631 F.Supp.2d 434 (D.Vt. 2009), 1:07-CV-188, IMS Health Inc. v. Sorrell

Docket Nº:1:07-CV-188, 1:07-CV-220.
Citation:631 F.Supp.2d 434
Opinion Judge:J. GARVAN MURTHA, District Judge.
Party Name:IMS HEALTH INCORPORATED; Verispan, LLC; and Source Healthcare Analytics, Inc., a subsidiary of Wolters Kluwer, Health Inc., Plaintiffs, v. William H. SORRELL, as Attorney General of the State of Vermont, Defendant. Pharmaceutical Research and Manufacturers of America, Plaintiff, v. William H. Sorrell, in his official capacity as Attorney General of
Attorney:Mark A. Ash, Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, Raleigh, NC, Matthew B. Byrne, Robert B. Hemley, Gravel and Shea, Burlington, VT, Michelle R. Milberg, Patricia Acosta, Thomas R. Julin, Hunton & Williams LLP, Miami, FL, Jeffrey L. Handwerker, Laura Riposo Vandruff, Robert ...
Case Date:April 23, 2009
Court:United States District Courts, 2nd Circuit, District of Vermont
 
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631 F.Supp.2d 434 (D.Vt. 2009)

IMS HEALTH INCORPORATED; Verispan, LLC; and Source Healthcare Analytics, Inc., a subsidiary of Wolters Kluwer, Health Inc., Plaintiffs,

v.

William H. SORRELL, as Attorney General of the State of Vermont, Defendant.

Pharmaceutical Research and Manufacturers of America, Plaintiff,

v.

William H. Sorrell, in his official capacity as Attorney General of the State of Vermont; Jim Douglas, in his official capacity as Governor of the State: of Vermont; and Cynthia D. Laware, in her official capacity as the Secretary of the Agency of Human Services of the State of Vermont, Defendants.

Nos. 1:07-CV-188, 1:07-CV-220.

United States District Court, D. Vermont.

April 23, 2009

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         Mark A. Ash, Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, Raleigh, NC, Matthew B. Byrne, Robert B. Hemley, Gravel and Shea, Burlington, VT, Michelle R. Milberg, Patricia Acosta, Thomas R. Julin, Hunton & Williams LLP, Miami, FL, Jeffrey L. Handwerker, Laura Riposo Vandruff, Robert N. Weiner, Sarah M. Brackney, Sarah E. Warlick, Arnold & Porter LLP, Washington, DC, Karen McAndrew, Dinse, Linda J. Cohen, Knapp & McAndrew, P.C., Burlington, VT, Rhonda L. Stewart, Arnold & Porter LLP, San Francisco, CA, William H. Graham, Esq., Roseland, NJ, for Plaintiffs.

          David R. Cassetty, Michael N. Donofrio, Bridget C. Asay, Kate G. Duffy, Sarah E.B. London, Vermont Office of the Attorney General, Montpelier, VT, for Defendants.

          MEMORANDUM OPINION AND ORDER

          J. GARVAN MURTHA, District Judge.

         I. Introduction

         This case is the third in a succession of challenges to legislation in New Hampshire, Maine, and Vermont intending to regulate the collection and use of data identifying health care providers' prescribing patterns. This ruling addresses multiple constitutional challenges to sections 17, 20 and 21 of Vt. Acts No. 80 (2007), as amended by Vt. Acts No. 89 (2008) (" the Act" ).

         For the following reasons, the Court finds the challenged sections withstand the constitutional challenges. Plaintiffs' motions for declaratory and injunctive relief as well as summary judgment (Papers 6, 61, 168) are denied. Defendants' motions for summary judgment (Papers 205, 247, 257) are denied as moot.

         II. Facts

         A. Introduction

         In 2007, the Vermont Legislature passed Act 80 aimed at protecting public health and containing prescription drug costs. The Act included the following sections, as amended by Act 89, passed in 2008:

• Section 17-prohibiting regulated entities from selling or using prescriber-identifiable data for marketing or promoting prescription drugs unless the prescriber consents, codified at Vt. Stat. Ann. tit. 18, § 4631;

• Section 20-creating an evidence-based education program for health

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care professionals concerning the therapeutic and cost-effective utilization of prescription drugs. The program is funded by a fee paid by pharmaceutical manufacturers whose products are sold through Vermont programs, codified at Vt. Stat. Ann. tit. 18, § 4622, Vt. Stat. Ann. tit. 33, § 2004;

• Section 21-creating a consumer fraud cause of action for advertisements printed, distributed or sold in Vermont that violate federal law, codified at Vt. Stat. Ann. tit. 9, § 2466a.1

         Plaintiffs challenge these sections of the Act as unconstitutional.

         B. Prescription Drug Industry Landscape

         For background information on the prescription drug industry and the practice of detailing, please refer to the thorough and detailed description in Judge Barbadoro's opinion in IMS Health Inc. v. Ayotte, 490 F.Supp.2d 163 (D.N.H.2007). See also IMS Health Inc. v. Ayotte, 550 F.3d 42 (1st Cir.2008); IMS Health Corp. v. Rowe, 532 F.Supp.2d 153 (D.Me.2007).

         In the course of filling prescriptions, pharmacies acquire prescription information. Certain 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, is purchased by third parties who, after manipulating the data, sell it to customers, principally pharmaceutical companies. These third-party entities are sometimes referred to as " data mining companies." The manipulated data shows, among other things, details of physicians' prescribing patterns in terms of gross number of prescriptions and inclination to prescribe a particular drug.

         Pharmaceutical manufacturers collectively spend close to $8 billion a year to market drugs directly to prescribers, employing thousands of sales representatives. The estimated total cost of marketing to Vermont prescribers approximates $10 million, not including samples 2 or direct-to-consumer advertising. Sales representatives provide " details" regarding the use, side effects and risk of interactions of the drug they are selling. For this reason, sales representatives are called " detailers." In addition to " details" and samples, representatives distribute medical literature and give small gifts 3 such as pens, notepads or lunch. Prescribers often rely on information provided by detailers because keeping current with the changing landscape of prescription drugs is time-consuming.4

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          Pharmaceutical companies use this prescriber-identifiable data (PI data) as a marketing tool. The data is used principally for " detailing." Detailing is the " face to face advocacy of a product by sales representatives" who visit health care professionals. Ayotte, 550 F.3d at 71 (Lipez, J.). Coincident with the phenomenon of " data mining," pharmaceutical industry spending on direct marketing has increased exponentially.

         Pharmaceutical sales representatives detail only branded drugs. When a patent expires, competitors introduce generic bioequivalent 5 versions of the drug and detailing is no longer cost-effective. Branded drugs are not necessarily better than generic drugs, however they are usually more expensive.

         Against this backdrop, a few states introduced laws restricting the use and sale of PI data for pharmaceutical marketing.

         C. Laws Restricting Prescriber Identifiable Data

         1. New Hampshire Law

         New Hampshire passed the first statute restricting the use of prescription information in June 2006. The New Hampshire law " expressly prohibit[ed] the transmission or use of both patient-identifiable data and prescriber-identifiable data for certain commercial purposes." 6 Ayotte, 490 F.Supp.2d at 170. The Legislature enacted the law " to protect patient and physician privacy and to save the State, consumers, and businesses money by reducing health care costs." Id. at 171. The law was passed quickly and without formal legislative findings. Id. at 177 n. 12. It did not include manufacturer fees or advertising provisions.

         Following a trial, New Hampshire's prescription information law was invalidated by the federal district court in April 2007 because the court determined the law violated the First Amendment. See Ayotte, 490 F.Supp.2d at 183.

         2. Maine Law

          Maine followed New Hampshire's lead, passing a law in June 2007 which also restricted the use of prescription information. The Maine Legislature made express findings, outlining the state's interests and specific purposes in enacting the law, which were improving public health, maintaining costs, and protecting the privacy of patients and prescribers. 22 Me.Rev.Stat. Ann. § 1711-E(1-A, 1-B), invalidated by IMS Health Corp. v. Rowe, 532 F.Supp.2d 153 (D.Me.2008). Unlike the New Hampshire statute, however, the Maine law was crafted with an " opt-out" provision. Maine prescribers could elect to prevent pharmaceutical companies from

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using their individualized prescribing information for marketing, either to them or others. Rowe, 532 F.Supp.2d at 165. The law operated by forbidding the sale or use of information for marketing purposes if the prescriber opted out.7

         Following a two-day evidentiary hearing, Maine's prescription privacy law was invalidated by the federal district court in December 2007 because the court determined that, notwithstanding the opt-out provision, the law violated the First Amendment. See id. at 183.

         3. First Circuit Court of Appeals

         Both the New Hampshire and Maine District Court decisions were appealed to the First Circuit Court of Appeals. See 1st Cir. Dkt. Nos. 07-1945 and 08-1248. The appeal of the Maine decision was stayed while the First Circuit decided the New Hampshire appeal in IMS Health Inc. v. Ayotte. In November 2008, the First Circuit issued its decision. IMS Health Inc. v. Ayotte, 550 F.3d 42 (1st Cir.2008). The majority held the New Hampshire law did not violate the First Amendment because it regulated conduct and not speech. Id. at 54. However, the majority offered an alternative holding that, if the law implicated First Amendment rights, it is constitutional because it withstands intermediate scrutiny. Id. at 60. Judge Lipez concurred in the result, but believed the law did concern First Amendment rights in the first instance and the commercial speech restriction passed constitutional muster. Id. at 102 (Lipez, J., concurring and dissenting).

         4. Vermont Law

          Vermont is also engaged in an effort to control health care costs and, in June 2007, the Vermont Legislature passed " An Act Relating to Increasing Transparency of Prescription Drug Pricing and...

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