The Supreme Court's June 23, 2011 decision in Sorrell v. IMS Health Inc. upheld the important First Amendment principle that the government cannot restrict commercial speech on the theory it is too persuasive. Upholding a decision of the U.S. Court of Appeals for the 2nd Circuit, the Court voted 6-3 to strike down Vermont's Prescription Confidentiality Law, which had prohibited the use, sale or disclosure of prescriber histories in pharmaceutical marketing to physicians.

Justice Anthony Kennedy's opinion for the Court, which deemed Vermont's law "contrary to basic First Amendment principles," is among its strongest with respect to constitutional protection of marketing and related commercial endeavors. The decision is particularly important because it effectively reversed two earlier circuit court opinions that had upheld similar state laws. One of those decisions had concluded that information used to craft a commercial message was not speech at all, but instead could be regulated as a "commodity," with no greater entitlement to First Amendment protection than "beef jerky." The Supreme Court, however, rejected this view and confirmed that facts are the building blocks of free expression. It observed that facts, after all, "are the beginning point for much of the speech that is most essential to advance human knowledge and to conduct human affairs."

Vermont's Prescription Confidentiality Law targeted pharmaceutical manufacturers' promotion of drugs through "detailing," i.e., in-person marketing to doctors that is aided by receipt and use of prescriber-identifying information. The law provided that, absent physician consent, such data may not be sold by pharmacies and similar entities, or disclosed by them for marketing, or used by pharmaceutical manufacturers for marketing, subject to a number of exemptions that allowed disclosure and/or use of the data for various non-marketing purposes.

The Court found that the law erects content- and speaker-based restrictions on the sale, disclosure, and use of prescriber-identifying information. Moreover, it disfavors speech with a particular content—marketing—as well as specific speakers—pharmaceutical manufacturers and those marketing on their behalf. Accordingly, Justice Kennedy wrote that the purpose and effect of the Vermont law was to restrict the use of prescriber-identifying data by those who would use it for marketing but not other purposes, and that the state's acknowledged objective was to correct what it believed to be an "imbalance" in the marketplace of ideas. But the Court found that Vermont's asserted purpose of putting its thumb on the scale of public discourse is "incompatible with the First Amendment." Justice Kennedy wrote:

In an attempt to reverse a disfavored trend in public opinion, a State could not ban campaigning with slogans, picketing with signs, or marching during the daytime. Likewise, the State may not seek to remove a popular but disfavored product from the marketplace by prohibiting truthful, nonmisleading advertisements that contain impressive endorsements or catchy jingles. That the State finds expression too persuasive does not permit it to quiet the speech or to burden its messengers.

He added that the "fear that people would make bad decisions if given truthful information" cannot justify content-based burdens on speech.

The Court found that Vermont's restrictions on speech were subject to "heightened scrutiny" but found it unnecessary to decide whether to apply the traditional test for regulating commercial speech. It said the result would be the same whether it conducted a commercial speech inquiry or applied a stricter form of judicial scrutiny. While the Court acknowledged that restricting protected expression differs from restricting economic activity—the latter of which the First Amendment permits even if it incidentally burdens speech—Vermont's law not only imposed far more than an incidental burden, it did so based on the content of speech and the identity of its speaker.

The Court found Vermont could not show that its Prescription Confidentiality Law could sufficiently advance any permissible interests. It explained that there was no claim that false or misleading information was at issue, or that patient confidentiality was at risk. The Court also rejected Vermont's claim that the law sought to protect physicians' privacy, insofar as it gave them only "a contrived choice: Either consent, which will allow your prescriber-identifying information to be disseminated … or, withhold consent, which will allow your information to be used by those speakers who message the State supports" with exceptions to the marketing ban.

The majority acknowledged that the state may be displeased that pharmaceutical marketers are able to craft a more effective message when they use prescriber-identifying data, but held that the state must express that view through its own speech or some other less restrictive measure, not by "burdening the speech of others in order to tilt public debate in a preferred direction." Even if Vermont sought to advance proper public policy goals of lowering costs and promoting public health, doing so by the indirect means of restraining speech "is incompatible with the First Amendment." As the Court put it, "[t]hose who seek to censor or burden free expression often assert that disfavored speech has adverse affects. But the fact that people would make bad decisions if given truthful information cannot justify content-based burdens."

Justice Breyer, joined by Justices Ginsburg and Kagan, dissented, on grounds that in their view the Vermont law's effect on expression is inextricably related to lawful State efforts to regulate a commercial enterprise, and satisfies the Court's traditional test for regulation of commercial speech. The dissent argued that all regulation of economic activity may incidentally restrict some speech, but that this is permissible so long as the law furthers legitimate regulatory objectives. The dissenters warned that the decision "opens a Pandora's Box of First Amendment challenges to many ordinary regulatory practices that may only incidentally affect a commercial message."\

Davis Wright Tremaine LLP filed an amicus brief supporting the respondents on behalf of the Association of National Advertisers, the American Advertising Federation, and the American Association of Advertising Agencies.