Supreme Court Sides with Pharma on Prescription Data Mining

The U.S. Supreme Court recently struck down a Vermont law restricting data mining of medical prescription information in Sorrell v. IMS Health. Although the Court ruled on this issue in June, it is an important opinion with widespread impact, and as this blog has addressed lower courts’ opinions on this issue in the past, it is notable that this question is now resolved.

The ruling, based on free speech grounds, allows pharmaceutical companies to purchase prescribing data and use that data to tailor marketing efforts to physicians. This data is commonly collected by pharmacies and sold to prescription drug intermediaries (“PDIs”), who then sell the information to prescription drug companies. The data generally contains information regarding the prescribing doctor and the medication itself and does not contain identifiable patient information.

The Vermont law directly prohibited the sale, licensing, or exchange of prescription data, and the state legislature advanced three objectives in passing the law: curtailing overprescription of drugs, controlling healthcare costs, and protecting physician privacy. The majority opinion by Justice Kennedy established that the law contained both a “content- and speaker-based restriction” on speech, which required the Court to apply “heightened judicial scrutiny” to assess its validity. Under this assessment, the Court rejected each of Vermont’s policy justifications and found the law unconstitutional because it was not narrowly tailored to these policies. 

Of note, the Court’s use of “heightened” scrutiny is somewhat ambiguous under free speech precedent. Typically, commercial speech is evaluated under an “intermediate scrutiny” test established in Central Hudson; however, “heightened” scrutiny has also been loosely used as a synonym for “strict scrutiny,” which requires a tighter correlation between the regulated speech and the government’s objectives. 

Critics of the opinion argue that state regulators will have “less latitude to make policy decisions” regarding healthcare data and that courts now have broad discretion to invalidate commercial regulations based on the effects on free speech. However, there may still be hope for existing and future data mining statutes, particularly if the restrictions specifically target important interests, such as patient privacy, and do not single out certain types of buyers and sellers of data. For example, a Maine data mining statute similar to Vermont’s is only triggered when a physician elects to opt-out of submitting prescriber data, thus making the law’s restrictions much narrower.  A number of state statutes are currently pending review in light of the Court’s opinion in Sorrell

To read the Court's opinion, click here.

Tags:

Supreme Court Hears Pharma Data-Mining Dispute

Tomorrow the United States Supreme Court will hear oral arguments regarding states' authority to limit uses by pharmaceutical companies of physician prescription records for marketing.  We discussed this issue in November on a blog post when the Vermont data-mining restrictions were found unconstitutional as a violation of free speech.  For more on this battle headed to the Supreme Court, see this article in the New York Times.

Vermont Data Mining Law Found Unconstitutional

The Second Circuit Court of Appeals decided yesterday that the Vermont law restricting pharmaceutical companies’ uses of information about the drugs that physician prescribe is unconstitutional as a violation of free speech. This ruling is a particularly interesting development because Maine and New Hampshire laws prohibiting data mining have both been upheld by the First Circuit Court of Appeals in the last several years. All of these laws involve limiting the type of information that pharmacies can give to pharmaceutical and health information companies, as those companies use the prescribing pattern information for marketing purposes.

In 2007, Vermont enacted a law to increase transparency in prescription drug information and pricing.   The law limited companies’ access to prescriber data for marketing purposes unless the prescribing physician consents by notifying the state licensing board.  Later in 2007, three health information companies, Verispan, LLC, Wolters Kluwer Health, and IMS Health Inc., filed a lawsuit against the State of Vermont to declare portions of its “Prescription Restraint” law unconstitutional, claiming the law violates the First Amendment by improperly restricting commercial speech. In 2009, a federal district court judge in Vermont held that the law was constitutional, rejecting the health information companies’ challenge.

In yesterday’s ruling, however, the Second Circuit struck down the Vermont law in a 2-1 decision, finding that the law is a restriction on commercial free speech in violation of the First Amendment. In the majority opinion, the court determined that “[Vermont] has not demonstrated that its interests in protecting public health and containing health care costs could not be as well served by a more limited restriction on speech.” Vermont officials have stated that the state is considering appealing this ruling to the U.S. Supreme Court.

This decision follows two previous rulings—the first in November 2008 and the second in August 2010—by the First Circuit Court of Appeals upholding similar laws in New Hampshire and Maine, respectively.  Interestingly, Vermont’s data mining law was modeled after the New Hampshire law. Given the Second Circuit’s ruling this week, however, there is now a circuit split between the First Circuit and Second Circuit on these data mining restrictions, making it increasingly difficult for companies to navigate compliance with the different restrictions in each state. This is especially true given that many other state legislatures currently have similar data mining laws pending. Although last year the U.S. Supreme Court refused to grant cert to the First Circuit Court of Appeals decision upholding the New Hampshire law, the Second Circuit’s decision this week on the Vermont law has created a divergence in the Circuit Courts’ decisions, making this issue particularly suited for U.S. Supreme Court review.

Pharma Giant Agrees to Half-Billion Dollar Settlement for Kickback Claims

The Connecticut Attorney General announced yesterday that the Office of the Inspector General and several states have settled with Novartis, the pharmaceutical giant, for criminal and civil claims that Novartis committed kickbacks and off-label marketing involving several of its drugs.  According to the allegations by the government, Novartis had marketed the drug Trileptal, an anti-epileptic medication, beyond its FDA-approved uses to boost sales and paid physicians compensation for prescribing the drug.

Under the settlement terms, Novartis will pay the states and the federal government a total of $237.5 million in damages and penalties for losses to state and federal health care programs, and another $185 million to resolve criminal allegations.

Novartis must also enter into a five-year Corporate Integrity Agreement with the OIG, ensuring that OIG will be monitoring Novartis' every move going forward.