OLR Research Report

December 4, 2008




By: John Kasprak, Senior Attorney

Following is information on a recent federal appellate court decision upholding a New Hampshire law that prohibits the sale of information about physicians' prescribing practices for use in prescription drug marketing.


In a recent decision, a federal appeals court overturned a lower federal court ruling and upheld a New Hampshire law prohibiting the sale of information about physicians' prescribing practices for use in prescription drug marketing. The New Hampshire law is intended to reduce state health care costs by eliminating a process that pharmaceutical representatives use to target physicians to promote certain prescription drugs.


The New Hampshire “Prescription Information Confidentiality Act” (Chapter 328 of the 2006 New Hampshire Laws) provides that records relating to prescription information containing patient- and prescriber-identifiable data must 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. Exceptions are allowed for 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 allowed by law.

The law defines “commercial purpose” as 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.

It does not prohibit (1) dispensing prescriptions to a patient or to the patient's authorized representative; (2) transmitting of prescription information between an authorized prescriber and a licensed pharmacy; (3) transfer between licensed pharmacies;(4) transferring prescription records if pharmacy ownership changes or transfers; and (5) care management educational communications given to a patient about a health condition, adherence to a prescribed course of therapy, or other information about the drug dispensed, treatment options, or clinical trials. Also, the law does not prohibit collecting, using, transferring or selling patient and prescriber data by zip code, geographic region, or medical specialty for commercial purposes, as long as it does not identify individuals. The law does not contain a provision that would allow doctors to opt in or opt out of prescription information-sharing programs.

The New Hampshire law basically involves “detailing”—the use of targeted marketing and sales visits by pharmaceutical representatives based on the data pharmaceutical companies obtain about the prescribing practices of individual physicians. “Data-mining” companies assemble this information and sell it to drug companies for use in focusing sales efforts on physicians who may be using competing products, for example (see BNA “Health Law Reporter” (HLR), Vol. 17, No. 46, November 20, 2008, p. 1513).


Federal District Court Challenge

The New Hampshire law was scheduled to take effect in July 2006. But IMS Health and Verispan, both data-mining companies, challenged it, arguing that it infringed on commercial free speech and that the collection of prescription drug information was valuable for public health. These firms said that the statute impermissibly criminalized free speech and contained vague and overly broad language. Supporters of the law said that it would promote patient and physician privacy and reduce health costs.

In April 2007, the U.S. District Court of the District of New Hampshire ruled that the law restricted constitutionally protected speech without directly serving the state's substantial interest and that the state could have instituted alternative measures without restricting speech. The court also said that the asserted privacy interest was not a distinct privacy interest advanced by the statute. It enjoined enforcement of the statute (IMS Health Inc. V. Ayotte, D.N.H., No. 06-cv-00280-PB, April 30, 2007).

New Hampshire appealed this decision. It argued that the statute did not regulate constitutionally protected speech and that, to the extent it could be found to restrict commercial speech at all, the limitations on the commercial use of prescriber-identifiable data served legitimate state interests and was reasonable (17 HLR, 1513).

U.S. Court of Appeals Decision

On November 18, 2008, the U.S. Court of Appeals for the First Circuit overturned the federal district court's decision and upheld the constitutionality of the New Hampshire law (IMS Health Inc. v. Ayotte, 1st Cir., No. 07-1945, Nov. 11, 2008).

The federal appellate court rejected the argument that the law violated the First Amendment by illegally restricting commercial speech. It also rejected claims that the law should be void because of its vagueness and that it violated the commerce clause of the U.S. Constitution. The court said that the New Hampshire statute does not regulate speech at all but regulates data transfers whose societal benefits “pale in comparison to the negative externalities produced” (17 HLR 1513). The court stated that even if the regulation does constrain protected speech, it does not violate the Constitution because it is no more restrictive than necessary to accomplish the state's goals of protecting patients' privacy and health while containing health care costs.

Senior Circuit Judge Bruce Selya's majority opinion stated, “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.” The majority opinion continued, “In the end, we conclude that the state adequately demonstrated that the Prescription Drug Information Law is reasonably calculated to advance its substantial interest in reducing overall health care costs within New Hampshire.”


New Hampshire was the first state to pass this type of legislation. Subsequently, Maine and Vermont enacted similar laws. Maine's law was struck down by a federal district court on First Amendment grounds in December 2007. That decision has been appealed to the First Circuit which granted a consent motion on March 24, 2008 to stay the appeal proceedings until after it ruled on the New Hampshire law. Maine's law allows doctors to opt out of participation in data mining and prevent a prescription drug information company from licensing or selling a doctor's prescribing information.

Vermont's law was also challenged. In August 2008, the U.S. District Court for the District of Vermont completed the trial on this challenge. It has not yet ruled. In the Vermont case, the U.S. Court of Appeals for the Second Circuit would have jurisdiction in appeal from the federal court.