the Vermont legislature cited its interest in protecting the public health of its citizens, protecting the privacy of prescribing physicians, containing costs through the promotion of less costly drugs, and ensuring that prescribers receive unbiased information. See Vt. Stat. Ann. tit. 18, § 4631.

The 2nd Circuit found the law to be unconstitutional because it fails to meet the legal standard required for a law that restricts commercial speech to be permissible. Under the legal standard, a statute that limits commercial speech must directly advance a substantial state interest. Additionally, the state must demonstrate that a less restrictive limit on commercial speech would not achieve the state’s interest.

In 2009, the U.S. District Court for the District of Vermont upheld the law under the legal standard. The 2nd Circuit overturned the lower court’s decision. The 2nd Circuit found that the law could have only an indirect effect on public health and cost control, and therefore did not directly advance a state interest. Moreover, the court found that the state had not proven that its interests could not be achieved equally well by employing a more limited restriction on commercial speech.

The 1st Circuit Court of Appeals reached a contrary conclusion in 2008, when it upheld a similar New Hampshire law, finding that the law permissibly restricts the conduct of the data miners and does not impermissibly restrict the speech of pharmaceutical companies. Earlier this year, the 1st Circuit also upheld a related Maine law that requires data miners to withhold a physician’s prescription data from sale or transfer for marketing purposes if the physician files for confidentiality protection. The Supreme Court declined to grant certiorari in the New Hampshire case. However, the split in authority between the 1st and 2nd Circuits may persuade the Supreme Court to grant certiorari on this issue in the future.

The other information requirements of the Prescription Cost Containment chapter of the Vermont Statutes, set forth at Vt. Stat. Ann tit. 18, 4631 et seq., which include prohibitions on certain expenditures by pharmaceutical and device manufacturers and disclosure requirements, were outside the scope of this decision and remain in effect.