Thursday, October 16, 2014

Big Pharma: the Unseemly First Amendment Champion, Part Two

Jane Bambauer

Jane Bambauer

For the conference on Public Health in the Shadow of the First Amendment

This is Part Two of a two-part post on the First Amendment issues raised in United States v. Caronia

Commercial Speech Protection Is Not That Dumb

First Amendment protection of commercial speech generally is not at odds with consumer protection. To the contrary, restrictions on advertising often favor incumbent firms, and the development of these restrictions is often the product of self-interested lobbying.

Legal scholars sometimes obscure the fact that the commercial speech doctrine was developed to promote a right to receive information by consumer listeners, and not to strengthen the power of corporations. Since the only dissenter in the seminal commercial speech case Virginia State Board of Pharmacy was then-Justice Rehnquist, it’s difficult to argue that the doctrine developed as mere obeisance to corporate America. Rather, the Court believed regulators were interfering with information exchanges that were desirable for consumers.

The Court was correct. A few years before Virginia State Board of Pharmacy, several studies showed that well-meaning advertising bans punished consumers instead of producers. For example, a 1972 study comparing states that either permitted or banned advertising by optometrists found that the prices for prescription eyeglasses were 25% higher in the states with advertising bans. The FTC itself found that the product quality was indistinguishable, and that the gap in prices was attributable to the information asymmetries in the ad ban states.  Other studies found the same effects from advertising restrictions on legal services and prescription drugs.

Even cigarette advertising restrictions have ambiguous effects, sometimes negative. Notwithstanding the Supreme Court’s findings in Lorillard, empirical evidence is mixed on whether tobacco advertising mostly affects market share among brands or if it raises overall demand for tobacco products. There was at least one period when cigarette advertising had the effect of decreasing demand for cigarettes. 1950 marked the first time that doctors were making an explicit connection between smoking and cancer. But while the federal government, the American Medical Association, and the American Cancer Institute reassured consumers that the evidence was preliminary and that there was no reason to drastically alter smoking habits, the tobacco industry lost sales every year for several years in a row. 

One plausible explanation, as explained by John Calfee, is that the industry was engaged in a “less worse” campaign. The brands were encouraging smokers to pick their slightly less-unhealthy brand over other more dangerous ones. So consumers were bombarded with the message that these things are NOT healthy.  

(Image from

But in 1955, cigarette sales picked up again, and continued to climb at a breakneck until the Surgeon General’s famous 1964 report. What happened in 1955 to reverse the trend? One candidate for causation is the Federal Trade Commission's first set of guidelines restricting health claims in cigarette advertising. After that year, cigarette companies were helped out of their Prisoner’s Dilemma and went back to advertising based on taste and smoothness. Similar stories of unintended consequences can be fairly convincingly told about the effects of advertising bans on less-bad forms of smoking, like lower-tar cigarettes and cigars.

The regulation of advertising doesn't always have the effects regulators expect. A 1993 study of European countries with and without cigarette advertising bans found a positive effect on consumption caused by the ad bans, and today the most rigorous studies of the effects of cigarette advertising restrictions continue to show that they have either no effect, or a small effect—an effect that is easily dwarfed by other policies like a simple tax increase. In other words, cigarette advertising regulation might not survive rational basis review, let alone intermediate scrutiny.
Regulations of prescription drug promotion are a different matter. Because on-patent drugs can extract monopoly rents for some time, the Chicago School story about efficient markets in advertising is not as plausible. The FDA is funding a “torrent ofstudies” right now to assess the effects of direct-to-consumer advertising for prescription drugs. Hopefully these will shed some light on whether there is a problem to be solved. But generally speaking, the public is not overly credulous. Surveys of consumer perceptions about advertising consistently find that 70% of people are skeptical of the claims made in advertising. (Skepticism is reduced, however, when consumers know that advertising regulations are in place.) In contrast to taxes and direct regulations of sales, the regulation of the information environment will have ambiguous effects on consumers.

Fostering the Production of Knowledge

Chris Robertson has argued that the regulatory scheme challenged by Caronia should survive a First Amendment challenge because it creates the proper incentives for drug producers to improve the state of scientific knowledge. The supplemental new drug application process will compel a drug company to do more, and better, research before promoting an off-label use of the drug. This is especially appealing where we have legitimate fears that a drug producer benefits from maintaining ignorance or thwarting independent research. For the reasons I described in Part One, I think the heightened standards for accuracy currently used by the FDA do not actually improve the state of knowledge because those standard, with their costly compliance, will have the net effect of filtering out useful information without supplying better information.
Moreover, the federal government has other, better, ways to improve the state of research. It could use its compulsion powers to generate more research data from doctors and pharmaceutical companies and make it available to researchers. And it could get out of the way of private data collection efforts.

First, consider how the government could expand the data commons available to public health researchers. A good deal of drug testing actually occurs after a drug has been FDA-approved. Because the pre-approval drug studies are limited in duration and subject population, doctors wind up using trial and error after the drug has come to market in order to see how a drug, for example, affects children, affects minority populations, interacts with other drugs, works over time, and works as off-label therapies. The benefits of this ad hoc research are not always shared with other doctors and with the public at large, and sometimes, without pooling the data over a large population of patients, important side effects and benefits will be missed. The FDA can improve the quality of post-market drug research by mandating reporting to its Adverse Event Reporting System. (Today reporting is voluntary.)

Second, the government should reconsider well-intentioned privacy and trade secret protections that stymie the production of knowledge. Researchers have used Google search results containing drug names and symptoms to discover previously unreported side effects. Public health workers in Kenya have used cell phone location data to track the spread of malaria. And Fitbit data can track recovery times from surgery. Future innovations of this sort could be wiped out if strong forms of data privacy laws are adopted to limit collection and repurposing of information. Existing laws like HIPAA make access to useful data cumbersome, and de-identification requirements often damage the utility of the data.

Public health receives great, albeit indirect, benefits from the collection and sharing of individual-level data. Poorly designed privacy laws disrupt those benefits. They might even violate First Amendment rights in collecting information, or so I have argued in my recent article “Is Data Speech?” I admit this is not a straightforward or easy argument to make. Historically, courts have distinguished between information dissemination and information gathering, recognizing First Amendment interests in the former but not the latter. However, one of the core achievements of free speech is to liberate minds. To do so, individuals must have the freedom to learn not only from each other, through traditional speaker-listener transfers, but also directly from the world, and from our observations of it. When the government regulates the collection of information for the very purpose of interfering with new knowledge, that regulation should give rise to First Amendment scrutiny.

Sure enough, courts are now beginning to recognize a right to record as a free speech necessity. Since the government can easily circumvent the free exchange of ideas and information by frustrating access to raw data, the freedom to collect information is indispensible to meaningfully free speech.
What I describe here is yet another expansion of First Amendment liberties. Its implications trouble scholars who already feel that the right to free speech has metastasized and grown beyond its use as a tool for democratic self-governance. I remain doubtful, but open-minded, about the horrors that are predicted to come in the Big Data era. At a high level of abstraction, though, I am quite confident the First Amendment will be interpreted to set limits on the scope of unprotected “misleading” speech and on the government’s ability to thwart data-collection. If it isn’t, we will live with a government that can decide what is “true” and keep us from learning on our own.
Jane Yakowitz Bambauer is Associate Professor of Law at the University of Arizona James E. Rogers College of Law. You can reach her by e-mail at

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