First Circuit Upholds Ban on Transfer of Prescription Histories by Data Mining Companies
February 3, 2009
The U.S. First Circuit Court of Appeals has upheld a New Hampshire statute that prohibits the transfer of physician prescribing histories for pharmaceutical sales representatives (also known as “detailers”) to use in marketing drugs. A divided panel held that the statute’s restrictions regulated conduct, not speech, and was therefore not subject to First Amendment scrutiny.
In 2006, New Hampshire passed the “Prescription Information Law” prohibiting the transfer, use, license or sale – by pharmacies, pharmacy benefits managers, insurance companies, or electronic transmission intermediaries – of prescription records for any commercial purpose other than health care management. The statute specifies that prohibited activities include “advertising, marketing, promotion, or any activity that could be used to influence sales ... influence or evaluate the prescribing behavior of an individual health care professional or evaluate the effectiveness of a professional pharmaceutical detailing sales force.” According to the legislative history, the articulated goals for this law were the protection of privacy interests, the safeguarding of patient health, and cost containment – the latter being of primary importance. The statute prescribed both civil and criminal penalties for violations.
In IMS Health Inc. v. Ayotte, two “data mining” companies – companies that purchase raw data on several billion prescriptions each year and then organize and resell that data for use by detailers – filed a federal lawsuit suit a month after the statute became effective. They argued that the statutory ban on transfer and use of prescriber-identifiable information violated the Free Speech Clause of the First Amendment, was void for vagueness and offended the Commerce Clause.
The trial court ruled that this statute regulated speech, not conduct, and therefore applied the constitutional test for regulations on commercial speech announced in Central Hudson Gas & Elec. Corp. v. Pib. Serv. Comm’n, 447 U.S. 557, 556 (1980). In so doing, the court found the governmental interests advanced by the state insufficient – specifically finding as to cost containment that the state reasoning rests on an assumption that any health care savings as a result of this ban can be achieved without compromising patient care.
Writing for the majority, First Circuit Judge Bruce Seyla reversed the trial court, but not before narrowing the scope of the rights at issue. The majority found that the statute did not regulate the use of this prescriber-specific information by detailers to promote products to physicians; it only regulated the data miners’ acquisition of this information from pharmacies and others, and the data miners’ subsequent sale of this information to pharmaceutical companies for use in detailing. The majority further ruled that, as there were no detailers or pharmaceutical companies in the case, the plaintiff data miners did not have standing to assert the First Amendment rights of these entities that used the information in their marketing efforts to physicians.
In considering only whether data miners’ “acquisition, aggregation and sale of prescriber-identifiable data” constituted speech, the majority held that although “pure informational data can qualify for First Amendment protection,” this statute principally regulates conduct and “to the extent that the challenged portions impinge at all upon speech” – given that the intended use of the information is to aid the promotional activities of drug manufacturers – “that speech is of scant societal value.” The court explained that, in this situation, information has become a commodity and the fact that the plaintiffs’ product happened to be information, as opposed to “beef jerky,” did not render their actions speech. Therefore, the court found the regulation subject to rational basis review as a species of economic regulation and the plaintiffs conceded that the statute survived this level of scrutiny.
Alternatively, the court held that even if the statute – as applied to data miners – could be regarded as a restriction on protected speech, the statute would survive intermediate scrutiny as a regulation of commercial speech under the Central Hudson test. The court found that the state’s cost containment justification was supported by evidence, though “not overwhelming,” that detailing increases the cost of prescription drugs; that prescribers’ histories increase the efficacy of detailing; and that detailing does not contribute to improved patients’ health – thereby allowing the inference that stripping detailers of this tool will result in an increase in the quantities of generic drugs dispensed.
In a lengthy concurrence/dissent, Judge Kermit Lipez concurred with the majority’s ruling that the statute and the state’s cost containment justification satisfied the Central Hudson test, but vigorously dissented from the majority’s ruling that the statute limited conduct, not speech. Judge Lipez characterized the majority’s refusal to address the constitutionality of the statute’s restriction on the communications between detailers and physicians as “misguided[]”, asserting that prudential standing considerations should not be a bar in this case, where the “core First Amendment issue” was “vigorously litigated and comprehensively considered by the district court” and the statute’s constitutionality “cannot be assessed without addressing its impact on the communications between detailers and prescribers.” Judge Lipez also found the distinction between regulation of information as a “commodity” and regulation of a speaker’s message inapplicable to this case where the express purpose of this statute is to modify the marketing message communicated by detailers.
For more information, contact:
Corrine A. Irish
212.513.3455
corrine.irish@hklaw.com
toll free: 1.888.688.8500
Related Practices