IMS Health Inc. v. Ayotte

550 F.3d 42, 2008 U.S. App. LEXIS 23701, 2008 WL 4911262
CourtCourt of Appeals for the First Circuit
DecidedNovember 18, 2008
Docket07-1945
StatusPublished
Cited by48 cases

This text of 550 F.3d 42 (IMS Health Inc. v. Ayotte) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
IMS Health Inc. v. Ayotte, 550 F.3d 42, 2008 U.S. App. LEXIS 23701, 2008 WL 4911262 (1st Cir. 2008).

Opinions

SELYA, Circuit Judge.

The spiraling cost of brand-name prescription drugs is a matter of great concern to government at every level. New Hampshire has attempted to curb this escalating problem by enacting innovative legislation. Certain affected companies have challenged New Hampshire’s legislative response, and that challenge raises important constitutional questions that lie at the intersection of free speech and cyberspace. The tale follows.

Pharmaceutical sales representatives, known in industry argot as “detailers,” earn their livelihood by promoting prescription drugs in one-on-one interactions with physicians. A valuable tool in this endeavor, available through the omnipresence of computerized technology, is knowledge of each individual physician’s prescribing history. With that informational [45]*45asset, detailers are able to target particular physicians and shape their sales pitches accordingly. Convinced that this detailing technique induces physicians to prescribe expensive brand-name drugs in place of equally effective but less costly generic drugs, New Hampshire enacted a law that among other things prohibited certain transfers of physicians’ prescribing histories for use in detailing. See 2006 N.H. Laws § 328, codified at N.H.Rev.Stat. Ann. §§ 318:47-f, 318:47-g, 318-B:12(IV) (2006) (the Prescription Information Law). A duo of data miners promptly challenged the law as invalid on various grounds. The district court found that it worked an unconstitutional abridgement of free speech and enjoined its enforcement. See IMS Health Inc. v. Ayotte, 490 F.Supp.2d 163, 183 (D.N.H.2007) (D.Ct.Op.). This appeal ensued.

In the pages that follow, we explain why we are not persuaded that the regulated data transfers embody restrictions on protected speech. In our view, the portions of the law at issue here regulate conduct, not speech. Unlike stereotypical commercial speech, new information is not filtered into the marketplace with the possibility of stimulating better informed consumer choices (after all, physicians already know their own prescribing histories) and the societal benefits flowing from the prohibited transactions pale in comparison to the negative externalities produced. This unusual combination of features removes the challenged portions of the statute from the proscriptions of the First Amendment.

There is a second basis for our decision. Even if the Prescription Information Law amounts to a regulation of protected speech — a proposition with which we disagree — it passes constitutional muster. In combating this novel threat to the cost-effective delivery of health care, New Hampshire has acted with as much forethought and precision as the circumstances permit and the Constitution demands.

I. BACKGROUND

The raw facts are largely undisputed. Modern-day detailing begins when a prescription is filled.1 At that moment, the pharmacy stores in its computerized database a potpourri of information about the transaction, such as the name of the patient, the identity of the prescribing physician, the drug, its dosage, and the quantity dispensed. Due to the complex relationships that mark the delivery of health care products and services in the twenty-first century, this information quickly finds its way into other databases, including those of insurance carriers and pharmacy benefits managers.

The plaintiffs in this case, IMS Health Inc. and Verispan, LLC, are in the business of data mining. For present purposes, that means that they purchase data of the type and kind described above, aggregate the entries, group them by pres-criber, and cross-reference each physician’s prescribing history with physician-specific information available through the American Medical Association. The final product enumerates the prescriber’s identity and speciality, the drug prescribed, and kindred information. The scope of the enterprise is mind-boggling: these two plaintiffs alone record, group, and organize several billion prescriptions each year. To protect patient privacy, prescribees’ names are encrypted, effectively eliminating the ability to match particular prescriptions with particular patients.

[46]*46These massive collections of information have great utility for certain non-profit entities (e.g., educational institutions, public interest groups, and law enforcement agencies). New Hampshire’s concern, however, is with a frankly commercial use: the exploitation of the mined data by pharmaceutical companies, whose detailers use it in marketing drugs to physicians.

At this point, the art of detailing warrants further elaboration. Detailing involves tailored one-on-one visits by pharmaceutical sales representatives with physicians and their staffs. This is time-consuming and expensive work, not suited to the marketing of lower-priced bioe-quivalent generic drugs (drugs that are pharmacologically indistinguishable from their brand-name counterparts save for potential differences in rates of absorption). The higher profit margins associated with brand-name drugs leaves the personal solicitation field open to brand-name drug manufacturers, who in the year 2000 spent roughly $4,000,000,000 on detailing.2

Brand-name drug manufacturers engage in detailing in several situations. For instance, detailing is employed where a manufacturer seeks to encourage prescription of a patented brand-name drug as against generic drugs, or as against a competitor's patented brand-name drug, or as a means of maintaining a physician’s brand loyalty after its patent on a brand-name drug has expired.

If a physician’s prescribing habits present an appropriate opportunity, the detail-er attempts to gain access to the physician’s office, usually by presenting herself as a helpful purveyor of pharmaceutical information and research. The detailer comes to the physician’s office armed with handouts and offers to educate the physician and his staff about the latest pharmacological developments. In other words, detailers open doors by holding out the promise of a convenient and efficient means for receiving practice-related updates.

Withal, a physician’s time is precious, and detailers must manage their way around physicians’ natural reluctance to make time for promotional presentations. To this end, detailers typically distribute an array of small gifts to physicians and their staffs, host complimentary lunches, and pass out free drug samples. From time to time, a detailer will invite a physician to attend an all-expense-paid conference or to accept a lucrative speaking engagement.

Most of these freebies cut very little ice. The free samples, however, are highly prized. Their sheer volume is astounding: in the year 2000, an estimated $1,000,000,000 in free drug samples flowed from detailers to physicians. That flood of free medications enables physicians to offer drugs free of charge to selected patients. Many physicians thus tolerate detailing visits in order to reap the harvest of samples that these visits bring.3

Once inside a physician’s office, detailers are capable of mounting an impressively sophisticated and intense marketing pitch. The detailer works to establish an ongoing relationship with the physician and, in [47]*47most cases, detailers’ visits become a regular occurrence. For example, the average primary care physician interacts with no fewer than twenty-eight detailers each week and the average specialist interacts with fourteen.

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Bluebook (online)
550 F.3d 42, 2008 U.S. App. LEXIS 23701, 2008 WL 4911262, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ims-health-inc-v-ayotte-ca1-2008.