The law, introduced in 2007, banned research companies from selling ‘prescriber-identifiable’ data to pharmaceutical manufacturers without the permission of the physician in question.

In a 6-3 decision, the court ruled that the law – which had been opposed by IMS Health, Source Healthcare Analytics and the Pharmaceutical Research and Manufacturers of America (PhRMA) – violated the First Amendment right to free speech. But Vermont’s attorney general said this was “not the end of the story”.

State legislators had argued that the law would keep costs down by making it harder for pharma companies to persuade doctors to pay for expensive branded presciption drugs over generic rivals.

The state sought a review by the Supreme Court after a federal appeals court overturned the law last year.

Harvey Ashman, IMS Health’s senior VP and general counsel, said: “Today’s ruling is clear and unmistakeable – these types of laws violate the Constitution and do nothing to improve healthcare, reduce costs or protect privacy as proponents have claimed.”

Bill Sorrell, attorney general of Vermont, said: “We are, of course, disappointed with this result. We knew going in that this Supreme Court has frequently sided with large corporations. Our challenge now will be to continue to work to protect medical privacy and reduce health care costs without violating the Supreme Court’s ruling. This is a step back, but not the end of the story.”

Sorrell said Vermont’s appeal had had the support of the federal government and 35 states.

Similar laws in Maine and New Hampshire now look likely to be declared unconstitutional or repealed. Numerous similar bills have been introduced in other state legislatures, but have not made it into law.