This Vermont case was one of three cases brought in the New England federal courts challenging state laws restricting the transfer and use for commercial purposes of information regarding individual physicians’ medication prescribing practices, so-called “prescriber-identifiable information.” This data is sold by pharmacies to data-mining companies like plaintiff IMS Health, which organize and compile the data and sell it to pharmaceutical companies for use in “detailing,” or marketing their drugs to doctors. Laws restricting pharmacies from selling this data and pharmaceutical companies from using it for commercial purposes were enacted in New Hampshire, Maine, and Vermont. While these cases most immediately affect the rights of pharmacies and pharmaceutical companies, they raise more generally questions regarding the level of protection to be afforded the sale or other voluntary transfer of information (e.g., marketing lists) by and between businesses.
IMS raised its First Amendment challenge to the Vermont statute in an action filed in the Vermont federal District Court against Vermont’s Attorney General. NELF filed an amicus brief in the District Court action on behalf of itself and co-amicus National Association of Chain Drug Stores (“NACDS”) arguing, in support of IMS Health, that Vermont’s version of the statute restricting the transfer or sale of prescriber identifiable information restricted speech and was in violation of the First Amendment. In addition to its legal arguments demonstrating that the statute did not pass Constitutional muster, NELF noted that in our “information age,” sales and other voluntary transfers of data by and between businesses are fundamental to the free enterprise system and often serve, as in this instance, societal interests as well as the interests of individual businesses. NELF argued further that, since market forces provide the incentives and resources for dissemination of most information in our society, restricting the transfer and use of data for commercial purposes can be expected to have consequences far beyond that intended focus to the detriment of the public interest.
In his 2009 decision, U.S. District Judge Murtha agreed with NELF that the Vermont statute restricted speech, as opposed to just conduct, but concluded that the regulated speech qualifies as “commercial speech” and that the Vermont statute survives the intermediate level of scrutiny applicable to that category of speech under the First Amendment. Whereas NELF had argued that only speech proposing a commercial transaction should be considered commercial speech, the court disagreed and appeared to consider “commercial speech” as encompassing any information that is put to a commercial use, a definition that NELF had argued was in conflict with both Supreme Court and Second Circuit precedent.
IMS appealed to the Second Circuit and NELF again filed an amicus brief in support of IMS in the appeal. In a decision issued on November 23, 2010, while agreeing with the lower court that the speech at issue is commercial speech, the Second Circuit nevertheless reversed, consistent with NELF’s position that the Vermont statute violated the First Amendment, although for different reasons. The Second Circuit viewed the restriction as unconstitutional because it unduly restricts commercial speech under the Supreme Court’s Central Hudson balancing test.
The Supreme Court granted the Attorney General of Vermont’s petition for certiorari, and NELF again filed an amicus brief on the merits in support of IMS Health in the Supreme Court, making arguments similar to those in its Second Circuit brief. NELF argued essentially, that the information in question should be accorded full First Amendment protection because, since it is indeed speech and does not propose a transaction, it is not commercial speech. Therefore, Vermont’s Prescription Restraint Law restricts noncommercial speech and is subject to, but cannot survive, strict scrutiny under the First Amendment. The Court has consistently held that speech is commercial under the First Amendment only if it proposes a commercial transaction. In applying this clear, content-based test for commercial speech, the Court has consistently found speech to be commercial only when it has advertised or promoted a product or service. No such content is provided by the information at issue.
NELF also argued that the Supreme Court’s content-based test for commercial speech best serves the primary rationale for according less First Amendment protection to commercial speech--namely, the prevention of economic harm that can arise from false or misleading advertising to promote the sale of a product or service. Commercial speech therefore implicates the well-established governmental interest in regulating the underlying transaction by ensuring the accuracy and clarity of its promotional “pitch” to consumers. Under this precedent, the prescriber-identifiable information at issue is clearly noncommercial speech because it does not advertise a product or service or otherwise propose any commercial transaction whatsoever. Instead, the prescriber-identifiable information simply provides the names of drug prescribers and related accurate information concerning their prescribing patterns. This unadorned information cannot satisfy the definition of commercial speech and should be accorded full First Amendment protection.
While the prescriber-identifiable information may ultimately be used by pharmaceutical company representatives as a tool in the marketing of their companies’ products, such use of the information is irrelevant to determining whether the content of the information proposes a commercial transaction. The incidental or indirect commercial use of the information cannot transform it into commercial speech for First Amendment purposes, when the information on its face simply does not propose a commercial transaction. Accordingly, Vermont’s Prescription Restraint Law warrants strict scrutiny and, as forcefully argued by IMS in its brief, cannot survive this standard of review and should be declared invalid under the First Amendment.
Finally, NELF argued that, because market forces fuel the compilation and publication of most information in modern society, efforts to restrict the transfer of information that serves a business purpose could have significant, unintended consequences to the detriment of the public interest. It is therefore critical that legislative measures restricting transfers of information that does not propose a commercial transaction receive strict First Amendment scrutiny, even if the restricted information does serve a business’s economic interests. Vermont’s Prescription Restraint Law should accordingly be subject to strict scrutiny and should be invalidated as an unconstitutional suppression of speech under the First Amendment.
On June 23, 2011, the Supreme Court affirmed, by a 6-3 majority , the Second Circuit’s decision, agreeing that Vermont’s statute had to be stricken because it violated the First Amendment. See Sorrell v. IMS Health, et al., 131 S.Ct. 2653 (2011). Like the Second Circuit, the Supreme Court ruled that the Vermont statute in fact regulated speech. Further, in his majority opinion, Justice Kennedy pointed out that the regulation imposed “more than an incidental burden on protected expression,” and noted (importantly in light of the concerns expressed by NELF in its brief), “[w]hile the burdened speech results from an economic motive, so too does a great deal of vital expression.” 131 S.Ct. at 2665 (citations omitted).