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Does the Supreme Court's Sorrell Decision Threaten Privacy?

July 2011

On June 23, as its 2010 term drew to a close, the U.S. Supreme Court announced its much-awaited decision in Sorrell v. IMS Health Inc. (No. 10-779), holding that Vermont's Act 80, prohibiting access to certain information on physicians' prescribing practices for use in marketing brand-name drugs, violated the First Amendment.  Initial press reports quoted various spokespersons to the effect that the decision represents a blow to privacy.  Time will tell, but another reading is simply that invoking privacy arguments as justification for a statute having another purpose can prove to be an unsuccessful legislative or litigation strategy.

Act 80 Background

In 2007, Vermont enacted a statute, labeled a Prescription Confidentiality Law (often referred to as Act 80), that sought to change practices then used to market brand-name prescription drugs.  Information on which drugs a physician prescribes is reported to pharmacies pursuant to law, with the result that pharmacies have data that can be analyzed to show how frequently physicians prescribe given drugs and on what diseases their practices focus.  Pharmacies have sold this information to "data miners," who prepare reports on the prescribing practices of physicians.  They provide the reports to pharmaceutical manufacturers, whose marketing "detailers" use them to identify which physicians might prescribe their manufacturers' drugs but are not already doing so, thus enabling them to target more effectively their doctor's office sales visits. 

Vermont perceived that manufacturers had been unduly successful in so marketing brand-name prescription drugs, doctors were not prescribing generic drugs often enough, and it was costing Vermont more money as a result.  In response, Act 80 prohibited pharmacies from selling or otherwise providing such data for marketing use and prohibited pharmaceutical manufacturers and marketers from using such "information for marketing or promoting a prescription drug unless the prescriber consents." 

Legal Proceedings

Separate suits were brought by data miners and the Pharmaceutical Research and Manufacturers of America against Vermont officials, seeking to enjoin enforcement of the statute as unconstitutional.  When U.S. District Judge J. Garvan Murtha upheld the statute's constitutionality in the consolidated actions and denied relief, the plaintiffs appealed to the U.S. Court of Appeals for the Second Circuit.  A divided Second Circuit panel reversed, with Senior Circuit Judge Wilfred Freeman and District Judge John G. Koeltl in the majority and Circuit Judge Ann Livingston dissenting, finding the statute failed to pass muster under the standards for assessing restrictions on commercial speech specified by the Supreme Court in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980).  At that point, of the four federal judges who had assessed the statute, two thought it was constitutional and two unconstitutional.

Vermont then sought review by the Supreme Court and was aided in securing review by there being a "split between circuits," the First Circuit earlier having upheld similar statutes enacted by New Hampshire (IMS Health Inc. v. Ayotte, 550 F. 3d 42 (2008)) and Maine (IMS Health Inc. v. Mills, 616 F.3d 7 (2010)).

When the Supreme Court granted review, the matter attracted great interest.  In addition to the defendant-petitioner and the two plaintiff-respondents, merits briefs were filed by 27 amici, 11 supporting the statute and 16 opposing it.  The  latter included Wiley Rein's amicus brief for the Genetic Alliance and the National Organization for Rare Disorders.  Those supporting Vermont included the United States, and Deputy Solicitor General Edwin S. Kneedler was allowed to participate in the April 26 oral argument.

The Supreme Court's Decision

By a 6-3 majority, the Supreme Court ruled that the Vermont statute violated the First Amendment (affirming the Second Circuit's decision).  The opinion of the Court, written by Justice Anthony Kennedy (viewed by many as the "swing vote" on today's Court) was joined by Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, Samuel Alito and Sonia Sotomayor.

Justice Kennedy's analysis focused first on what standard should be used in measuring the constitutionality of this Vermont statute.  Several proposals were advocated.  The Second Circuit had used the Central Hudson test, which several groups supported.  The respondents advocated a "strict scrutiny" test of the sort applied to statutes restricting noncommercial speech, and Vermont, as well as certain other participants, advocated a less demanding standard used for reviewing state regulation of economic conduct (as distinct from speech).

The majority concluded that, because the statute "on its face burdens disfavored speech by disfavored speakers" and "imposes a speaker-based and content-based burden on protected expression," it is subject to "heightened scrutiny" such as the Court had applied in Cincinnati v. Discovery Network, Inc., 507 U.S. 410 (1993) (reviewing "a categorical prohibition on the use of news racks to disseminate commercial messages").  In this context, Justice Kennedy found that "it is all but dispositive to conclude that a law is content-based and, in practice, viewpoint discriminatory."

Nevertheless, the majority went on to analyze the statute using the Central Hudson standard under which "the State must show at least that the statute directly advances a substantial governmental interest and that the measure is drawn to achieve that interest."  First, it considered Vermont's argument that the "law is necessary to protect medical privacy," finding that the statute is "not drawn to serve that interest," essentially because "pharmacies may share prescriber-identifying information with anyone for any reason save one," namely "for marketing," and thus the information is "available to an almost limitless audience."

Second, the majority addressed Vermont's argument that the statute "advances public policy goals by lowering the costs of medical services and promoting public health."  The majority concluded from the Vermont "legislative findings" that these were the statute's actual goals and the legislative means was to "inhibit detailing."  Accepting those goals, the majority found the means impermissible, because the fact that the "State finds expression too persuasive does not permit it to quiet the speech or burden its messengers."  On those bases, the Court found Act 80's prohibitions to be unconstitutional.

The Dissent's Perspective

Justice Stephen Breyer dissented, in an opinion joined by Justices Ruth Bader Ginsberg and Elena Kagan.  The dissenters contended that the First Amendment does not require "a special 'heightened' standard of review for a statute that deprives manufacturers of data" that could help them "create better sales messages."  Instead, they would "ask whether Vermont's regulatory provisions work harm to First Amendment interests that is disproportionate to their furtherance of legitimate regulatory objectives."  They stressed that the First Amendment "offers considerably less protection" to the marketplace of goods and services and should be construed to "reflect the democratic importance of permitting an elected government to implement through effective programs policy choices for which the people's elected representatives have voted."  They feared that applying heightened scrutiny whenever a "program burdens speech" would "transfer from legislatures to judges the primary power to weigh ends and choose means" and could produce a return to the "happily bygone era" of Lochner v. New York, when "judges scrutinized legislation for its interference with economic liberty."

Justice Breyer went on to argue that Vermont's statute should be found to meet the Central Hudson standard as well as "any more limited 'economic regulation' test."  The dissenters adjudged "withholding of information collected through a regulatory program, thereby preventing companies from shaping a commercial message they believe maximally effective" to be "harm" that is "modest at most."  They deemed the stated objectives of protecting the "public health of Vermonters," protecting "the privacy of prescribers and prescribing information," ensuring "costs are contained" and ensuring "prescribers receive unbiased information" to be "important" and "neutral" as to speech.  They then found that "the record evidence is sufficient to permit a legislature to conclude that the statute 'directly advances' each of these objectives."

They asserted that detailing messages based on "an individual doctor's prior prescription habits" may sell more of a manufacturer's drugs, but it does so "by diverting attention from scientific  research about a drug's safety and effectiveness, as well as its costs," which diversion comes at the "expense of public health and the State's fiscal interest."

They further declared that the "record adequately supports the State's privacy objective."  They observed that under other Vermont rules, confidentiality of prescribing practices "remains the norm," and there is no indication that anyone used "this information for counterdetailing efforts."  On those grounds, the dissenters concluded that Act 80 satisfied the Central Hudson standard and, thus, necessarily satisfied "less demanding standards that are more appropriately applied in this kind of commercial regulatory case."

So Where Does Privacy Stand?

The majority clearly showed a willingness to give considerable weight to First Amendment protections in a commercial context.  Other end-of-term decisions revealed a majority willingness to expand First Amendment protections in additional areas as well.  See Arizona Free Enterprise Club's Freedom Club PAC v. Bennett, No. 10-238 (June 27, 2011) (5-4 majority invalidated the Arizona Citizens Clean Elections Act); Brown v. Entertainment Merchants Association, No. 08-1448 (June 27, 2011) (7-2 majority invalidated a California statute restricting the sale or rental of violent video games to minors).  Such rulings clearly will lend comfort to those advocating First Amendment issues, and, to the extent that a claimed privacy right is squarely in conflict with a claimed First  Amendment protection, such a trend may well prove troubling to privacy proponents.

Additionally, many will read the Sorrell majority decision as showing sympathy toward targeted marketing.  That, after all, is precisely what detailers were doing when they used the reports analyzing physician prescribing practices to guide their decisions on which physicians should receive marketing visits.  Legislatures and regulatory agencies currently are exploring whether information gathering and use for targeted marketing in a variety of contexts should be restricted, and there is no shortage of restriction advocates.  The possibility that targeted marketing could in some situations enjoy First Amendment protection could influence the debate.

Such indirect effects notwithstanding, a conclusion that the majority decision is anti-privacy would appear to be overreaching.  First, it seems clear that Act 80 really had little to do with physician privacy, if by privacy one means "the right to be let alone."  The statute did not prevent drug manufacturers from using detailers to market to physicians in their offices.  It merely made it more difficult for a detailer to identify which physicians might have use for the drugs that detailer was selling.  One obvious possibility is that the lack of good targeting information would cause detailers to visit more physicians in an effort to reach the right ones.  Thus, if a detailer visit were viewed as an infringement on privacy, Act 80 actually might have resulted in a loss of privacy.

The Sorrell majority clearly doubted that Act 80 was a statute that sought to advance privacy.  Indeed, it concluded expressly that the "State did not enact a statute with that purpose or design" and made explicit that a statute actually advancing "physician confidentiality" would "present a different case than the one presented here."  Moreover, the majority expressly acknowledged that the "capacity of technology to find and publish personal information" presents "serious and unresolved issues with respect to personal privacy and the dignity it seeks to ensure," clearly signaling that consideration of such "unresolved" issues was for another day.

At the same time, the majority made clear its distaste for attempting to justify the state's efforts to coerce increased use of generic drugs in the name of preserving privacy:  "Privacy is a concept too integral to the person and a right too essential to freedom to allow its manipulation to support just those ideas the government prefers."  Thus, the decision's true message may be that efforts to legislate for some other objective are not likely to be saved by cloaking them in makeweight claims of privacy protection.