July 27, 2011 — A recent article written by Kate Rawson in The RPM Report provides an excellent summary of the Supreme Court”s decision in Sorrell v. IMS Health Inc. and discusses the decision”s implications for the pharmaceutical industry. Coalition for Healthcare Communication Executive Director John Kamp is quoted in this insightful article, which is reprinted below, with permission.
When the Supreme Court threw out a Vermont law that prevented pharmaceutical companies from using physician prescribing data for marketing purposes, the unexpectedly broad opinion was cheered by Big Pharma and data miners alike. But IMS Health is already gearing up for the next data mining battle. And this time, the company says, the fight will be about protecting patient privacy.
By Kate Rawson
“We are feeling really good right now.”
That is SDI Health VP-Marketing Jody Fisher’s reaction to the Supreme Court’s 6-3 decision in Sorrell vs. IMS Health to strike down a Vermont law that restricted the use of physician prescribing data by pharmaceutical companies for marketing purposes. The court, which issued its decision on June 23, ruled that the state statute (known as Act 80) violated the free speech clause of the First Amendment.
Given that data miners like SDI Health are in the business of providing physician prescribing data to the pharmaceutical industry, it’s understandable that Fisher would be breathing a sigh of relief. The ruling is also an important one for pharmaceutical companies, who risked losing a key tool in effectively marketing their products to physicians. (See “Flying Blind: Learning to Live Without Physician Prescribing Data,” The RPM Report, January 2007.)
The Vermont case turned on IMS Health’s argument at the Supreme Court that the state discriminated against pharmaceutical companies by banning their use of the data for a specific purpose (marketing), while allowing other parties (include Vermont itself) access to the same data. During oral arguments on April 23, IMS argued that Vermont cannot restrict truthful advertising, as regulated by the Food & Drug Administration, just because it doesn’t like the message.
A majority of the Supreme Court agreed. “On its face, the law enacts a content-and speaker-based restriction on the sale, disclosure, and use of prescriber-identifying information,” Justice Anthony Kennedy’s majority opinion states. The statute “imposes an aimed, content-based burden on detailers, in particular detailers who promote brand-name drugs. In practical operation, Vermont’s law goes even beyond mere content discrimination, to actual viewpoint discrimination.”
In addition to Vermont, New Hampshire and Maine had also passed laws that prevented pharmaceutical companies from using health care professionals’ prescribing data without their consent. Additional states have been waiting in the wings as the legal battles played out.
But with the Supreme Court striking down the Vermont law, the New Hampshire and Maine statutes are likely to come off the books, and other states may be deterred from enacting similar provisions.
The Supreme Court opinion may well mean the end of direct threats to the use of physician prescribing data, but it doesn’t mean that states—and perhaps, a few interested members of Congress—won’t find other ways to achieve the same goals. As SDI’s Fisher says, “there are lots of creative people out there.” And, he says, they may start putting that creativity to use.
IMS Health is already preparing for additional attacks. Whether legislation can be crafted in such a way that it does not run afoul of the Supreme Court is uncertain, but Vermont’s failed defense of its law may in fact provide a roadmap for those who want to restrict access to prescriber data. IMS, at least, expects the battle will shift away from a focus on protecting physician privacy, which was the basis for Vermont’s oral arguments at the Supreme Court. This time, IMS says, anti-data mining advocates will focus on protecting patient privacy.
Three States, Split Circuits
The Supreme Court opinion in Sorrell vs. IMS Health is an unqualified win for both Big Pharma and the data mining companies that provide drug companies with information on physicians’ prescribing habits. To drug marketers, the data are essential for a host of sales and marketing activities: establishing sales force territories, compensating sales representatives, crafting direct-to-consumer advertising campaigns, and creating promotional materials and sampling efforts.
And they are also critical in helping sales representatives effectively tailor their marketing messages. For example, if prescribing data show that a physician tends to prescribe a competing medication, sales representatives can talk up the benefits of their company’s product over that specific competitor. Or, if a health care professional is a high prescriber of a company’s product, they might be a candidate to lead a continuing medical education program.
The data also have benefits outside marketing: they can be used to inform physicians of drug safety problems, enroll patients in clinical trials and ensure formulary compliance. Private insurance companies and government health care programs use the information to target health care professionals for counter-detailing efforts (i.e., to persuade physicians to use generics over more expensive branded products).
Here’s how data mining works: When a prescription is filled, the pharmacy collects that data (as a requirement of federal law), strips it of patient-identifiable information, and sells it to companies like IMS Health, SDI Health and Wolters Kluwer. Those vendors then aggregate the data and sell it to pharmaceutical manufacturers in customized reports, which show, for a given physician, the number of prescriptions written for a drug, prescriptions for other drugs in the same class, refills and switches.
For some physicians, the fact that the pharmaceutical industry has access to their prescribing data simply rubs them the wrong way. Some observers trace back the fight over physician prescribing data to a cocktail party conversation between an OB/GYN and a drug representative in California, during which the rep described the physician’s prescribing practices in “excruciating detail,” much to the physician’s alarm and dismay. (See “Loose Lips Sink Ships,” The RPM Report, January 2007.)
That conversation eventually led California to consider banning the use of prescribing data by marketers in 2003. In 2006, New Hampshire became the first state to enact legislation, and Maine and Vermont quickly followed suit in 2007. The three laws have some differences, most notably that Vermont and New Hampshire physicians must first indicate that their data can be used for marketing (an “opt-in” provision), while Maine’s less-restrictive law assumes a physician’s data can be used for marketing unless he or she says no (an “opt out” provision). (See Exhibit 1.)
All three laws were immediately challenged in court by data miners and the Pharmaceutical Research & Manufacturers of America. The First Circuit Court of Appeals upheld the New Hampshire law in 2008 and the Maine law in 2010. At the same time, the Second Circuit Court of Appeals overturned a district court ruling in Vermont and found the state’s restrictions to be unconstitutional. In January 2011, citing the split in opinions between the appeals courts, the Supreme Court agreed to hear the case.
“A Narrow Class of Disfavored Speakers”
In the majority opinion in Sorrell vs. IMS Health, Justice Kennedy first addressed which standard the Supreme Court should use in determining the constitutionality of the Vermont statute.
The federal district court and Second Circuit Court of Appeals both used the Central Hudson test applicable to restrictions on commercial speech—but came to opposite conclusions, with the lower court upholding Act 80, and the appeals court reversing. Under Central Hudson, the government must show that the regulation directly advances a substantial interest and is no more restrictive of speech than is necessary.
Vermont argued that the data should be viewed by the Supreme Court in the context of a less demanding standard used for state regulation of economic activity. IMS Health, on the other hand, argued that the statute is subject to “heightened judicial scrutiny” typically reserved for noncommercial speech.
And, in a surprise to many observers, the Court agreed, and held that the commercial speech restriction is subject to heightened review. The First Amendment requires heightened scrutiny “whenever the government creates a regulation of speech because of disagreement with the message it conveys,” the opinion states. Because the statute imposes a speaker- and content-based burden on protected expression, Act 80 is subject to heightened judicial scrutiny.
The statute “disfavors marketing, that is, speech with a particular content. More than that, the statute disfavors specific speakers, namely pharmaceutical manufacturers,” the majority opinion states. “As a result of these content- and speaker-based rules, detailers cannot obtain prescriber-identifying information, even though the information may be purchased or acquired by other speakers with diverse purposes and viewpoints. Detailers are likewise barred from using the information for marketing, even though the information may be used by a wide range of other speakers.”
The statute “imposes more than an incidental burden on protected expression,” the opinion continues. “Both on its face and in its practical operation, Vermont’s law imposes a burden based on the content of the speech and the identity of the speaker.” That has led some to suggest that the decision could lead to challenges to other restrictions on the pharmaceutical industry—including the constitutionality of restrictions on the communication of off-label uses. (See “Interpreting a Surprisingly Broad Decision.”)
“An Almost Limitless Audience”
The ruling that the statute merits higher scrutiny than the Central Hudson commercial speech standard is noteworthy, but the Supreme Court also declared that the statute would fail under Central Hudson. In that framework, the majority again found Vermont’s restrictions on physician prescribing data to be unconstitutional, rejecting the state’s assertion that Act 80 advances a “substantial government interest” in justifying the need for the restrictions.
Vermont advanced two reasons why Act 80 was necessary: (1) to protect the privacy of physicians, who, the state said, do not want their prescribing data to be used by pharmaceutical companies; and (2) to prevent reduce health care costs by preventing drug companies from effectively marketing their products. Neither passed muster with the majority of the Supreme Court justices.
Part of the problem with Vermont’s privacy argument is that the data aren’t completely private. In crafting its law, the legislature wanted to ensure that the prescribing data could continue to be used for non-marketing purposes, like formulary compliance and drug safety efforts. So the statute specifically restricted one party (pharmaceutical companies) from accessing the data for a specific purpose (sales and marketing efforts). (See Exhibit 2.)
“Assuming that physicians have an interest in keeping their prescription decisions confidential,” the statute “is not drawn to serve that interest,” the majority opinion says. Given the information’s widespread availability and many permissible uses—including insurers, researchers, journalists and the state itself—“Vermont’s asserted interest in physician confidentiality cannot justify the burdens that [the law] imposes on protected expression.”
Indeed, Vermont made the data available to “an almost limitless audience.” The statute “allows the information to be studied and used by all but a narrow class of disfavored speakers. Given the information’s widespread availability and many permissible uses, the State’s asserted interest in physician confidentiality does not justify the burden that [the statute] places on protected expression.”
Justice Kennedy speculates in the majority opinion whether a less-restrictive opt-out statute (like that passed in Maine) might be less of a burden on speech, but ultimately concludes that “a revision to that effect would not necessarily save” the statute. “Even reliance on a prior election would not suffice, for instance, if available categories of coverage by design favored speakers of one political persuasion over another.”
Would a Narrower Law Fare Better?
The opinion does appear to leave open the possibility that a statute with fewer exemptions might fare better with the Supreme Court.
“The State might have advanced its asserted privacy interest by allowing the information’s sale or disclosure in only a few narrow and well-justified circumstances,” Kennedy’s opinion says, with a reference to the Health Insurance Portability and Accountability Act. “A statute of that type would present quite a different case than the one presented here.”
PhRMA, however, doesn’t see that happening.
There are always other uses for physician prescribing data that a state would wish to preserve, PhRMA Exec VP and General Counsel Diane Bieri points out. Once states start to approve those uses, she says, “they would fall into the same trap” that Vermont found itself in. “It would be very challenging for any state to imagine a statute that could be narrowly tailored enough to withstand Supreme Court scrutiny.”
But Wiley & Rein counsel and Coalition for Healthcare Communication Executive Director John Kamp isn’t so sure. Up until the Supreme Court appearance, Vermont defended Act 80 using the cost-containment argument—that the state had an interest in controlling health care costs that outweighed any protections on commercial speech.
Indeed, the original intent of the Vermont law is quite clear: the legislature wanted to prevent drug companies from using prescribing data in hopes that such a restriction would lower health care costs. Make it harder for companies to sell their products, so the theory goes, and physicians will write fewer prescriptions for brand-name drugs, which run bigger price tags than generics. Physician privacy was also mentioned as a concern of the state legislature, but it did not appear to be the central goal of the legislation.
But a new legal team brought in for the Supreme Court appearance recognized that the majority of justices were unlikely to look kindly on the cost containment argument. So in its briefs to the Supreme Court and in oral arguments, Vermont focused instead on protecting the physicians’ right to privacy. That switch did not sit well with the justices, notably Justice Antonin Scalia, who aggressively questioned Vermont during oral arguments on the intent of the statute. (See Exhibit 3.)
Vermont’s eleventh-hour reliance on physician privacy as a justification for the law was a “clumsy, post-hoc rationalization,” Kamp says. Vermont “threw up privacy as a reason, but the justices saw right through it.”
If a better thought-out legal argument were presented, Kamp suggests, it’s possible that a case could succeed.
No Evidence of Cost Savings
While Vermont’s Asay focused on the physician privacy argument during oral arguments, she declined to acknowledge that the cost containment goal was the original legislative intent of Act 80. That stance clearly ended up damaging the state’s case.
In Vermont’s briefs filed with the Supreme Court, “the State contends that [the statute] advances important public policy goals by lowering the costs of medical services and promoting public health,” the majority opinion states. “If prescriber-identifying information were available for use by detailers, the State contends, then detailing would be effective in promoting brand-name drugs that are more expensive and less safe than generic alternatives.”
“This logic is set out at length in the legislative findings….Yet at oral argument here, the State declined to acknowledge that [the statute’s] objective purpose and practical effect were to inhibit detailing and alter doctors’ prescription decisions,” the opinion continues. “The State’s reluctance to embrace its own legislature’s rationale reflects the vulnerability of its position.”
Part of that vulnerability was that Vermont was unable to produce any evidence showing that the data mining restrictions had any effect on the state’s health care expenditures. “There is no direct evidence that there are any cost savings, and no way to interpret any impact on costs,” IMS Health VP-External Affairs Randy Frankel says.
Given the legislative history, however, the Vermont AG’s office may not have had much a choice. If the Vermont legislature “had just been less aggressive (and less candid) in declaring its commitment to reducing the sales of pharmaceutical companies, its law may well have passed muster—as indeed, Kennedy came close to conceding,” according to an analysis by long-time Supreme Court observer Lyle Denniston, in a post on SCOTUSblog.com.
Indeed, Vermont’s legal team may have simply fallen victim to a poorly conceived law. Asay, the assistant attorney general who represented Vermont, did a “perfectly decent job” during oral arguments, said Washington Legal Foundation chief counsel Richard Samp. “She got beaten up, but anyone would have in that situation.”
Is The Fight Really Over?
Despite the Supreme Court ruling, there are still many parties that do not want pharmaceutical companies to use prescribing data to market their products to physicians. And they may find ways to keep that fight alive.
The National Legislative Association of Prescription Drug Prices, formed by state legislators seeking to reduce drug prices and expand access to prescription drugs, is one group that says it is not giving up.
In a , NLARx quotes several legal analysts with suggestions for ways to work within the Supreme Court opinion. Washington College of Law Associate Director of the Program on Information Justice and Intellectual Property Sean Fiil-Flynn, who served as counsel for amici NLARx and AARP, suggests that there is room for more targeted medical records laws, like those that would “extend the protections of HIPAA to prescriber-identified prescription (and other medical) records.”
NLARx also cites Boston University law professor Kevin Outterson, who wrote the amici curiae brief on behalf of the New England Journal of Medicine and other parties, as saying that “the Vermont statute suffered from self-inflicted wounds, namely some incautious comments in the preamble” about the desire to control health care spending, and that “Vermont can fix the statute quite easily with the guidance given by the Court.”
One option, Outterson says, would be to make the statute a narrow extension of HIPAA giving the privacy right exclusively to the patient and a confidentiality right directly to the physician. Alternatively, he suggests, “Vermont can ban data mining by contract with participating pharmacies through Green Mountain Care,” its newly-enacted single payer health program. Finally, Vermont could also clarify that pharmacies collect this information only as a state-mandated record.
WLF’s Samp posits that a state could also try and pass a counter-detailing requirement for drug companies where a sales rep would essentially have to provide information about a competing generic or over-the-counter drug (Vermont had such a requirement in the original law, but it was amended). While industry could make a case that the requirement was “compelled speech,” Samp notes that the tobacco industry has repeatedly lost that argument in fights over warnings on cigarette packaging.
SDI Health’s Fisher sees that as a non-starter. “Given the act of detailing is probably more closely aligned with commercial speech or direct speech, and given that the opinion already essentially struck down the state”s ‘indirect’ approach to restricting speech, I think it would be very difficult to craft a similarly intended and unbalanced restriction that serves to balance the direct speech of sales representative.”
“I never want to say never, because there are a lot of creative legislators who seek to attack the issues here, but a lot of thought will need to go into another plan that ultimately serves to chill or imbalance speech,” Fisher says.
Whatever the path taken, IMS agrees that the fight is not over. “We don’t believe it will be the end of things,” Frankel says. While declining to give specifics on what IMS is planning for, “patient privacy will be a focal point going forward,” he predicted. “How states manage the privacy issue could impact everyone. We are not content to wait and sit by and not address these issues.”
One privacy argument that came out in the amicus briefs for Sorrell vs. IMS Health—but not addressed by the Court—is that the data are not truly anonymous and can be de-identified. But Frankel says it’s a “dead end” to try and make that kind of case: “We are constantly updating our processes” to prevent third parties from de-identifying patient data. WLF’s Samp agrees: “If one wanted to make that case, they would need to show that it is more than a theoretical possibility. I don’t see it getting very far.”
IMS’ future plans will be to inform the public on what it sees as the value of prescribing data to individual patients—a message the company used in the months leading up to the oral arguments. The company launched and continues to maintain a website at www.imsfreespeech.org with information about Sorrell vs. IMS Health, including a section in which the company makes a case that “patients suffer when information is limited.”
The website highlights the difficulty Eisai Co. Ltd. faced in getting rufinamide (Banzel) to Lennox-Gastaut Syndrome epilepsy patients in New Hampshire due to the state’s restrictions on physician prescribing data. Citing a Massachusetts Biotechnology Council case study, IMS says: “While most patients across the country received the new treatment very quickly, ‘the experience in New Hampshire did not serve patient care as well,’ and there were long delays in finding the doctors who treated the disease.”
Where is the Next Battlefield?
If a state does decide to move forward, Maine is unlikely to be that battlefield. Maine State Representative Rep. Sharon Treat (D-Hallowell), an advocate for the data mining restrictions and executive director of the advocacy group NLARx, points to a “very pro-pharma agenda” in Maine with Republican Governor Paul LePage and a Republican legislature.
“We have a very unpredictable government right now in Maine,” Treat says. “Those who support restrictions to physician prescribing data will have to wait until the climate is better.” The Maine legislature, in cooperation with the first Republican governor in 16 years, has spent much of 2011 repealing many laws passed by the last two Democratic administrations, including a state “Sunshine Act” that partially overlaps with the federal statute, and a pharmacy benefit manager transparency law.
Treat sees New Hampshire and Vermont as more fruitful political environments to carry on the fight. Vermont Governor Peter Shumlin (D) is a co-founder of the NLARx, which supports restrictions to physician prescribing data. Treat also points to New Hampshire’s libertarian strain and interest in protecting privacy as a combination that could keep the issue alive.
There is also a chance that the issue could be revisited by Congress. Capitol Hill has pretty much stayed out of prescribing data since 2006, when Reps. Frank Pallone (D-NJ) and Pete Stark (D-Calif.) introduced the “Prescription Privacy Protection Act.” The bill never got out of committee, and it hasn’t been reintroduced since.
But two well-known members of Congress— Senate Judiciary Committee Chairman Sen. Patrick Leahy (D-Vt.) and Rep. Edward Markey (D-Mass.) both spoke out against the Supreme Court decision, and Rep. Markey went so far as to introduce a resolution on the House floor condemning the opinion. “The Supreme Court tipped the scales of justice in favor of big drug companies at the expense of patients and their doctors,” Rep. Markey says in a press release.
Those statements got attention. “I never underestimate Rep. Markey,” says Wiley & Rein’s Kamp. “He’s a high-profile, well-liked liberal who would be a spokesman for these groups.” Rep. Markey’s office would not comment on whether he would pursue the issue, and the Senate Judiciary Committee would only say that it had “no immediate plans” to introduce legislation, but it did not rule it out.
Action at the federal level is clearly a long-shot for the foreseeable future. But despite the ruling in Sorrell vs. IMS Health, even the Supreme Court doesn’t have the power to end the controversy over the use of prescribing data.
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