Court Upholds Vermont’s Tough New Prescriber Data Law

Tougher state law limits on the ability of pharmaceutical companies and others to use prescription data for marketing purposes continue to survive judicial scrutiny, in ways that may force many companies to review and revise their current practices.

The latest decision, IMS Health, Inc. v. Sorrell, comes from Vermont, where a federal district court has upheld all key provisions of a restrictive Vermont law prohibiting the collection, sale, and use of health care providers’ prescription data for marketing purposes.

The Vermont statute also establishes a “counter-detailing” program, to be funded by fees from the pharmaceutical manufacturers whose products are sold though Vermont programs, effectively requiring innovator companies to pay for the state's promotion of their generic competitors’ products, as well as a new state consumer fraud cause of action for advertisements that violate federal law. The Vermont court also rejected challenges to both of these provisions.

The manufacturers have appealed to the Second Circuit and asked the district court to enjoin enforcement of the statute pending appeal.

Clients not already doing so will want to review their data compliance policies in preparation for the Vermont law’s effective date (July 1, unless enjoined) and other state law initiatives.

Part of A National Issue—Will the Supreme Court Weigh In?

Several states have enacted similar laws limiting the use of prescriber identified data (PI) in the context of pharmaceutical marketing practices and the US Supreme Court may yet weigh in on this rapidly evolving issue.

The Vermont law is similar to a New Hampshire law that imposes an outright ban on the use of PI data for sales and marketing purposes. A federal district court in New Hampshire struck down the New Hampshire law on free speech grounds in April 2007. The First Circuit Court of Appeals subsequently upheld the New Hampshire statute on the bases that it regulated conduct and not speech and that the statute did not violate the First Amendment, regardless of whether or not it restricted protected speech. We expect the Supreme Court to decide by June whether or not to grant certiorari to an appeal of the First Circuit’s decision.

In contrast to the First Circuit's decision in the New Hampshire case, the Vermont court treated the Vermont statute as regulating speech, not just conduct. Nonetheless, it upheld the constitutionality of the Vermont law as a reasonable regulation of commercial speech under the Supreme Court's “intermediate scrutiny test,” finding that the statute was narrowly tailored to directly advance the compelling state interests of containing costs and protecting public health. The statute itself reflects how active the Vermont legislature has been in this area, as was further evidenced last week by passage of a bill imposing strict new reporting guidelines on any gifts or payments to physicians.

Recommendations

Many companies are currently following the PhRMA Code section entitled “Prescriber Data” and the voluntary AMA Prescribing Data Restriction Program (PDRP). The Vermont law, along with pending or enacted laws in other states, places more extensive limits on the use of data for marketing-related purposes than the PhRMA Code and the PDRP.

To comply with the Vermont law, pharmaceutical manufacturers and marketers will need to develop internal policies and procedures to: 

• monitor whether prescribers have consented to the use of their data under the statute’s “opt-in” provisions; 
• prevent uses even under these circumstances for non-permitted purposes; and 
• monitor the list of consenting providers at least every six months.

Most importantly, companies will need to clarify for their business operations and sales and marketing staff which of their uses of prescriber data constitute “marketing” or “promotion” under the Vermont law.

Finally, clients should also be aware of the status of related laws in New Hampshire (currently effective) and Maine (currently subject to a preliminary injunction). In Massachusetts, a provision requiring manufacturers to permit prescribers to opt-out of the marketing use of their prescriber data becomes effective July 1, 2009. Additional legislation regulating prescriber data use is pending in a number of other states.

For further information regarding the Vermont law and a more detailed analysis of the court decision, a chart and further information describing the rapidly evolving national landscape of state prescriber data laws, or specific advice on managing the use of prescriber data and databases, please contact your regular Ropes & Gray attorney or any of the attorneys listed at the top of this page.