630 F.3d 263 (2nd Cir. 2010), 09-1913, IMS Health Inc. v. Sorrell

Docket Nº:09-1913-cv(L), 09-2056-cv(CON).
Citation:630 F.3d 263
Opinion Judge:JOHN G. KOELTL, District Judge:
Party Name:IMS HEALTH INC., Verispan, LLC, Source Healthcare Analytics, Inc., a subsidiary of Wolters Kluwer Health, Inc., and Pharmaceutical Research and Manufacturers of America, Plaintiffs-Appellants, v. William H. SORRELL, as Attorney General of the State of Vermont, Jim Douglas, in his official capacity as Governor of the State of Vermont, and Robert Hof
Attorney:Thomas R. Julin, Jamie Z. Isani, Patricia Acosta, Hunton & Williams LLP, Miami, FL; Robert B. Hemley, Matthew B. Byrne, Gravel & Shea, P.A., Burlington, VT; Thomas C. Goldstein, Akin Gump Strauss Hauer & Feld LLP, Washington, DC, for Plaintiffs-Appellants IMS Health Inc. and Source Healthcare Ana...
Judge Panel:Before: FEINBERG and LIVINGSTON, Circuit Judges, and KOELTL, District Judge.[*] Judge LIVINGSTON dissents in a separate opinion. DEBRA ANN LIVINGSTON, Circuit Judge, dissenting:
Case Date:November 23, 2010
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
FREE EXCERPT

Page 263

630 F.3d 263 (2nd Cir. 2010)

IMS HEALTH INC., Verispan, LLC, Source Healthcare Analytics, Inc., a subsidiary of Wolters Kluwer Health, Inc., and Pharmaceutical Research and Manufacturers of America, Plaintiffs-Appellants,

v.

William H. SORRELL, as Attorney General of the State of Vermont, Jim Douglas, in his official capacity as Governor of the State of Vermont, and Robert Hofmann, in his capacity as Secretary of the Agency of Human Services of the States of Vermont, Defendants-Appellees.

Nos. 09-1913-cv(L), 09-2056-cv(CON).

United States Court of Appeals, Second Circuit.

November 23, 2010

Argued: Oct. 13, 2009.

Page 264

[Copyrighted Material Omitted]

Page 265

Thomas R. Julin, Jamie Z. Isani, Patricia Acosta, Hunton & Williams LLP, Miami, FL; Robert B. Hemley, Matthew B. Byrne, Gravel & Shea, P.A., Burlington, VT; Thomas C. Goldstein, Akin Gump Strauss Hauer & Feld LLP, Washington, DC, for Plaintiffs-Appellants IMS Health Inc. and Source Healthcare Analytics, Inc.

Page 266

Mark A. Ash, Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, Raleigh, NC, for Plaintiff-Appellant Verispan LLC.

Robert N. Weiner, Jeffrey L. Handwerker, Sarah Brackney Arni, Arnold & Porter LLP, Washington, DC; Karen McAndrew, Linda J. Cohen, Dinse, Knapp & McAndrew, P.C., Burlington, VT, for Plaintiff-Appellant Pharmaceutical Research & Manufacturers of America.

William H. Sorrell, Attorney General of the State of Vermont; Bridget C. Asay, Assistant Attorney General; Sarah E.B. London, Kate G. Duffy, David R. Cassetty, Assistants Attorneys General, on the brief, Montpelier, VT, for Defendants-Appellees.

Before: FEINBERG and LIVINGSTON, Circuit Judges, and KOELTL, District Judge.[*]

Judge LIVINGSTON dissents in a separate opinion.

JOHN G. KOELTL, District Judge:

The appellants, IMS Health Inc., Verispan, LLC, Source Healthcare Analytics, Inc., and Pharmaceutical Research and Manufacturers of America (" PhRMA" ) (collectively, " the appellants" ) challenge a Vermont statute banning the sale, transmission, or use of prescriber-identifiable data (" PI data" ) for marketing or promoting a prescription drug unless the prescriber consents. In 2007, Vermont enacted the statute at issue, namely Vt. Acts No. 80, § 17 (2007), codified at Vt. Stat. Ann. tit. 18, § 4631 (2007), as amended by Vt. Acts No. 89 (2008) (changing effective date of § 17 from January 1, 2008 to July 1, 2009) (Act 80, " section 17" ). The appellants appeal from a judgment of the United States District Court for the District of Vermont (J. Garvan Murtha, Judge ) finding section 17 to be a constitutional restriction on commercial speech pursuant to Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 561-66, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980), and finding that section 17 does not violate the Commerce Clause, art. I, § 8, cl. 3, of the United States Constitution.1 IMS Health Inc. v. Sorrell, 631 F.Supp.2d 434 (D.Vt.2009).

On appeal, the appellants argue (1) that section 17 restricts non-commercial speech and cannot withstand strict scrutiny, (2) that even if section 17 restricts only commercial speech, it cannot withstand intermediate scrutiny under Central Hudson, and (3) that section 17 violates the dormant Commerce Clause by prohibiting commerce wholly outside of Vermont. The appellees, Vermont Attorney General William H. Sorrell, Vermont Governor Jim Douglas, and Secretary of the Agency of Human Services of the State of Vermont Robert Hofmann, contend (1) that section 17 does not implicate the appellants' First Amendment rights, (2) that even if section 17 is a restriction on the appellants' commercial speech, section 17 survives intermediate scrutiny because it is a narrowly tailored statute that directly advances Vermont's substantial interest in protecting medical privacy, in controlling health care costs, and in promoting public health, and (3) that the appellants lack standing to challenge section 17 under the dormant Commerce Clause and that, in any event, section 17 does not violate the dormant Commerce Clause because it regulates intrastate commerce.

Page 267

We conclude that because section 17 is a commercial speech restriction that does not directly advance the substantial state interests asserted by Vermont, and is not narrowly tailored to serve those interests, the statute cannot survive intermediate scrutiny under Central Hudson. Therefore, we reverse and remand the judgment of the district court.

BACKGROUND

The Vermont legislature passed Act 80 in 2007, intending to protect public health, to protect prescriber privacy, and to reduce health care costs. Section 17 prohibits the sale, license, or exchange for value of PI data for marketing or promoting a prescription drug, and prohibits pharmaceutical manufacturers and marketers from using PI data for marketing or promoting a prescription drug, unless the prescriber consents. See Vt. Stat. Ann. tit. 18, § 4631(a) & (d). As amended, section 17 was effective on July 1, 2009. See Vt. Acts No. 89 (2008).

I.

When filling prescriptions, pharmacies in Vermont collect information including the prescriber's name and address, the name, dosage, and quantity of the drug, the date and place the prescription is filled, and the patient's age and gender. Pharmacies sell this PI data to the data mining appellants IMS Health Inc., Verispan, LLC, and Source Healthcare Analytics, Inc.2 These data mining companies, all located outside of Vermont, aggregate the data to reveal individual physician prescribing patterns and sell it outside of Vermont, primarily to pharmaceutical manufacturers. The PI data sold by the data-mining appellants is stripped of patient information, to protect patient privacy. Appellant Pharmaceutical Research and Manufacturers of America (" PhRMA" ) is a non-profit association representing pharmaceutical researchers and manufacturers, the primary customers of the data mining appellants.

Pharmaceutical manufacturers market their products through various means, including advertising and detailing. " Detailing" refers to visits by pharmaceutical representatives, called detailers, to individual physicians to provide information on specific prescription drugs, including the use, side effects, and risks of drug interactions. Pharmaceutical manufacturers use PI data to identify audiences for their marketing efforts, to focus marketing messages for individual prescribers, to direct scientific and safety messages to physicians most in need of that information, to track disease progression, to aid law enforcement, to implement risk mitigation programs, and to conduct clinical trials and post-marketing surveillance required by the United States Food and Drug Administration (" FDA" ).

While section 17 in part aims to decrease detailing, prescribers may want to receive the information detailers provide, and, in any event, prescribers are free to decline meetings with detailers.

As the district court noted, pharmaceutical industry spending on detailing has increased exponentially along with the rise of data mining. Detailing is only cost-effective for brand-name drugs. When a

Page 268

patent expires, competitors can introduce bioequivalent generic drugs. Bioequivalent generic drugs are not necessarily identical to the brand name version, but are required to demonstrate an absorption rate between 80 and 125 percent of the brand-name drug. Variations in absorption rates among branded or generic drugs may cause different reactions, such as side effects. The district court also noted that while a brand-name drug is not necessarily better than its generic version, the brand-name drug is typically more expensive.

Pharmaceutical manufacturers are not the only entities that purchase PI data from the data mining appellants, although pharmaceutical manufacturers and marketers are the only customers banned from using PI data in their marketing efforts by section 17. The state of Vermont itself uses PI data for law enforcement and other state programs. Researchers use PI data to identify overuse of a pharmaceutical in specific populations, to develop new drugs, and to facilitate identification of potential patients to participate in clinical trials. The FDA, the Center for Disease Control, and the federal Drug Enforcement Agency use PI data to monitor usage of controlled substances and to identify prescribers who need time-sensitive safety information. Insurance companies and pharmacy benefit managers use the data to process claims and manage formulary compliance. Moreover, insurance companies and state governments like Vermont's use PI data to encourage the use of cheaper, generic medications-the very medications section 17 seeks to promote. While insurance companies and governments collect their own PI data, their databases are not as thorough as those maintained by the data mining appellants. To preserve the value of their data, data mining companies typically restrict re-publication of the data they provide their customers. The appellants argue that the sales covered by section 17 are essential to the ability of the data mining appellants to provide PI data for these other, permitted, uses.

II.

a.

The Vermont law was adopted in the wake of a similar statute that had been enacted in New Hampshire, and shortly before another similar statute adopted in Maine.

In 2006 the New Hampshire state legislature passed a statute prohibiting the transmission or use of patient-identifiable and PI data for most commercial purposes. See IMS Health Inc. v. Ayotte, 490 F.Supp.2d 163, 170-71 (D.N.H.2007), rev'd, 550 F.3d 42 (1st Cir.2008). In relevant part, the statute reads:

Records relative to prescription...

To continue reading

FREE SIGN UP