The Threat That Corporations Pose to a Democracy

The founders of the United States took the First Amendment to the U.S. Constitution and the concepts of free speech and freedom of conscience very seriously.

“Whoever would overthrow the liberty of a nation must begin by subduing the freeness of speech,” said Benjamin Franklin.

“Information is the currency of democracy,” intoned Thomas Jefferson — one of countless Jefferson odes to the central importance of ideas and free transmission of information in fostering a working democracy.

But could they possibly have imagined the twisted purposes to which the First Amendment is put today?

Two crucial developments in U.S. constitutional jurisprudence — the grant of Bill of Rights protections to corporations, and the extension of First Amendment protections to commercial speech — have enabled corporations to invoke the First Amendment to defend their right to hawk goods, so long as they are legal, by almost any means short of outright lying or clear deception.

Now corporations are suggesting the First Amendment should effectively immunize them from government-imposed rules related to the simple commercial exchange of information.

This new expansion of the First Amendment to block broad public regulatory powers emerges from efforts in New England to control one of the most insidious pharmaceutical marketing practices.

Anyone who watches television in the United States, or reads magazines, is familiar with drug company advertisements to consumers. But these represent a relatively small fraction of industry marketing expenditures.

Drug companies devote much more money, and time, to influencing those with the power to prescribe medicines — as much as $34 billion in the United States, more than eight times what is spent on direct-to-consumer marketing.

The most important element of the marketing onslaught directed at doctors is “detailing” — the activities of the sales representatives who visit doctors constantly, and provide free lunches, free pens, free charts and other free goodies (including, very importantly, free samples). The average primary care physician sees drug detailers more than five times a day.

When a sales rep walks into a doctors office, he or she knows a lot about that doctor — including exactly what medicines the doctor prescribes, and in what quantities. How can this be?

Pharmaceutical companies purchase the information from data-mining companies, the largest of which is IMS Health. Pharmacies track what drug is sold to each customer. IMS buys the data from the pharmacies, deletes all patient names, combines it with data that enables the identification of prescribers for each prescription, and aggregates the information.

Then, when the drug company representatives cheerfully bound in to a doctor’s office, they know exactly what the doctor is prescribing. They know if the doctor prescribes a lot of medicine or a little (drug company reps rate the doctors on a scale of 1-10, or A-F), and whether they go for the rep’s company’s product or a competitor’s or a generic. They know where to focus their efforts, and how to frame their sales pitches.

And, as the New York Times explained, quoting an e-mail message from a pharmaceutical executive to company salespeople, they use the data to “hold [doctors] accountable for all the time, samples, lunches, dinners, programs and past preceptorships that you have paid for and get the business!” The sales reps obviously do not have punitive power over the doctors, but they use the prescribing information to exploit and manipulate the social ties built on the giving relationship.

Neither doctors nor patients consent to this use of prescribing data, and only a tiny few even know about it.

New Hampshire decided to ban this use of the data in 2006. Vermont and Maine followed with similar laws.

IMS sued to block implementation of the laws, and won at the U.S. district court level. Judges agreed with IMS that the New Hampshire and Maine laws violate the company’s claimed First Amendment rights.

The New Hampshire law permits IMS and other data miners to continue to collect prescription data, but they can’t use individualized data — information about specific doctors’ prescribing practices — for commercial purposes.

The law is a “speech restriction because it limits both the use and disclosure of prescriber-identifiable data for commercial purposes,” District Judge Paul Barbadoro found in the New Hampshire case.

This was a misguided determination, challenged by the State of New Hampshire in an appeal argued before the First Circuit Court of Appeals yesterday. Leave aside the merits of providing First Amendment protections to corporations, or to commercial speech. Nothing about the New Hampshire law impinges on the expressive values that the First Amendment is intended to protect.

Contends Sean Flynn, the lead attorney for a coalition of public interest organizations supporting the New Hampshire law, “This case is not about speech, it is about industry surveillance of the doctor-patient relationship. New Hampshire acted through its data-mining law to safeguard that relationship, and the public health, by protecting it from industry surveillance and manipulation.”

Flynn says that if the district court’s ruling is upheld, and the principle of commercial speech protections is extended to cover any commercial exchange of text or data, then a host of existing laws are vulnerable to constitutional challenge. These include laws to protect consumer privacy and to mandate disclosure of financial information related to securities transactions.

It is very hard to defend government regulations determined to restrict commercial speech. Under Supreme Court rulings, judges must assess whether a commercial speech restriction advances a substantial governmental interest, directly advances the interest and is no more limiting of speech than necessary. In a case like New Hampshire’s pharmaceutical data-mining restrictions, the test effectively requires the judge to closely scrutinize a government regulation and decide if it is both a good idea, and the best possible and least speech-restrictive way of achieving a desired ends. It gives the judge unwarranted authority — comparable, as former Justice Rehnquist noted, to the discredited turn-of-the-20th-century Lochner authority to strike down economic regulations — and makes it very hard to uphold a challenged regulation.

In applying the test, Judge Barbadoro knocked down the New Hampshire law on numerous grounds. There was no legitimate privacy interest involved, he found, especially since there is no evidence of drug sales reps harassing doctors. Pharmaceutical detailing may result in more brand-name and fewer generic drugs being prescribed, at greater expense, but there is no evidence that prescriber data “is being used to propagate false or misleading marketing messages.” And, he found, there are other ways the State could aim to curb drug company gifts, counter detailers’ messages and educate doctors, and aim to promote greater use of generic drugs.

Just to list the judge’s findings is to show how much inappropriate power the commercial speech test confers on judges in a case like this.

Will the appeals court agree with Judge Barbadoro? We’ll know in a few months.

Could Thomas Jefferson and his contemporaries have imagined the First Amendment being deployed for such purposes?

The world has obviously changed in the last 200-plus years, and Jefferson could not have envisioned even the existence of the modern pharmaceutical industry. But he did understand the threat that corporations posed to a working democracy.

“I hope that we shall crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country,” he wrote.