Prescription Drug Data-Mining: Federal Appellate Court Upholds Law That Guards Privacy of Prescribing Practices and Rejects Free Speech Challenge - IMS Health, Inc. V. Ayotte1

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Prescription Drug Data-Mining: Federal Appellate Court Upholds Law that Guards Privacy of Prescribing Practices and Rejects Free Speech Challenge - IMS Health, Inc. v. Ayotte1 - The United States Court of Appeals for the First Circuit held that a New Hampshire statute,2 which bans the transfer or sale of physicians' prescribing information for certain commercial purposes, regulates conduct rather than protected speech and does not violate the First Amendment.3

The plaintiffs, IMS Health, Inc. and Verispan, LLC, are two of the nation's largest data-mining firms.4 Data-mining refers to the purchase, analysis and sale of data that reveals the identity of physicians and the drugs they prescribe ("prescriber-identifiable data"), but not patient information.5 Pharmaceutical companies purchase this information and utilize it in marketing efforts that directly target physicians ("detailing").6 Each year the plaintiffs analyze billions of prescription transactions and earn "substantially all" of their revenue by selling the resulting "profiles" to pharmaceutical companies, who then target their sales pitches to the known preferences of prescribers.7

The statute at issue, the Prescription Information Confidentiality Act ("the Statute"), was passed in 2006 by the New Hampshire legislature to regulate data-mining, protect privacy interests and curb rising health care costs.8 It provides that prescription records with prescriber-identifiable data "shall not be licensed, transferred, used, or sold by any pharmacy benefits manager, insurance company ... or similar entity, for any commercial purposes," except for limited administrative purposes.9 The Statute is the first legislative attempt to regulate data-mining in the United States.10 The plaintiffs brought a claim against the State of New Hampshire in the United States District Court for the District of New Hampshire, seeking to enjoin enforcement of the Statute on the grounds that it violated their First Amendment rights to free speech.11

The trial court concluded that the First Amendment protects prescriberidentifiable data.12 Applying the Central Hudson13 test for commercial speech, it found that the Statute unconstitutionally restricts commercial speech by preventing pharmaceutical companies from using prescription information to formulate their marketing communications.14 The trial court stated that the Statute did not advance a substantial State interest in public health or costcontainment, and that there were less restrictive ways to address the Statute's policy goals without regulating speech.15 Judge Barbadoro explained that even if detailing causes physicians to make poor prescribing decisions, "the remedy to be applied is more speech, not enforced silence."16

The Court of Appeals reversed.17 At the outset of its statutory analysis, the Court distinguished between protected speech and mere conduct.18 Unlike traditional commercial speech, the transfer of prescription information from pharmacies to data-mining companies does not provide consumers with new information to aid purchasing decisions.19 Further, the Court stated that the negative externalities of this transaction outweigh the societal benefits.20 Therefore, the Court held that data-mining constitutes conduct, not protected commercial speech, and does not implicate the First Amendment.21

Despite this distinction, the Court held that even if the Statute regulates commercial speech, it does not violate the First Amendment because it is the least restrictive means of directly advancing a substantial State interest. …