Published in the HealthCare Review, February 3, 2009 (http://www.healthcarereview.com/index.php?src=news&prid=2471&category=Columns&search=glahn)
Last November, a divided United States Court of Appeals for the First Circuit in Boston upheld New Hampshire's "Prescription Information Confidentiality Act" against constitutional attack. The decision in IMS Heath Inc. and Verispan, LLC v. Ayotte, reversed a 2007 decision of the United States District Court for New Hampshire striking down the Act as an unlawful restraint on commercial speech in violation of the First Amendment to the federal Constitution.
The result of the Circuit Court's decision is that the practice of "detailing" in which pharmaceutical sales representatives promote prescription drugs in one-on-one interactions with doctors, survives. Yet it seems inevitable that attacks on the Act or on similar statutes dealing with the practice of promoting brand-name drugs will continue, perhaps until the U.S. Supreme Court resolves the issue.
The New Hampshire Act should be viewed in the context of increased State efforts to contain or control health care costs , particularly the cost of prescription drugs. Passed in 2006, the Act sought to curtail drug costs by regulating the sale and distribution of prescription data through "data miners" for commercial profit. As the Court opinions cover in depth, more than 3 billion prescriptions are written each year by doctors and other health care providers on 8,000 different pharmaceutical products. These prescriptions, filled by more than 54,000 retail pharmacies, totaled $168 billion. Pharmaceutical companies seek to protect their market for these drugs by sophisticated marketing efforts aimed directly at doctors and other prescribers, of which detailing is perhaps the most pervasive and direct promotion.
Detailing includes the use of gifts, free samples and other perks to doctors and their office staff in order for doctors to allow one-on-one visits with the sales reps. The practice is made possible by data miners, who collect and organize highly detailed information about doctors and their prescribing patterns from retail pharmacies, insurers and other sources. Sales reps use this data to promote patented brand-name medications over bioequivalent generic drugs. It was “this choice-between a still-under-patent, branded drug and a similar, but biologically different generic medication-that is at the heart of this case.” The Court record established that drug companies spent $4 billion on detailing efforts in one year alone, giving out $1 billion in free samples and that an average primary care physician may interact with as many as 28 sales reps a week. The State’s theory was that if detailing didn’t work, the drug companies would not have spent so much money on the practice.
The New Hampshire Act sought to regulate this practice indirectly, by prohibiting the sale of the prescriber information from pharmacies and data miners, rather than directly attacking the practice of detailing. The Act prohibits “prescription information containing patient-identifiable and prescriber-identifiable data” from being transferred, used or sold for “any commercial purpose,” including “advertising, marketing, promotion, or any activity that could be used to influence sales or market share of a pharmaceutical product…. or “the prescribing behavior of an individual health care professional.”
Within weeks of its passage, two data miners, IMS and Verispan challenged the Act as an unconstitutional restriction on the speech activity involved in the one-on-one visits between sales reps and doctors. After an evidentiary hearing, the U.S. District Court in Concord found the Act to be an unconstitutional restriction on commercial speech.
Although the suit was filed by data miners who were not engaged in commercial speech and not by the drug companies, who were most directly affected, the Court granted the miners “standing” to challenge the Act as restraining speech, since the Act would effectively put them out of business. Concluding that the Act addressed commercial speech in detailing, not conduct, the Court applied “middle tier” scrutiny.
This test required the State to prove that the Act advanced a substantial government interest, directly advanced that interest, and restricted speech no more than necessary to further that interest. Although finding that cost containment was a legitimate interest, the Court concluded that State failed to prove either that the promotion of brand-name drugs directly increased health care costs, or that the speech could not be regulated by less restrictive means, such as banning gifts and free samples or altering the Medicaid program so that non-preferred brand-name drugs could be prescribed only after consultation with State pharmacists. In sum, the Court found the proper remedy for truthful commercial speech to be more speech, not State suppression ofideas.
The Court of Appeals took a different approach. Although the State did not raise the issue, two members of the Court found that the data miners had no standing to raise the speech issue since the Act regulated only the conduct of selling information not the speech associated with detailing and because the drug companies could easily have entered the case. This conclusion should have been sufficient to decide the entire case, but the majority also found that even if commercial speech was implicated, the Act was not unconstitutional.
The majority gave great deference to the legislative means chosen to advance the issue of cost containment, finding that since New Hampshire was one of the first States to regulate detailing practice, more leeway should be permitted in that regulation. The minority opinion, agreed with the District Court on standing, and that the Act regulated speech, but also upheld the Act, concluding that the State had shown that the Act directly advanced the interest of cost containment and had wide latitude to regulate commercial speech.
The decision is likely not the last word on either the Act or similar efforts in other states to regulate either detailing or to contain medical costs by legislation. The data miners may seek review from the Supreme Court. Other Courts have reached different results. Moreover, as States choose different strategies to address the issue, Courts may be less willing to defer to legislatures where truthful commercial speech is involved. Health care professionals should watch all these decisions with both interest and concern.
Bill Glahn serves as Chair of the Business Litigation Practice Group at McLane, Graf, Raulerson & Middleton, Professional Association. Bill can be reached at (603) 628-1469 or [email protected]. The McLane Law Firm is the largest full-service law firm in the State of New Hampshire, with offices in Concord, Manchester and Portsmouth, as well as Woburn, Massachusetts.