Circuit Split on Free Speech And Drug Prescription Data

Pharmaceutical companies use data from the prescribing histories of individual doctors to focus their in-person marketing. They get the information from data-mining companies, who in turn purchase it from pharmacies and insurers. This is big business: One of the major data-mining companies reported revenue of $1.75 billion in just one year from selling aggregated prescriber information.

Several states have recently enacted laws aimed at limiting this practice. These laws generally prohibit the sale of prescriber-specific data for commercial purposes. Faced with First Amendment challenges from the data-mining companies, federal circuits have split on whether these laws are constitutional. Each of the federal circuit opinions has resulted in a divided panel. And even before the split, one judge had expressly called for Supreme Court guidance.

Where does the disagreement lie?

Courts disagree over whether the laws restrict conduct or speech. Assuming that speech is at issue, courts also disagree over whether various governmental interests justify the restrictions and how closely the speech restrictions must track those interests. So far, the 1st U.S. Circuit Court of Appeals has adopted a more deferential approach to governmental interests, and the 2nd U.S. Circuit Court of Appeals a more searching one.

New Hampshire was the first state to restrict access to doctors' prescribing histories. Its statute provided that "Records containing prescriber-identifiable data shall not be licensed, transferred, used, or sold for any commercial purpose," with limited exceptions. Two data-mining companies argued that this provision violated their First Amendment right to free speech.

The 1st Circuit rejected the challenge in IMS Health Inc. v. Ayotte, 550 F.3d 42 (2008). Concluding that "information itself has become a commodity" in this context, the majority held that the law restricted conduct, not speech, and so did not implicate the First Amendment.

The 1st Circuit further found that even if the New Hampshire law did restrict speech, the speech was commercial and the restriction was acceptable under the test set forth by the Supreme Court in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557 (1980). Central Hudson provides that a restriction on commercial speech is permissible if it is enacted to serve a substantial governmental interest, directly advances that interest, and restricts speech no more than is necessary to further that interest.

New Hampshire claimed that it had a substantial interest in, among other things, containing the cost of medical care. It explained that in-person marketing leads doctors to prescribe brand-name medications rather than generics, and that such marketing is more effective when pharmaceutical representatives have access to a doctor's prescribing history. The 1st Circuit agreed that cost-containment is a valid government interest and that reducing the efficacy of marketing visits directly advances that interest. It also held that the regulation was not too broad and that other alternatives would be less effective.

Writing separately, Judge Kermit Lipez agreed with the majority's result, but not its rationale. He would have held that the law was a permissible restraint on commercial speech, rather than a conduct restriction outside the First Amendment's reach.

The 1st Circuit revisited these issues earlier this year in IMS Health Inc. v. Mills, 616 F.3d 7 (2010). Mills involved a Maine law that was similar to New Hampshire's, but that required doctors to opt in to its protections. The 1st Circuit rejected a First Amendment challenge, relying primarily on Ayotte. But, citing Justice Louis Brandeis' "right to be let alone," it also went beyond Ayotte in holding that the law furthers a substantial governmental interest in privacy. That is because the restrictions protect doctors from unwanted solicitations based on their prescribing histories.

Judge Lipez again wrote separately, this time calling on the Supreme Court to resolve the tension between the need for states to experiment with ways to address spiraling drug costs, and the constitutional protection afforded to speech.

Now the 2nd Circuit has weighed in: Last month, it struck down a Vermont law that was similar to those at issue in the 1st Circuit cases. In IMS Health Inc. v. Sorrell, 2010 WL 4723183 (2d Cir. Nov. 23, 2010), a divided 2nd Circuit panel held that a restriction on selling or using prescriber-specific data addressed speech, not conduct, and that it failed the Central Hudson test for permissible restrictions on commercial speech.

The 2nd Circuit diverged from the 1st Circuit's Central Hudson analysis in several ways. While Sorrell agreed that the state has a substantial interest in cost-containment, it rejected the state's claimed interest in doctors' privacy as too speculative. And although it recognized a substantial interest in cost-containment, it faulted the Vermont statute for advancing that interest only indirectly. Limiting what data can be sold or used to target sales pitches does not directly influence prescriber behavior, which was Vermont's stated goal. Sorrell also found that there were less speech-restrictive means available, such as funding an educational program or mandating that doctors prescribe generics in the first instance.

Judge Debra Livingston dissented. Focusing on the fact that the data existed only because of state requirements, she would have allowed the state to restrict how it is used. If the First Amendment did apply, she would have recognized a substantial government interest in protecting medical privacy and held that the law directly advanced that interest and that there were no less speech-restrictive alternatives.

These conflicting decisions show that the circuits are struggling to balance competing interests. On one hand, there are data compilers' and users' First Amendment rights. On the other hand, there are doctors' privacy interests and the states' ability to, in the words of Justice Brandeis, serve as a "laboratory" for "novel social and economic experiments."

This is not a new struggle. In fact, one of the very first "experiments" in the computerized collection and analysis of prescription information came before the U.S. Supreme Court 35 years ago in a case where the state itself was collecting the information.

In Whalen v. Roe, 429 U.S. 589 (1977), the Supreme Court reviewed a New York statute requiring doctors to report whenever patients received certain drugs. The state computerized that information and used it to identify possible cases of drug abuse. Doctors and patients argued that the law invaded their privacy and independence.

A unanimous Court upheld the statute. It held that the patient-identification requirement was a reasonable exercise of the state's police power. On this point, it quoted Justice Brandeis' statement that, "It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country." The 1st Circuit cited the same statement in upholding the New Hampshire law - an experiment that restricted the use of data, as compared to Whalen, which embraced a new use of data.

Whalen, like the 1st Circuit in Mills, also recognized Justice Brandeis' famous invocation of the right to be let alone. While that privacy interest was an argument for the data-mining statutes, it was an argument against the statute upheld in Whalen.

Whalen held that the state's prescription database was not an unconstitutional invasion of privacy. But it recognized "the threat to privacy implicit in the accumulation of personal information in computerized data banks or other massive government files." And it left open the questions that "might be presented by the unwarranted disclosure of accumulated private data...."

The new data-mining restrictions squarely raise the questions left unanswered in Whalen. Among the relevant questions are: Does the fact that states have a role in creating prescriber data mean that they can restrict how it is used? Do the laws restrict speech or conduct? If speech, is the privacy right of doctors a sufficiently strong interest to support data-restriction laws, as it was found to be in Mills but not in Sorrell? What is the appropriate balancing of the states' interests against commercial speech rights under Central Hudson? And must states who wish to encourage generic drug use do so through more direct means that restrict speech less?

Legislation restricting the use of prescriber data is pending in many states. While the 1st Circuit cases were early victories for the states, the 2nd Circuit decision provides hope for the data-mining companies. Other circuits, and ultimately the Supreme Court, will need to weigh in on these questions.