As if a 20-Year Consent Order Wasn’t Enough Fun: FTC Brings First Monetary Settlement in Information Security Case

Adam H. Greene of Davis Wright Tremaine LLP discusses the consent order Henry Schein Practice Solutions signed to settle an FTC complaint, and finds it noteworthy for a number of reasons. One of the reasons, he writes, is that it is the first consent order in a data security case to involve a monetary penalty.

I don’t agree with framing it that way, though, as this really wasn’t about data security enforcement or Henry Schein simply offering “subpar encryption.” This case was about deceptive or misleading advertising, which brings it squarely under the non-security enforcement cases FTC has tackled. Had Henry Schein advertised its product by saying, “This product does not provide AES-256 encryption, but rather a weaker form of data security that does not fully comply, by itself, with HIPAA’s Security Rule,” could the FTC ever have gone after them? I don’t think so.

That issue aside for the moment, here’s another point Greene makes:

The FTC’s complaint alleged that the encryption that Schein’s software used “was not capable of helping dentists protect patient data, as required by HIPAA.” What the FTC’s complaint suggests that the HIPAA Security Rule requires arguably is not the case. The HIPAA Breach Notification Rule includes a breach notification safe harbor if data is encrypted in accordance with NIST standards; however, the Security Rule, in contrast, does not. Although it appears that a covered entity or business associate could comply with the HIPAA Security Rule even with encryption that does not meet NIST standards, this FTC settlement raises the prospect that the FTC may consider related claims of HIPAA compliance as deceptive if encryption does not meet NIST standards.

Greene also mentions some take-home messages, beginning with:

HIPAA compliance may not be enough.

Yes, I think the LabMD enforcement action has already demonstrated that the FTC will pursue cases that HHS/OCR might not pursue. Then too, even 7 years ago, they went after RiteAid and CVS on disposal of pharmacy records, even though both those entities fall under HIPAA.

Read Greene’s full article on Privacy & Security Law Blog.

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