FTC Imposes $1.5 Million Civil Penalty in First-of-Its-Type Well being Breach Notification Rule Enforcement Motion


On February 1, 2023, the Federal Commerce Fee (“FTC”) introduced an enforcement motion (“Enforcement Motion”) towards California-based telehealth and prescription drug low cost supplier GoodRx Holdings, Inc. (“GoodRx”) for allegedly violating part 5 of the FTC Act and the Well being Breach Notification Rule (“HBNR”). The proposed order (“Proposed Order”), which was introduced by the U.S. Division of Justice on behalf of the FTC, marks the primary time the FTC has enforced the HBNR and will sign the start of elevated scrutiny and enforcement of the HBNR. Along with imposing a civil penalty of $1.5 million, the Proposed Order prohibits GoodRx from sharing well being info for promoting functions and imposes a number of necessities on GoodRx, together with necessities to (1) get hold of person consent for every other sharing of data, (2) search the deletion of data held by third events, (3) restrict how lengthy it might probably retain private and well being info, and (4) implement a privateness program.

The Increasing Scope of the HBNR

The HBNR is comparatively easy in its necessities as a breach notification rule and requires distributors of private well being data (“PHRs”) and PHR associated entities to inform customers, the FTC, and, in some circumstances, the media, within the occasion of a breach of safety of unsecured PHR identifiable well being info. If a service supplier to one among these entities experiences a breach, it should notify the entity, which in flip should perform its notification obligations.

What’s much less easy, nevertheless, is the scope of the HBNR. The HBNR defines a PHR as an digital report of PHR identifiable well being info on a person that may be drawn from a number of sources and that’s managed, shared, and managed by or primarily for the person. A vendor of PHRs is outlined as an entity that gives or maintains a PHR, whereas a PHR associated entity is outlined as an entity that (1) provides services or products by means of the web site of a vendor of PHRs; (2) provides services or products by means of the web sites of lined entities as outlined beneath the Well being Insurance coverage Portability and Accountability Act (“HIPAA”) that provide PHRs to people; or (3) accesses info in, or sends info to, a PHR. The HBNR doesn’t apply to HIPAA-covered entities or entities to the extent that they have interaction in actions as a enterprise affiliate. This doesn’t essentially imply, nevertheless, that entities performing features as a enterprise affiliate are wholly exempt from the HBNR since many enterprise associates have interaction in each HIPAA-covered actions and non-HIPAA-covered actions.

As additional detailed in a earlier , the FTC issued a coverage assertion in September 2021 (“Coverage Assertion”) that seems to have considerably expanded the rule’s scope to comb in numerous expertise firms and actions, together with well being apps that leverage utility programming interfaces (“APIs”). For instance, an app is topic to the HBNR if it collects info straight from customers and has the technical capability to attract info by means of an API that allows syncing with a shopper’s health tracker. Based on the Coverage Assertion, an app that pulls info from a number of sources can also be topic to the HBNR, even when the well being info comes from just one supply – for instance, if a blood sugar monitoring app attracts well being info solely from one supply (e.g., a shopper’s inputted blood sugar ranges), but additionally takes non-health info from one other supply (e.g., dates from the calendar on the patron’s telephone), it’s topic to the HBNR. As well as, the Coverage Assertion clarified {that a} “breach” is just not restricted to cybersecurity intrusions or nefarious habits, but additionally covers incidents of unauthorized entry equivalent to sharing of lined info with out a person’s authorization.

The Grievance

Based on the Grievance, GoodRx is a vendor of PHRs and is topic to the HBNR because it maintains “an digital report of PHR identifiable well being info on a person that may be drawn from a number of sources and that’s managed, shared, and managed by or primarily for the person.” The Grievance asserts that GoodRx’s web site and cell apps are digital data of PHR identifiable well being info which might be able to drawing info from a number of sources, and the data is managed, shared, or managed by or primarily for the person. Whereas PHRs are historically thought-about a relatively slim product centered on sufferers organizing and managing their well being info, the Coverage Assertion demonstrated that the FTC is taking an expansive interpretation of the HBNR’s definition of “PHR” and, consequently, what constitutes a “vendor of PHRs.” It’s little shock due to this fact that the FTC considers GoodRx topic to the HBNR, significantly in mild of the examples articulated within the Coverage Assertion.

The Grievance alleges that since 2017, GoodRx “repeatedly” violated its guarantees to customers that it might solely share their private info with restricted third events for restricted functions, would prohibit third events’ use of such info, and would by no means share private well being info with advertisers or different third events. With out offering discover to customers or acquiring their consent, GoodRx allegedly shared info with third-party promoting firms and platforms, which included probably delicate info on prescription medicines and private well being circumstances, in an effort to supply focused ads to customers. Based on the Grievance, these disclosures revealed “extraordinarily intimate and delicate particulars about GoodRx customers” that could possibly be linked to such circumstances as psychological well being circumstances, substance dependancy, and sexual and reproductive well being.

Based on the FTC, these disclosures represent a “breach” (i.e., disclosures with out the person’s authorization) that require notification beneath the HBNR. As famous above, that is broader than the standard interpretation of “breach,” however because the Coverage Assertion defined, the FTC is seemingly decoding the HBNR’s definition of “breach” to cowl just about any sharing of data with out the person’s authorization. The Enforcement Motion means that, in apply, the FTC could also be extra more likely to implement the HBNR the place the entity repeatedly fails to abide by the statements in its privateness insurance policies.

The Grievance additionally alleges the next:

  • GoodRx allowed third events to make use of GoodRx’s info for their very own inner functions, equivalent to for analysis and improvement or commercial optimization functions.
  • GoodRx displayed a seal on the backside of its telehealth companies homepage testifying HIPAA compliance, which acknowledged “HIPAA Safe. Affected person Information Protected.”
  • GoodRx did not implement enough insurance policies or procedures to forestall the improper disclosure of delicate well being info.

The Proposed Order

Along with imposing a $1.5 million civil penalty on GoodRx, the Proposed Order prohibits GoodRx from participating in sure practices, requires it to inform people as required beneath the HBNR, and requires it to interact in varied actions designed to bolster its compliance program. Particularly, the Proposed Order consists of the next prohibitions and necessities:

  • GoodRx is prohibited from disclosing well being info to 3rd events for promoting functions, and the corporate should get hold of affirmative categorical consent from customers earlier than disclosing their well being info to 3rd events for non-advertising functions.
  • GoodRx is prohibited from making misrepresentations concerning varied features associated to its info privateness and safety practices.
  • GoodRx should present customers discover of the breach and Enforcement Motion.
  • GoodRx should instruct third events that acquired well being info to delete such info.
  • Inside 180 days of entry of the Proposed Order, all GoodRx companies should set up and implement a complete privateness program that protects the privateness, safety, availability, confidentiality, and integrity of private info. This system should embrace, amongst different components, insurance policies and procedures, assessments, and obligatory annual coaching for all workers.
  • GoodRx companies that acquire, preserve, use, disclose, or present entry to private info should rent an unbiased third occasion to conduct an preliminary privateness evaluation and biennial assessments thereafter.
  • GoodRx should yearly certify to the FTC its compliance with the necessities of the Proposed Order and report, inside 30 days of discovery, incidents of noncompliance.

Takeaways

Digital well being firms and different organizations throughout the well being care business ought to pay attention to the Enforcement Motion and consider whether or not the HBNR applies to their enterprise, significantly because the FTC seems to have considerably expanded the rule’s scope by means of the Coverage Assertion. Though HIPAA-regulated actions are typically exempt from the HBNR, many organizations have interaction in each HIPAA-covered and non-HIPAA-covered actions. For instance, a digital well being firm could also be a enterprise affiliate with respect to sure merchandise it provides on behalf of a HIPAA-covered entity whereas additionally providing direct-to-consumer merchandise that aren’t topic to HIPAA.  

The Enforcement Motion is very noteworthy as it’s the first time the FTC has taken enforcement motion beneath the HBNR, a rule that has been in impact since 2009. As first foreshadowed within the Coverage Assertion, the Enforcement Motion could possibly be a harbinger of accelerating reliance on the HBNR as a lever for the FTC to penalize firms that misuse well being info and violate their guarantees to customers.

For extra info or recommendation concerning the applicability of the Enforcement Motion to your group, please contact the skilled(s) listed under or your common Crowell & Moring contact.

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