Requiring pharmacy benefit managers to send data to insurance companies does not compel speech in violation of California’s Free Speech Clause.
The Issue: Pharmacies sued benefit managers (companies that administer insurance claims submitted by pharmacies) for failing to comply with a California statute that requires benefit managers to gather and report data on fees paid to pharmacists. The benefit managers argued that that the statute unconstitutionally compels speech, comparing it to being forced to recite the Pledge of Allegiance against one’s conscience. After a divided Ninth Circuit panel found no constitutional infirmity, the Ninth Circuit sitting en banc certified to the California Supreme Court the question whether the requirement offends California’s Free Speech Clause.
Why It Matters: Although only a few years ago it might have been difficult to imagine that the benefit managers’ free speech challenge would be taken seriously, just such a challenge had been recently upheld by three California courts of appeal. By subjecting any required reporting to government and any required sharing of information among businesses or with the public to heightened scrutiny, the standard of Free Speech review proposed by the benefit managers could seriously threaten government’s ability to regulate business to protect public safety, consumers, and the environment. Among the laws that would be at risk are product labeling statutes, environmental hazard reporting requirements, laws requiring accident reports by common carriers, SEC-required securities disclosures, mandatory disclosure of privacy policies or patients’ rights, and requirements to file tax returns, to name only a few. Such a standard of review would trivialize – and thereby weaken – the protection for genuine freedom of conscience guaranteed by the Free Speech Clause.
Public Good’s Contribution: Public Good’s brief explained that the text, history, and judicial interpretation of the Free Speech Clause make clear that it exists to protect the expression of ‘sentiments,’ a category that does not encompass the dry data at issue. Our brief also explained that compelled factual speech has been found unconstitutional only when the required expression would interfere with the speaker’s communication of her own message, a consequence not threatened in this case. Finally, Public Good pointed out the far-reaching deleterious consequences to numerous regulatory regimes were the Court to accept the benefit managers’ arguments – a result reminiscent of the now-derided “Lochner Era” of the early 20th century when the U.S. Supreme Court routinely struck down economic regulations on dubious constitutional grounds.
Amici joining Public Good: Public Good’s brief was filed on behalf of itself and prominent national consumer protection and public health organizations: Consumer Action, Consumers for Auto Reliability and Safety, and the Public Health Law Center.
Outcome: The California Supreme Court upheld the constitutionality of the challenged statute. Noting that factual disclosure requirements are “ubiquitous” in California law, the Court rejected benefits managers’ arguments that such laws require extensive review under the Free Speech Clause. Rather, the Court held that only the most lenient form of scrutiny – “rational basis” review – was called for, since the statute involved only the transmission of information and did not require regulated entities to adopt or support any particular viewpoint or opinion. In accord with Public Good’s brief, the Court pointedly referred to the Lochner decision itself. The decision, like the First Circuit’s decision in National Ass’n of Tobacco Outlets, Inc. v. City of Providence is an important victory in the fight to prevent corporations from abusing constitutional protections by “Lochnerizing” the First Amendment and state free speech clauses.
58 Cal. 4th 329 (Dec. 19, 2013)