Yesterday's decision by the First Circuit in IMS Health Inc. v. Ayotte, No. 07-1945, could very well be a turning point in the way courts address data privacy issues. The court rejected a First Amendment challenge to a New Hampshire law that forbids data-mining companies from selling information about a physician's drug-prescribing habits to drug manufacturers. (Apparently this data is powerful when wielded by a skilled prescription drug marketer. New Hampshire legislators believed that brand-name drug marketers, armed with knowledge about a physician's drug-prescribing habits, are partially responsible for millions of dollars in increased state health care costs, which are incurred when physicians depart from medical guidelines and prescribe higher-priced, brand-name drugs in lieu of lower-cost generics.)
Most discussions about privacy assume that, as privacy expands, important First Amendment values (the freedom to discover and distribute truthful information, for example) are diminished. Relevant to marketing communications, the First Amendment has been held to protect pure data (Universal City Studios v. Corley) and even mundane expression such as product prices (Va. Board of Pharmacy v. Va. Consumer Council).
What is important about the IMS Health v. Ayotte decision is not that the court found no First Amendment violation, but its conclusion that the New Hampshire law regulated conduct entirely outside the protection of the First Amendment. A 2-1 majority of the court held that the target of the New Hampshire law -- namely, communications about a physician's drug-prescribing habits -- did not merit First Amendment protection at all. The court said that the information restricted by the New Hampshire law was similar to fighting words, misleading commercial speech, speech in furtherance of a crime, restraints of trade, or promises of benefits in order to influence a union election -- all of which have been held to be outside the protection of the First Amendment. Here are the key passages from Judge Selya's majority opinion:
This case poses the relatively narrow question of whether the Prescription Information Law constitutionally may bar these plaintiffs (data miners) from aggregating, manipulating, and transferring data for one particular purpose only. ...
To be sure, certain information exchanges are foreclosed by the Prescription Information Law. They are not, however, the sorts of exchanges valued by the Supreme Court's First Amendment jurisprudence but, rather, are exchanges undertaken to increase one party's bargaining power in negotiations. We believe that in moving to combat the novel problems presented by detailing in the information age, New Hampshire has adopted a form of conduct-focused economic regulation that does not come within the First Amendment's scope. ...
We believe that the transfers of prescriber-identifiable information regulated by the Prescription Information Law (transfers that otherwise would flow from pharmacies to data miners to detailers for the purpose of promoting the dispensation of expensive brand-name drugs) fit within this integument. The challenged portions of the statute principally regulate conduct, and to the extent that the challenged portions impinge at all upon speech, that speech is of scant societal value. We say that the challenged elements of the Prescription Information Law principally regulate conduct because those provisions serve only to restrict the ability of data miners to aggregate, compile, and transfer information destined for narrowly defined commercial ends. In our view, this is a restriction on the conduct, not the speech, of the data miners.
I think what the First Circuit has done here is show state legislatures a way to write privacy legislation that can withstand First Amendment objections. (True, the state did not seriously advance the argument that the law was justified as a matter of physician privacy. It was the dramatic increase in health care costs due to brand-name drug prescriptions that caught the state's, and this court's, attention. Nevertheless, the First Amendment point is the same: some kinds of data communications are outside First Amendment protection.) The idea that a restriction on the use of a particular kind of data, in order to serve a clearly defined social purpose, does not implicate the First Amendment at all, is a powerful one that should attract a lot of attention in the next few years.
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