The Fight Over Drug Data Mining
IMS Health (RX) has built a lucrative niche collecting data on which drugs physicians prescribe, then selling the information to pharmaceutical companies. But legislators in more than 20 states are considering actions to curb the practices.
The legal drama began in 2006, when New Hampshire passed the Prescription Information Law. It bars the collection of data on what drugs specific doctors prescribe -- information drug companies use to fine-tune sales tactics. The law struck right at the heart of IMS's business model, which brought the Norwalk (Conn.) company $311 million in profits on $2.3 billion in sales in 2008. New Hampshire Attorney General Kelly A. Ayotte has argued that collecting prescription data endangers the privacy of physicians and patients, even though patient information is kept anonymous. IMS and another data collection company, Verispan (now SDI Health), sued in federal court to challenge the law, which they believe violates their First Amendment rights to free speech.
The case wound its way up to the U.S. Court of Appeals for the First Circuit, which upheld the New Hampshire law in November 2008. The court ruled that data and speech are not the same thing. Data is just like any product, Circuit Judge Bruce M. Selya said, and states have the authority to legislate how companies sell their goods. "The plaintiffs ... ask us in essence to rule that because their product is information instead of, say, beef jerky, any regulation constitutes a restriction of speech," wrote Selya in the November opinion. "We think that such an interpretation stretches the fabric of the First Amendment beyond any rational measure."
But to the pharmaceutical industry, prescription information isn't beef jerky -- it's prime rib. Drug companies use IMS data to guide their salesforce strategies. For example, they can save money by distributing free samples of a new drug only to the biggest prescribers of products in that same class. Without the data, they risk wasting samples on doctors who are just going to throw them in the trash.
Governments also purchase consumer data -- and that alone could prompt the Supreme Court to hear the case. "If you want to track swine flu, you might want to know who's prescribing Tamiflu," says Jaideep Bajaj, managing director at ZS Associates, a marketing consulting firm in Boston that works with more than 100 pharmaceutical companies. "How do you do that without the data?"
Privacy advocates, however, believe laws such as the one passed in New Hampshire are vital for protecting consumers. Randy Frankel, IMS vice-president for external affairs, says his company uses sophisticated encryption technology to shield patients' identities. What's more, the American Medical Assn. allows physicians to request anonymity, and about 22,000 docs have done so. But critics fear such technology could fail or that enterprising hackers could somehow glean enough details from the data to determine who has what diseases.