What’s at stake?

Corporations using private consumer information to increase their profits.

Issue:

Whether pharmacies and data mining companies have a First Amendment right to sell prescription records to pharmaceutical companies to use for marketing purposes.

Decision date:

June 23, 2011

Outcome:

6-3 in favor of IMS Health.  Justice Kennedy delivered the opinion of the court.  Chief Justice Roberts and Justices Scalia, Thomas, Alito, and Sotomayor joined the majority.  Justice Breyer dissented, joined by Justices Ginsburg and Kagan.

What the court held:

The federal and state governments require pharmacies to maintain certain prescription records.  Pharmacies have begun selling information in these records to data mining companies that repackage the data for pharmaceutical companies.  The information includes the name of the prescribing physician and extensive information about the physicians’ prescription practices and treatment plans, including the quantity, dosage and name of the drug prescribed, and whether the prescription was a refill, an existing prescription or a change in treatment.  Pharmaceutical companies use the information to target sales pitches to individual physicians.

Vermont chose to restrict pharmacies from selling this sort of detailed marketing profile on individual physicians unless the prescribing physician consents.  Physicians complained that allowing pharmaceutical companies to “spy” on their prescription records allows the drug companies to target doctors and put intense pressure on them to prescribe newer and more expensive drugs over equally effective and cheaper alternatives.  Research shows that this sort of marketing has a tangible effect on a physician’s prescribing habits, even though the quality of prescribing decisions fares best when physicians rely on independent sources of information.  Pharmaceutical representatives’ sales pitches often do not give a balanced representation of a drug’s advantages and disadvantages, leading physicians to develop a skewed view of the drug’s value and compromising clinical decision-making.

A group of data mining companies and a pharmaceutical trade group challenged the law, claiming that they had a First Amendment right to use the information or sell it, and that Vermont’s law discriminated against speech by pharmaceutical companies. The trial court found that the law was a permissible regulation of commercial speech, but the Second Circuit reversed.

Vermont argued that the pharmacies do not have an unfettered right to use the records as they wish, and noted that the Supreme Court has held that when the government compels production of otherwise private information, it may permissibly restrict further use of that information.  Indeed, limits on the use and disclosure of medical records are widely accepted speech restrictions.

A brief filed by a coalition of consumer and public interest organizations, including AFJ member organizations Consumer Action and the Center for Science in the Public Interest, as well as Public Citizen, argued that the sale of private data does not constitute speech at all, and therefore is not entitled to special First Amendment protection.  The groups warned that finding otherwise could compromise a host of other laws aimed at protecting the privacy of consumers.  A host of other organizations filed amicus briefs, with the U.S. Chamber of Commerce and other big business supporting IMS Health, and consumer and privacy rights groups supporting the Vermont law.

The Court held that the Vermont law illegitimately burdened free speech.  The majority said that this case called for heightened judicial scrutiny because the Vermont law restricted the First Amendment right to free speech.  In order for a state law to survive strict scrutiny, the state must show that it has a “substantial governmental interest [in the relevant policy] and that the measure is drawn to achieve that interest.”  Here, the majority said, the law does not serve the stated state interest of ensuring that pharmacies will only use prescriber-identifying information to process and fill prescriptions.  “Under Vermont’s law, pharmacies may share prescriber-identifying information with anyone for any reason” besides marketing; therefore, the law does not further the stated interest.  The majority also insisted that “creation and dissemination of information are speech within the meaning of the First Amendment,” thus rejecting Vermont’s argument (shared by the above-mentioned amici) that free speech is not at issue here.

The majority further stated that Vermont had created a restriction based on content which Vermont opposes rather than a general concern for privacy.  “Vermont physicians are forced to acquiesce in the State’s goal of burdening disfavored speech by disfavored speakers,” they said.  The majority also discredited Vermont’s concerns that doctors would feel pressured into prescribing certain drugs, which also worries patients, claiming that the same concerns might hold equally for other uses permitted by the law.  In the majority’s view, the law does not legitimately advance the State goal of lowering medical costs and advancing public health.

Justice Breyer’s dissent contended that this case did not warrant heightened scrutiny.  He stated that Vermont was merely preventing the pharmaceutical companies from improving their “sales messages” and that “this effect on expression is inextricably related to a lawful government effort to regulate a commercial enterprise.”  Justice Breyer would consider whether the burden on free speech was disproportionate to the benefit of regulating the pharmaceutical industry rather than applying the demanding standard of heightened scrutiny.  He also pointed out that such a standard would be similar to that applied to other regulatory schemes, such as those of the Food and Drug Administration, and that regulation based on the content of the speech or the identity of the speaker has never required heightened scrutiny.  Further, he noted, “[n]othing in Vermont’s statute undermines the ability of persons opposing the State’s policies to speak their mind or to pursue a different set of policy objectives through the democratic process.”  Additionally, the information in question would not exist without government regulation.  The burden on commercial speech is not great, and the statute does substantially further the important state interests of public health, privacy, and lower private health care costs.

Because the Supreme Court sided with the pharmaceutical industry, corporations will enjoy First Amendment protection to use and sell prescription information collected from doctors without their consent.

Learn more

Merit briefs

Amicus briefs