Court Nixes Vermont|Prescription Data Law

(CN) - The 2nd Circuit struck down a Vermont law banning prescription data aggregators from selling their information to drug manufacturers, saying it unconstitutionally restricts commercial speech.

A federal judge in Vermont had upheld the law, finding that it was a constitutionally sound restriction of commercial speech and did not violate the dormant Commerce Clause.

Pharmacies collect information about the prescriptions they fill, including prescribing doctor'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.

The Vermont law, section 17, which was passed in 2007 on the heels of similar legislation in New Hampshire and Maine, concerns the data mining companies that buy the prescriber-identifiable, or PI, data.

After the law was passed, three such companies, IMS Health, Verispan and Source Healthcare Analytics, sued Vermont Governor Jim Douglas, Vermont Attorney General William Sorrell and Robert Hofmann, the state secretary of the Agency of Human Services.

The companies aggregate the data, "stripped of patient information to protect patient privacy," and sell it primarily to pharmaceutical manufacturers, who use it for "detailing."

Pharmaceutical Research and Manufacturers of America, a nonprofit group of pharmaceutical researchers and manufacturers, which make up the primary customers of the data-miners, joined the companies suing over the Vermont law.

The federal appeals court in Manhattan listed the many uses pharmaceutical manufacturers find for PI data, including marketing, tracking disease progression, aiding law enforcement, and proving important information to the Food and Drug Administration.

Only companies that use PI data for marketing are affected by section 17, but the data aggregators say that those companies are their biggest customers and the sales make the permitted uses, such as assisting law enforcement, possible.

"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," U.S. District Judge John Koeltl wrote for the majority.

Vermont's law could only survive scrutiny if the government proves how the legislation advances substantial state interest, according to the circuit court's ruling. The law also must not be more extensive than necessary to achieve the government's interest.

"Because this court finds that section 17's restriction on data miners cannot survive even the lower intermediate scrutiny that applies to regulations of commercial speech, we assume without deciding that the statute restricts the data mining appellants' commercial speech," Koeltl wrote.

The court explained that section 17 does not improve protection of patient data, since it is still being collected for the permitted uses.

Koeltl wrote that the law is too "speculative" and does not directly advance the state's interests in protecting public health and reducing health care costs.

"The statute restricts protected speech when uttered for purposes the government does not approve of in order to reduce the effectiveness of marketing campaigns and, ultimately, alter the behavior of prescribers, who are not regulated by the statute," according to the ruling. "This route is too indirect to survive intermediate scrutiny."

Judge Debra Livingston dissented, writing that the law "permissibly restricts access to information that Vermont requires pharmacies to collect and that the statute has very limited, if any, effects on First Amendment."

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