SUPREME COURT STRIKES DOWN VERMONT DATA MINING LAW

Tuesday • August 9, 2011 • by admin

The Supreme Court has spoken. In June, the U.S. Supreme Court affirmed the judgment of the Second Circuit Court of Appeals, which had held that Vermont’s Prescription Confidentiality Law unconstitutionally burdens the speech of pharmaceutical marketers and data miners without adequate justification. Sorrell v. IMS Health, Inc., No. 10-779, (S. Ct. June 23, 2011.) At first, the opinion seems clear enough: pharmaceutical marketers and data miners have a constitutional right to use prescriber-identifying data for marketing purposes. But questions do arise. Vermont’s Pharmacy Rules define “unprofessional conduct” to include “divulging or revealing to unauthorized persons patient or practitioner information or the nature of professional pharmacy services rendered.” Rule 20.1(i). So how do the pharmaceutical manufacturers and data miners get this information in the first place? Is Vermont just not enforcing its own rule? And what about the other entities covered by the statute, the health insurers, self-insured employers, electronic transmission intermediaries and pharmacies? How are they affected?

I previously discussed several cases dealing with statutes prohibiting prescription data mining for marketing purposes. Two arose in Maine and New Hampshire, and the First Circuit Court of Appeals upheld the statutes. The third statute was adopted by the State of Vermont, upheld by the district court but struck down by the Second Circuit Court of Appeals. With the conflict between circuits, the Supreme Court granted certiorari.

Vermont’s Prescription Confidentiality Law, Vt. Stat. Ann., Tit. 18, Section 4631, prohibits the sale and use of “regulated records” which contain prescriber identifiable information for marketing or promoting a prescription drug, unless the prescriber consents. “Regulated records” is defined as information or documentation from a prescription dispensed in Vermont and written by a prescriber doing business in Vermont. Vermont pharmacies, like pharmacies across the country, as a matter of business routine and federal law, receive prescriber-identifying information when processing prescriptions. Many pharmacies then sell this information to “data miners,” firms that analyze prescriber-identifying information and produce reports on prescriber behavior. Data miners lease these reports to pharmaceutical manufacturers. Detailers, who represent the manufacturers, then use the reports to refine their marketing tactics and increase sales.

The Prescription Confidentiality Law is subject to exceptions that permit the prescriber-identifying information to be used for the following purposes:

(1)        Pharmacy reimbursement, formulary compliance, patient care management, utilization review by a health care professional or the patient’s health insurer or health care research;

(2)        The dispensing of medication to a patient;

(3)        The transmission of information between a prescriber and a licensed pharmacy, between licensed pharmacies or in the context of change of ownership of a pharmacy;

(4)        Care management educational communications provided to a patient about his health condition, adherence to a prescribed course of therapy and other information relating to the drug being dispensed, treatment options, recall or patient safety notices or clinical trials;

(5)        Regulatory compliance;

(6)        Law enforcement; and

(7)        Marketing purposes so long as the data do not identify the prescriber.

Section 4631(e).

The Justices who rendered the Court opinion represent both the conservative and liberal wings of the Court:  Kennedy, Roberts, Scalia, Thomas, Alito and Sotomayor. Justices Breyer, Ginsburg and Kagan dissented.

First, the Court considered the applicable standard to be used to judge the law’s constitionality. The majority held that the Vermont statute imposes content-and speaker-based burdens on protected expression and therefore is subject to heightened judicial scrutiny. The law forbids sales subject to exceptions based in large part on the content of a purchaser’s speech. It also bars pharmacies from disclosing the information when the recipients will use it for marketing. Finally, it prohibits pharmaceutical manufacturers from using the information for marketing. The majority believed that the statute thus disfavors marketing, i.e., speech with a particular content, as well as particular speakers, i.e., detailers engaged in marketing on behalf of pharmaceutical manufacturers. Yet the law allows prescriber-identifying information to be purchased, acquired and used for other types of speech and by other speakers. The majority thought that, in practical operation, Vermont’s law went even beyond mere content discrimination to actual viewpoint discrimination. Therefore, heightened judicial scrutiny was warranted.

The State of Vermont contended that the law is mere commercial regulation, but the majority held that the statute imposes its burden based on the content of speech and the identity of the speaker. It does not have a mere incidental effect on speech.

Vermont then argued that heightened judicial scrutiny was unwarranted because sale, transfer and use of prescriber-identifying information are conduct, not speech. The Court rejected that argument, noting that the creation and dissemination of information are speech for First Amendment purposes. Even assuming that prescriber-identifying information is a mere commodity, the Court repeated that the statute imposes the speaker and content-based burden on protected expression, sufficient to justify applying heightened scrutiny.

To sustain the statute, the Court stated that Vermont must show at least that the statute directly advances a substantial government interest and that the measure is drawn narrowly to achieve that interest. Vermont contended that the law was necessary to protect medical privacy, including physician confidentiality, avoidance of harassment and the integrity of the doctor-patient relationship. They also argued that the law was integral to the achievement of the State’s policy objectives of improving public health and reducing healthcare costs.

Even assuming that physicians have an interest in keeping their prescription decisions confidential, the majority believed that the statute is not drawn to serve that interest. It stated that pharmacies may share prescriber-identifying information with anyone for any reason except for marketing. Vermont might have addressed physician confidentiality through a more coherent policy, such as allowing the sale or disclosure of information in only a few narrow and well-justified circumstances. “Given the information’s widespread availability and many permissible uses, Vermont’s asserted interest in physician confidentiality cannot justify the burdens that [the statute] imposes on protected expression.”

Vermont asserted that the content-based rule is necessary to avoid harassment, but the majority pointed out that doctors can simply decline to meet with detailers. The State further argued that detailers’ use of prescriber-identifying information undermines the doctor-patient relationship by allowing detailers to influence treatment decisions. However, if pharmaceutical marketing affects treatment decisions, it can do so only because it is persuasive. Fear that speech might persuade is not a lawful basis for the state to prohibit it.

The Court believed that Vermont was seeking to achieve its goal of lowering the cost of medical services and promoting public health by restraining certain speech by certain speakers, i.e., by diminishing detailers’ ability to influence prescription decisions. However, the fear that people would make bad decisions if given truthful information, the majority held, cannot justify content-based burdens on speech. These precepts apply even more when the audience, prescribing physicians, consist of “sophisticated and experienced” consumers. “Vermont may be displeased that detailers with prescriber-identifying information are effective in promoting brand name drugs, but the State may not burden protected expressions in order to tilt public debate in a preferred direction.” The State did not contend that the law would prevent false or misleading speech, and the Court held that the State’s interest in burdening detailers’ speech thus turned on nothing more than a difference of opinion.

Interestingly, the majority opinion considered only the free speech rights of detailers and pharmaceutical manufacturers. However, the Prescription Confidentiality Law is broader than that. Specifically, it states, “a health insurer, a self-insured employer, an electronic transmission intermediary, a pharmacy, or other similar entity shall not sell, license, or exchange for value, regulated records containing prescriber-identifiable information.” (It is not clear what an “other similar entity” would be.) No health insurer, self-insured employer, electronic transmission intermediary or pharmacy was before the Court. Does that mean that the restrictions do still apply to health insurers, self-insured employers, electronic transmission intermediaries and pharmacies in Vermont? Is the Supreme Court really saying that a prohibition on the sale of prescriber-identifiable information violates the First Amendment? This is not clear and seems doubtful.

The statute also states that those entities may not permit the use of records containing prescriber-identifiable information for marketing or promoting a prescription drug (unless the prescribers consent). Does the Court’s opinion cover this prohibition? Clearly, a restriction on the use of information for marketing purposes can violate the First Amendment, since the regulation directly relates to the use of information, i.e., content of speech. However, that depends on the standard of analysis imposed by the Court. The Sorrell Court held that “heightened judicial scrutiny” is required, not a less than strict intermediate review. So most likely, the Court would apply its decision to those entities.

The statute goes on to state that pharmaceutical manufacturers and marketers may not use prescriber-identifiable information for marketing or promoting a prescription drug unless the prescriber consents. Clearly, the Supreme Court struck down that portion of the statute.

Justices Breyer, Ginsburg and Kagan dissented. They first rejected the approach to evaluating ordinary commercial legislation that affects speech. “To apply a ‘heightened’ standard of review in such cases as a matter of course would risk what then-Justice Rehnquist…described as a…’return to [a] bygone era…in which it was common practice for this Court to strike down economic regulations adopted by a State based on the Court’s own notions of the most appropriate means for the State to implement its considered policies,’” citing Central Hudson Gas & Elec. Corp. v. Public Serv. Commn. of N.Y., 447 US 557 at 589 (1980).

The dissenting Justices pointed out that Vermont’s statute neither forbids nor requires anyone to say anything, engage in any form of symbolic speech or endorse any particular point of view, whether ideological or related to the sale of a product. They continued that the statute’s requirements form part of a traditional, comprehensive regulatory regime of an industry that has been heavily regulated by the federal government since 1906. Furthermore, the statute was directed toward information that exists only by virtue of government regulation. Under federal law, certain drugs can be dispensed only by a pharmacist operating under the orders of a medical practitioner. Vermont regulates the qualifications, fitness and the practices of the pharmacists themselves and requires pharmacies to maintain a patient record system that, among other things, tracks who prescribed which drug. The dissenting Justices also noted that the Court has never found that the First Amendment prohibits the government from restricting the use of information gathered pursuant to a regulatory mandate, whether the information rests in government files or has remained in the hands of the private firms that gathered it.

The dissenting Justices also pointed out that content-based and speaker-based categories have never before justified greater scrutiny when regulatory activity affects commercial speech. Regulatory programs necessarily draw distinctions based on content. Nor is it unusual for particular rules to be “speaker-based,” affecting only a class of entities, mainly, the regulated firms. The Court, the dissenters said, should review the constitutionality of the statute merely for rationality.

They also noted that the record contains no evidence that prescriber-identifying data are widely disseminated. They pointed out that Vermont’s Pharmacy Rules define “unprofessional conduct” to include “divulging or revealing to unauthorized persons patient or practitioner information or the nature of professional pharmacy services rendered.” Rule 20.1(i). The dissenters thought that the Prescription Confidentiality Law reinforces the prohibition on dissemination of prescriber-identifying data where pharmaceutical marketing is at issue.

In addition, the dissenters believed that the exceptions created by the statute were narrow and concerned common and often essential uses of prescription data. This conclusion is purely a matter of opinion. Are the exceptions so broad they defeat the rule, as the majority believed? Alternatively, are the exceptions narrowly drawn and not shown to result in widespread use of prescriber-identifying information? Reasonable people may disagree.

The dissenters further thought that the legitimate State interests that the statute serves are substantial. They mention the protection to public health and the State’s interest in healthcare spending. Maintaining privacy is also an important public policy goal. Contrary to the majority, the dissenters believed that the record evidence was sufficient to permit a legislature to conclude that the statute directly advances each of these objectives. They pointed to Vermont’s substantial legislative record (as opposed to the record in this case) as corroborating this line of reasoning.    The dissent stated that the law “…works no more than modest First Amendment harm; the prohibition is justified by the need to ensure unbiased sales presentations, prevent unnecessarily high drug costs, and protect the privacy of prescribing physicians.”

The dissent concluded with the following:

“At best the Court opens a Pandora’s Box of First Amendment challenges to many ordinary regulatory practices that may only incidentally affect a commercial message. [Cit. om.] At worst it reawakens… [the] New Deal threat of substituting judicial for democratic decision making where ordinary economic regulation is at issue. See Central Hudson, 447 U. S., at 589.”

I am sure the dissenters took some pleasure in quoting the late Chief Justice Rehnquist for that statement.