Data Mining May be Headed to the U.S. Supreme Court

Business Week has a story out this week about how a case involving a New Hampshire law barring data mining on drug prescription data, that could have a profound impact on data mining across industries:

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 Supreme Court could shine a spotlight on this topic in the next few weeks if it decides to hear a closely watched case IMS has been fighting in New Hampshire. The court's ruling would quickly reverberate beyond the pharmaceutical industry, affecting virtually any business that uses information about consumer buying behavior to guide its sales strategies.

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