Monday, December 01, 2008

Restriction on Transfer of Prescription Data for Marketing Use Did Not Violate Free Speech

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

A New Hampshire law that prohibited certain transfers of physicians' prescribing histories for use in marketing campaigns by pharmaceutical manufacturers did not unconstitutionally restrict commercial speech, the U.S. Court of Appeals in Boston has held.

The New Hampshire Prescription Information Law (N.H. Revised Statutes Annotated Sec. 318:47-f, 318:47-g, and 318-B:12(IV)) regulated conduct, not speech. Even if the law amounted to a regulation of protected speech, it passed constitutional muster, the court said.

A decision of the federal district court in Concord, New Hampshire (CCH Privacy Law in Marketing ¶60,103), invalidating the law on First Amendment grounds, was reversed.

New Hampshire Prescription Information Law

According to the appellate court, the purpose of the Prescription Information Law was to curb the spiraling costs of brand-name prescription drugs. In relevant part, the law states:

Records relative to prescription information containing patient-identifiable and prescriber-identifiable data shall not be licensed, transferred, used, or sold by any pharmacy benefits manager, insurance company, electronic transmission intermediary, retail, mail order, or Internet pharmacy or other similar entity, for any commercial purpose, except for the limited purposes of pharmacy reimbursement; formulary compliance; care management; utilization review by a health care provider, the patient's insurance provider or the agent of either; health care research; or as otherwise provided by law. Commercial purpose includes, but is not limited to, advertising, marketing, promotion, or any activity that could be used to influence sales or market share of a pharmaceutical product, influence or evaluate the prescribing behavior of an individual health care professional, or evaluate the effectiveness of a professional pharmaceutical detailing sales force.

N.H. Revised Statutes Annotated Sec. 318:47-f.

Data Mining Practices

Two data mining companies challenged the law. They alleged 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 data miners purchased prescription history data, aggregated the entries, grouped them by prescriber, and cross-referenced each physician's prescribing history with physician-specific information available through the American Medical Association. Their final products enumerated the prescriber's identity and specialty, the drug prescribed, and related information.

They sold these database products to brand-name drug manufacturers, to facilitate marketing efforts called “detailing.” Detailing involved tailored, one-on-one visits by pharmaceutical sales representatives with physicians and their staffs.

Prescription history information enabled detailers to focus on physicians who regularly prescribed competitors' drugs, physicians who prescribed large quantities of drugs for particular conditions, and "early adopters" of new pharmaceutical products.

Conduct v. Commercial Speech

The law’s restrictions on transfers of prescriber-identifiable information regulated conduct, not expression, the court said. Unlike typical commercial speech, the transfers did not cause new information to be filtered into the marketplace with the possibility of stimulating better informed consumer choices. The law only restricted the ability of data miners to aggregate, compile, and transfer information destined for narrowly-defined commercial ends.

For the data miners, information itself was a commodity. “The plaintiffs, who are in the business of harvesting, refining, and selling this commodity, ask us in essence to rule that because their product is information instead of, say, beef jerky, any regulation constitutes a restriction of speech,” the court said. “We think that such an interpretation stretches the fabric of the First Amendment beyond any rational measure.”

The data miners could legally gather and analyze the regulated information and could publish, transfer, and sell it, as long as the purchaser did not use the information for detailing, the court stated.

The law’s restriction was on the conduct of detailing, not on the information with which the conduct was carried out. The fact that the law made the most profitable use of that information illegal did not mean that the data miners’ free speech rights had been violated.

To the extent that the challenged portions of the law impinged at all on speech, that speech was of scant societal value, in the court’s view. The benefits flowing from the prohibited transactions paled in comparison to the negative externalities produced.

First Amendment Scrutiny

Even if the law’s restrictions on data transfers implicated the First Amendment, the law was constitutional, the court held. In combating a novel threat to the cost-effective delivery of health care, New Hampshire acted with as much forethought and precision as the circumstances permitted and the Constitution demanded.

Under the Central Hudson test for restrictions on commercial speech, the law would be permissible if the statute was enacted in the service of a substantial governmental interest, directly advanced that interest, and restricted speech no more than was necessary to further that interest.

New Hampshire cited three governmental interests: (1) maintaining patient and prescriber privacy, (2) protecting citizens' health from the adverse effects of skewed prescribing practices, and (3) containing costs. For simplicity's sake, the court restricted its analysis to the third of those interests.

Cost containment was a sufficiently substantial government interest, the court said. The state provided evidence that the transfer of prescriber-identifiable information for marketing purposes led to higher drug prices. Trial testimony indicated that the practice of detailing substantially increased physicians' rates of prescribing brand-name drugs, which tended to be more expensive than generic drugs.

The data miners did not deny that the collection and processing of prescribing histories made detailing more efficacious. Accordingly, the Prescription Information Law was reasonably calculated to advance the state’s substantial interest in reducing overall health care costs within New Hampshire.


The court rejected the data miners’ contention that the Prescription Information Law was void for vagueness. Read in light of the legislature's manifest intent, the law is sufficiently clear. The law’s specific purpose was to curtail the practice of targeted detailing by pharmaceutical companies. In keeping with this narrow purpose, the statute excluded from its coverage almost every commercial use other than detailing.

This narrow reading of the law served to allay any concerns of a “chilling effect” on permissible uses. As long as data transfers did not involve targeted marketing efforts, there was no violation.

Commerce Clause

Also rejected was the data miners’ assertion that the law unconstitutionally regulated interstate commerce. Although the law did not explicitly limit its reach to conduct taking place within New Hampshire, the New Hampshire Supreme Court would interpret the law to affect only intrastate transactions, according to the court. The law may result in a loss of profit to out-of-state data miners due to the closing of one aspect of the New Hampshire market for their wares, but that did not amount to regulating conduct outside the state.

The November 18 decision in IMS Health Inc. v. Ayotte will appear in CCH Privacy Law in Marketing.

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