IMS HEALTH INC. v. SORRELL

" state interests. With respect to the second, which is the only asserted interest on which the majority and I diverge, I am unable to accept the majority's conclusion that the state's interest in medical privacy is "too speculative" to qualify as a substantial interest. The majority's analysis — which focuses on the evidence, or asserted lack thereof, of section 17's effect on medical privacy — is relevant only to whether section 17 "directly advances" the state interest. It has no bearing on whether that interest is real and substantial, an issue which the majority does not directly question. Indeed, neither appellants nor the majority advances any serious argument that the state does not have a legitimate and substantial interest in medical privacy, nor am I aware of any. To the contrary, in an era of increasing and well-founded concern about medical privacy and the rampant dissemination of confidential information, the federal government has repeatedly acted on that interest and legislated to protect the privacy of medical records, see, e.g., 45 C.F.R. §§ 164.501-164.520 (protecting information collected pursuant to the Health Insurance Portability and Accountability Act); 42 U.S.C. § 2000ff et seq. (protecting privacy of genetic information); 42 C.F.R. §§ 431.300, 431.303 (protecting records of Medicaid patients), and thirteen states and the District of Columbia have considered or enacted bills aimed at protecting medical privacy in the very same way Vermont's statute does. See Br. of Amicus Curiae Elec. Privacy Inf. Ctr. ("EPIC") at 2 (collecting statutes). Accordingly, I would find that all three of the state's asserted interests are "substantial" for purposes of Central Hudson and proceed to evaluate whether section 17 "directly advances" those interests.

For similar reasons, I reject the majority's suggestion that Vermont has no legitimate interest in medical privacy because the state allows the dissemination of PI data for certain non-marketing purposes. The argument, which also bears on the effectiveness of section 17 in furthering the interest in medical privacy rather than on the legitimacy of that interest, suggests, at most, that section 17 may be "underinclusive." However, as noted below, underinclusiveness, even if established, is not a basis for voiding a statute under Central Hudson analysis.

b.

The second and third prongs of the Central Hudson test require us to consider whether the regulation at issue "directly advances" the asserted state interests as well as whether the restriction "is not more extensive than necessary to serve th[ose] interest[s]." Cent. Hudson, 447 U.S. at 564, 566, 100 S.Ct. 2343. To meet these requirements, the government carries "the burden of establishing a reasonable fit between the [law's] ends and the means chosen to achieve those ends." City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 414, 113 S.Ct. 1505, 123 L.Ed.2d 99 (1993) (internal quotation marks omitted). However, as we have recently observed, a "reasonable fit" is not a "least restrictive means" test, Clear Channel Outdoor, Inc. v. City of New York, 594 F.3d 94, 104 (2d Cir. 2010), and thus we do not ask whether there is "no conceivable alternative" but instead demand "`only that the regulation not burden substantially more speech than is necessary to further the government's legitimate interests.'" Id. (quoting Bd of Trs. of the State Univ. of NY. v. Fox, 492 U.S. 469, 478, 109 S.Ct. 3028, 106 L.Ed.2d 388 (1989)). The critical inquiry, as the district court noted, is therefore whether the restriction on speech is "in reasonable proportion to the substantial state interests] served." Sorrell, 631 F.Supp.2d at 454 (internal quotation marks omitted).

As the majority correctly notes, in Thompson v. Western States Medical Center, 535 U.S. 357, 371, 122 S.Ct. 1497, 152 L.Ed.2d 563 (2002), the Supreme Court observed that "if the Government could achieve its interests in a manner that does not restrict speech, or that restricts less speech, the Government must do so." However, there is no indication that the Court's observation was meant to displace the entirely consistent principle that Central Hudson does not require consideration of every "conceivable alternative" or amount to a "least restrictive means" test. Instead, the Thompson Court was reacting to the government's failure, there, to "even consider . . . any other alternatives" — i.e., to the fact that a restriction on speech "seems to have been the first strategy the Government thought to try." Id. at 373, 122 S.Ct. 1497; cf. Id. at 368, 122 S.Ct. 1497 (affirming that Central Hudson controls and finding "no need in this case to break new ground").

With respect to these factors, the government carries the burden of showing that its law furthers at least one interest "in a direct and material way," Edenfield v. Fane, 507 U.S. 761, 767, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993), and accordingly we ask whether the state has demonstrated "that the harms it recites are real and that [the restriction] will alleviate them to a material degree." Anderson, 294 F.3d at 462 (internal citation and quotations omitted). In evaluating whether the government has met that burden, the parties dispute the level of deference, if any, we owe to the legislature's determination. Specifically, the parties dispute whether we should apply so-called Turner deference and thereby "accord substantial deference to the predictive judgments" of legislative bodies which, as "institution[s] [are] far better equipped than the judiciary to amass and evaluate the vast amounts of data bearing upon legislative questions." Turner Broad. Sys. Inc. v. Fed. Comm. Comm'n, 520 U.S. 180, 195, 117 S.Ct. 1174, 137 L.Ed.2d 369 (1997) (internal quotation marks and citations omitted). Like the majority, I feel no need to decide the issue, as I would conclude that even without applying Turner deference, Vermont meets its burden. Because I feel the majority overstates that burden, however, I explain briefly what I consider the prevailing standard to be.

As appellants correctly note, Turner did not address a restriction on commercial speech, a context in which the Supreme Court, independent of Turner, has repeatedly urged deference to legislative findings. See Ayotte, 550 F.3d at 93 (Lipez, J., concurring in part and dissenting in part) ("[T]he general principle of legislative deference" articulated in Turner "also is compatible with the Court's commercial speech precedent."). Specifically, the Court has found that the commercial speech doctrine allows "some room for the exercise of legislative judgment," kk Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 508, 116 S.Ct. 1495, 134 L.Ed.2d 711 (1996) (plurality opinion), and cautioned that, where a legislature has deemed a particular regulation a properly tailored response to a substantial interest, "we have been loath to second-guess the [g]overnment's judgment to that effect." Fox, 492 U.S. at 478, 109 S.Ct. 3028. Accordingly, as we recently observed in upholding a commercial speech regulation, "if [a government] determination about how to regulate [commercial speech] is `reasonable' . . . then we should defer to that determination." Clear Channel, 594 F.3d at 104. Such deference is "all the more appropriate" where, as here, the law targets a form of commercial speech that has "traditionally been subject to extensive regulation," Anderson, 294 F.3d at 463, or where the regulation fits within a broader regulatory or policy framework. Cf. Clear Channel, 594 F.3d at 105 ("[I]t is not this Court's role to second guess the City's urban planning decisions.")

Accordingly, in evaluating legislative findings and conclusions in the context of a commercial speech regulation, we do not necessarily demand hard evidence, particularly, where, as here, the statute had yet to take effect when first challenged, but instead ask "whether the government is able to support its restriction on speech by adducing] either empirical support or at least sound reasoning on behalf of its measure." Ayotte, 550 F.3d at 93 (Lipez, J., concurring in part and dissenting in part) (internal quotation marks and alterations omitted) (emphasis added); see also id. at 55 ("A state need not go beyond the demands of common sense to show that a statute promises directly to advance an identified government interest." (citing Burson v. Freeman, 504 U.S. 191, 211, 112 S.Ct. 1846, 119 L.Ed.2d 5 (1992))).

The majority, while declining to determine what level of deference is appropriate, contends that Clear Channel should be limited to the context of "commercial bill-boards." Maj. Op. at 279-80. There is nothing in the language of that opinion to suggest as much, and indeed, the Clear Channel opinion cites Ward v. Rock Against Racism, 491 U.S. 781, 109 S.Ct. 2746, 105 L.Ed.2d 661 (1989) — a case that did not involve outdoor advertising at all — for the proposition that deference to a government's determination of reasonableness is appropriate. See Clear Channel, 594 F.3d at 104. Moreover, as noted above, Clear Channel is entirely consistent with a much broader body of our case law making clear that deference to legislative findings in the context of restrictions on commercial speech — and, particularly, commercial speech in a heavily regulated industry — is appropriate.

Accordingly, as I proceed to ask whether section 17 "directly advances" at least one of the three asserted government interests and whether it is "not more extensive than necessary to serve th[ose] interest[s]," I engage in de novo review of the record. Bose Corp. v. Consumers Union of U.S., Inc., 466 U.S. 485, 499, 104 S.Ct. 1949, 80 L.Ed.2d 502 (1984). But in so doing, I do not substitute my judgment for that of the legislature and instead defer to that body's determinations where "reasonable." Clear Channel, 594 F.3d at 94; see also Ayotte, 550 F.3d at 93 (Lipez, J., concurring in part and dissenting in part) ("If the government makes the requisite showing, we defer to the legislative judgment to adopt the challenged measure."). Moreover, I am cognizant of the context in which the restriction was passed and examine section 17 "in relation `to the overall problem the government seeks to correct.'" Clear Channel, 594 F.3d at 94 (quoting Ward, 491 U.S. at 801, 109 S.Ct. 2746). Engaging in such review, I would conclude that the statute directly advances each of the asserted interests in a material manner, and that it is "reasonably proportional" which is to say that it does not burden "substantially more speech than is necessary to further the government's legitimate interests." Id. at 104.

c.

First, I would find on this record that section 17 "directly advances" all three of Vermont's asserted substantial interests. With respect to cost containment and the public health, the district court found, and the record supports the finding that, section 17 materially advances both. The record establishes that pharmaceutical companies spend billions to "detail" new brand name prescription drugs that are more expensive, although not necessarily more effective, than generic class equivalents and whose effects and potential risks are less well known than those associated with generic class equivalents. Sorrell, 631 F.Supp.2d at 451-54. The record further establishes that detailing works — doctors who are "detailed" are more likely to prescribe new brand name drugs, despite the fact that generic class equivalents are more cost-effective and their risks are better known. Id. Finally, the record establishes that PI data is a critical tool for increasing the effectiveness of detailing. IMS Health, for example, promises "big returns" for its PI data clients, noting that a sample client "increased its market share 86% with PI data." Id. at 451.

Vermont thus took the reasonable course of restricting use of that critical tool. By preventing pharmaceutical companies from using PI data, section 17 makes detailing less effective, which in turn, makes it less likely that doctors will prescribe less cost-effective, and potentially riskier brand name drugs over generic class equivalents. That "sound reasoning," which is amply supported by the testimony of expert witnesses — including some of appellants' witnesses — and other evidence adduced by the state, is sufficient to satisfy the second prong of the Central Hudson standard. Ayotte, 550 F.3d at 93 (Lipez, J., concurring in part and dissenting in part).

The majority, in concluding otherwise, does not dispute any of the state's evidence or contest the district court's findings. Instead, it argues the "route" by which section 17 furthers the state's interests is "too indirect to survive intermediate scrutiny." Maj, Op. at 279. However, it is that very same "route" that the majority travels in order to find a First Amendment implication — and thus a need to apply Central Hudson — in the first place. As the majority argues, section 17 implicates First Amendment interests because it restricts access to PI data which in turn "affects manufacturers' ability to [detail] . . . by making it harder to identify those physicians for whom the message will be most relevant and to tailor the detailing messages based on individual physicians' prescribing habits." Maj. Op. at 274. In other words, the majority's First Amendment holding is premised on the understanding that section 17 not only travels that route but travels that route successfully — it achieves its purpose of making detailing more difficult and less effective, which in turn promotes the state's asserted interests in controlling costs and protecting the public health. Cf. Sorrell, 631 F.Supp.2d. at 451 ("strongest evidence" that section 17 advances state interests is the fact that "if PI data did not help sell new drugs, pharmaceutical companies would not buy it.") Having found section 17's route sufficiently direct to establish the First Amendment violation in the first place, the majority's conclusion that the statute is too indirect to survive Central Hudson is nothing short of bewildering.

No doubt, there are more direct ways Vermont could contain costs or promote health, many of them, I note, far more restrictive of detailers' activities and First Amendment conduct than the regulation actually passed. But that is not what the second prong of the Central Hudson test requires. Instead, all that standard demands is that the "harms" the state identifies "are real and that [the] restriction will in fact alleviate them to a material degree." Anderson, 294 F.3d at 462. I would find, on this record, that Vermont meets that standard. The evidence developed below and unchallenged by the majority here establishes that the harms — i.e., exorbitant health care costs and threats to patient safety — are real, and that section 17, by restricting access to PI data, makes detailing more difficult and less effective, which, in turn, reduces the pressure on doctors to prescribe more expensive, less proven drugs. Indeed, as discussed above, the majority agrees that section 17 is likely to be effective in this regard.

Moreover, I note that I would also find that section 17 "directly advances" the state's third interest — i.e., in "protecting the privacy of prescribers and prescribing information." Without question, the law restricts the flow of otherwise private information about doctors' prescribing habits and the care they provide to their patients. No party seriously disputes that. Appellants contend that the interest cannot be deemed "directly advanced" because section 17 still permits the sale and use of PI data for other purposes. As a preliminary matter, I note that the record supports the conclusion that section 17 does not just reduce but dramatically reduces the spread of PI data. As the district court found, with respect to PI data, pharmaceutical companies are the data mining appellants `"only paying customers." Sorrell, 631 F.Supp.2d at 451. More important, what amounts to an "underincmsiveness" argument is not availing in the context of Central Hudson, which does not require strict scrutiny. See Posadas de Puerto Rico Assocs., 478 U.S. 328, 342, 106 S.Ct. 2968, 92 L.Ed.2d 266 (1986) (statute's "underinclusivefness]" not controlling of determination as to whether it "directly advances" state interests); Clear Channel, 594 F.3d at 110 ("[T]he Supreme Court has made clear that underincmsiveness will not necessarily defeat a claim that a stat interest has been materially advanced."). All that Central Hudson demands is that a regulation materially advance a real harm, which section 17 plainly does.

Accordingly, I would find that section 17 meets the second Central Hudson factor.

d.

The third Central Hudson factor requires consideration of whether the statute is "not more extensive than necessary to serve" the asserted state interests. Because, as noted, this "narrow tailoring" requirement is not a "least restrictive means" test, we look only for a fit "that is not necessarily perfect, but reasonable" and ask whether the restriction is one "whose scope is in proportion to the interest served." Greater New Orleans Broad. Ass'n, 527 U.S. at 188, 119 S.Ct. 1923.

Because we thus look for "proportion[ality]," the inquiry inherently requires us not simply to evaluate the extent to which the statute furthers the state interests, but also to quantify and then balance the actual burden imposed on speech. It is this latter inquiry that the majority wholly sidesteps in its analysis but that I begin with, because to the extent section 17 restricts commercial speech — a finding that, as set forth above, I doubt — the restriction imposed is both minimal and indirect. At most, section 17 indirectly limits the message detailers convey by preventing them from "tailoring" their message based on a particular doctor's past prescribing habits. The law does not otherwise affect the message they deliver, nor does it directly restrict detailing in any way. Indeed, as the majority notes, section 17 "does not . . . directly restrict the marketing practices of detailers." Maj. Op. at 277.

Given that minimal and indirect burden on speech, section 17 is inherently distinct from the sorts of "categorical" and direct bans on commercial speech the Supreme Court has previously struck down. See Ayotte, 550 F.3d at 97 (Lipez, J., concurring in part and dissenting in part) ("[T]he restriction on speech imposed by the Prescription Act is significantly more limited than similar restrictions on commercial speech that have been considered by the Supreme Court. It is neither a complete ban on the marketing or advertising of a product . . . nor a blanket prohibition on in-person solicitation.") (internal citations omitted). It is with that limited burden imposed by section 17 in mind, that I consider the "proportion[ality]" of the law.

I would find that the minimal and indirect burden section 17 imposes on speech is not "more than is necessary to further" the government's three asserted interests. Clear Channel, 594 F.3d at 104 (quoting Fox, 492 U.S. at 478, 109 S.Ct. 3028). The statute directly advances three substantial state interests in material ways, and it does so by imposing exceedingly limited burdens on commercial speech. As such, I find a "reasonable fit" between the burdens imposed and the interests furthered. In so finding, I would note that many of the alternatives proposed by appellants and the majority are actually far more restrictive of appellants' activities. For example, the data mining appellants suggest the state could instead "limit advertising of drugs that it concluded were unnecessarily expensive," while the majority suggests, "mandating] the use of generic drugs as a first course of treatment . . . for all those patients receiving Medicare Part D funds." Maj. Op. at 280. The state instead adopted a regulation that promotes all three interests without directly regulating speech or the content of detailers' messages, and without unduly interfering in the prescribing habits of doctors. As such, I would find it to be a "reasonable" regulatory choice, one that deserves deference from this Court. See Clear Channel, 594 F.3d at 104.

The majority contends that section 17 cannot be deemed "narrowly tailored" because it is overinclusive in several respects. First, the majority contends that section 17 is over-inclusive because it applies "without regard to whether the data pertains to a prescription drug that is efficacious." Maj. Op. at 281. However, the very harm section 17 seeks to avoid is aggressive marketing of drugs whose efficacy is not yet known because the drug has not been subject to much actual use or patient experience. Alternatively, the majority contends that section 17 is over-inclusive because it applies even where no generic alternative exists or where a new drug is "unique." The majority's analysis, however, overlooks the state's third asserted interest — that in protecting medical privacy. Because I do not overlook that interest, I would reject both overinclusiveness arguments on the ground that section 17 furthers the state interest in protecting medical privacy by prohibiting the transfer of PI data for marketing purposes irrespective of whether the brand-name drug being detailed is effective or has a generic equivalent.

Alternatively, the majority contends that section 17 is not "narrowly tailored" because Vermont failed to consider "less speech-restrictive means available." Maj. Op. at 280. As noted, among those "less speech-restrictive" measures the majority posits are mandating the use of generic drugs. Alternatively, the majority suggests that, among other things, Vermont could await the results of a "counter-speech" measure already adopted by the state. First, none of these "less restrictive" means would address all three state interests because none would further the state's substantial interest in protecting medical privacy. That alone is grounds for accepting the state's decision not to seriously pursue those alternatives. Cf. Thompson v. Western States Med. Ctr., 535 U.S. 357, 371, 122 S.Ct. 1497, 152 L.Ed.2d 563 (2002) ("[I]f the Government could achieve its interests in a manner that does not restrict speech . . . the Government must do so.").

But second, as noted above, many of the less speech-restrictive alternatives the majority considers to be "available" are, in fact, far more intrusive restrictions on appellants' business practices or doctors' pre-scribing habits. And while Central Hudson and its progeny make clear that a state may not default to speech restrictions where other, equally effective remedies are available, I do not read that body of law to require a state to adopt far more restrictive and intrusive measures simply because the less restrictive measure imposes an incidental burden on speech.

Finally, where, as here, the state is legislating within an already heavily regulated field, we owe particular deference to the specific regulatory choice the state makes. See Anderson, 294 F.3d at 463. Especially in that context, it is not the role of this Court to "second guess" a legislature's decision as to which regulatory approach is best. See Fox, 492 U.S. at 478, 109 S.Ct. 3028; Clear Channel, 594 F.3d at 105. It is, instead, our role to ensure that the restriction chosen is "reasonably proportional" to the interests it furthers. Section 17 meets that standard. Indeed, the majority offers no significant argument to the contrary — it does not engage in proportionality analysis at all — and instead converts the "reasonable proportionality" standard into a far more aggressive form of inquiry which in effect, if not form, bears striking resemblance to strict scrutiny.

I am unwilling to proceed down that road, particularly where, as here, the law restricts the sale and use of an informational product — PI data — and does not directly limit commercial speech. Because I would find that section 17 constitutes a reasonable restriction that satisfies Central Hudson, I would defer to the state's conclusion that this particular method of furthering its substantial interests is best. See Clear Channel, 594 F.3d at 105. Id. would thus conclude that to the extent section 17 can be construed as a restriction on commercial speech, it satisfies Central Hudson and should therefore be affirmed.

IV.

Because I would find that appellants' First Amendment challenge fails, I briefly address the data mining appellants' additional dormant Commerce Clause challenge. I would reject that challenge as well, substantially for the reasons cogently set forth by the district court. See Sorrell, 631 F.Supp.2d at 457-59.

The so-called "dormant Commerce Clause," which refers to the "negative implication" the Supreme Court has long drawn against state interference in Congress' constitutional authority to regulate interstate commerce, Dep't of Revenue of Ky. v. Davis, 553 U.S. 328, 337, 128 S.Ct. 1801, 170 L.Ed.2d 685 (2008), prohibits states from regulating "commerce occurring wholly outside [a] State's borders." Healy v. Beer Inst, 491 U.S. 324, 332, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989). In evaluating whether a state law violates the dormant Commerce Clause, the Supreme Court has articulated two primary concerns: first, a concern about "economic protectionism — that is, regulatory measures designed to benefit in-state interests by burdening out-of-state [interests]," Davis, 553 U.S. at 337-38, 128 S.Ct. 1801 (internal quotation marks omitted); and, second, a concern about "inconsistent legislation" or incompatible cross-state regulatory regimes "arising from the projection of one state regulatory regime into the jurisdiction of another State," Healy, 491 U.S. at 337, 109 S.Ct. 2491.

Section 17 implicates neither concern. Section 17 does not discriminate against out-of-state entities in favor of in-state competitors nor does it risk imposing regulatory obligations inconsistent with those of other states. Instead it restricts the sale of data collected within the state and the use of that data within the state. That data mining appellants seek to take that data out of state to compile it does not relieve them of restrictions on their in-state purchase of that data and in-state re-sale of that data. Cf. Mills, 616 F.3d at 28 (finding similar Maine statute "implicates none" of the "concerns central to the way the Supreme Court has framed the dormant Commerce Clause in its recent opinions").

Accordingly, I would find no basis in dormant Commerce Clause jurisprudence to disturb Vermont's statute.

V.

In striking down section 17, the majority not only misconstrues a statutory ban on access to private information as a speech restriction, but it then breaks from the law of this Court, first, in labeling data miners' sale of "dry information" protected First Amendment activity, and, second, in applying an aggressive form of Central Hudson that affords insufficient deference to legislative findings and determinations. As a result, I cannot and do not sign on either to the majority's outcome or the manner by which it arrives thereto.

As noted above, the transfer of data has become a burgeoning business, with those engaged in such transfers frequently having no intention of engaging in expressive or communicative conduct. For the reasons set forth above, I am unwilling to accept the majority's conclusion that such business operations have an inherent right to invoke the First Amendment as a shield against reasonable regulation simply because their business deals in "dry information" rather than dry goods. Moreover, I express serious concern that the majority's discussion not only of the First Amendment interests at issue here but also of the standard imposed by Central Hudson will make it unduly and inappropriately difficult for states to properly and constitutionally regulate in furtherance of substantial interests, including a state's very serious interest in the protection of private information.

I would thus affirm section 17 as a legitimate restriction on access to information and commercial conduct with few, if any, attenuated effects on First Amendment activity. Alternatively, even were I to conclude that section 17 restricts First Amendment activity, in applying Central Hudson, I would afford far greater deference to the eminently reasonable legislative judgments the state has made here in furtherance of several substantial state interests and the reasonably proportional response its statute effects. Accordingly, I respectfully dissent.