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9/24/2004
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States' Perspective On Health-Care Privacy

States may adopt their own laws on health privacy as long as they don't conflict with the HIPAA rules and as long as they provide more stringent protections.

Until the Health Insurance Portability and Accountability Act was enacted, there were few federal privacy laws that covered health issues. Those that existed protected special groups, such as patients with HIV or those on Medicare. The states were forced to enact laws and regulations to handle health issues to fill the gap. Because of this, HIPAA didn't preempt all state laws in this area. States may adopt their own laws on health privacy as long as they don't expressly conflict with the HIPAA rules and as long as they provide more stringent protections.

In many cases, the state health-care privacy laws provide different standards for protection of patients' privacy than HIPAA. This can be a serious problem for manufacturers and large retailers who operate in several states or across the country. Whenever important policy issues are handled differently in 50 states, consumers usually lose. And nationwide providers are understandably frustrated. It ends up becoming a situation where the lowest common denominator controls the entire country.

But the marketing provision of HIPAA's Privacy Rule has been very controversial, and several states have enacted state versions that are far more strict than HIPAA's. While HIPAA permits unauthorized communications to patients promoting a prescription renewal or treatment alternative sent on behalf of the pharmacist or physician, even if the pharmacist or physician receives remuneration for the communication from the drug manufacturer or treatment service provider, some states do not. Chief among those is California, which has more far-reaching privacy laws than any other state. (See "What You Don't Know About Privacy Can Hurt You" .)

The recent lawsuit filed by The Privacy Rights Clearinghouse against Albertsons and its affiliates could only have been brought in California, given the changes in its health-care marketing rules. In the Albertsons case, The Privacy Rights Clearinghouse asserts that Albertsons and its affiliates allowed drug manufacturers to sponsor communications with Albertsons' pharmacy customers. Albertsons would mine its database for potential recipients of the marketing campaign and solicit sponsorships delivering the drug manufacturer's messages. (See "Albertsons Sued Over Customer-Data Privacy".) The messages included targeted health-care information called the "Next Step" program, and prescription reminders with product information. (These examples can be found here.)

Apparently, the personal information about the customer was never provided to the drug manufacturers themselves. And presumably the direct marketing facilitators were required to enter into "business affiliate" agreements requiring them not to disclose any information obtained from Albertsons except to make the mailings or phone calls on its behalf. (Otherwise, HIPAA claims probably would have been asserted.)

The Confidentiality of Medical Information Act ("CMIA"), Civil Code 56, et seq. covers the disclosure of health information for California residents. It was amended this year to expressly limit many HIPAA-permitted marketing practices. Like HIPAA, the act defines "marketing" to mean a communication about a product or service that encourages recipients of the communication to purchase or use the product or service.

The act's definition of "marketing" is much broader than HIPAA's, however. It only excludes communications: (1) for which the communicator does not receive direct or indirect remuneration from a third party; (2) made to current health plan enrollees informing them of their benefits and plan procedures, including the availability of more cost-effective drugs; (3) concerning "disease management programs" for chronic and seriously debilitating or life-threatening conditions, provided that notification of third-party remuneration is provided and patients are provided the opportunity to opt-out of receiving future remunerated communications. The HIPAA exclusions for "treatment," "case management or case coordination," and recommending alternative "treatments" or "therapies" aren't mirrored here. Moreover, the definition of disease-management programs is detailed and could be narrowly construed.

CMIA Civil Code 56.10 (d), as amended effective Jan. 1, 2004, provides:

"Prohibition on Unauthorized Disclosure of Medical Information (d) Except to the extent expressly authorized by the patient or enrollee or subscriber or as provided by subdivisions (b) and (c), no provider of health care, health-care-service plan contractor, or corporation and its subsidiaries and affiliates shall intentionally share, sell, use for marketing or otherwise use any medical information for any purpose not necessary to provide health care services to the patient. (emphasis provided)"

The complaint also alleges various breach of professional fiduciary and standards of care claims. Similar cases have been brought in other states purely under these types of claims, especially against large pharmacy chains. State laws are very precise in regulating what medical professionals may and may not do with patient information and for what they may receive remuneration. For example, in 2001, a New York court ruled that it could be a deceptive practice under its state consumer-protection laws for pharmacies that were going out of business to sell their customer prescription information to a large chain pharmacy without informing their customers of the arrangement.

In that case, CVS was sued by an AIDS patient who learned that his file had been sold to CVS. Part of the CVS program which purchased the files from the closing pharmacies required that they not disclose that they were closing or that the information had been transferred. The nondisclosure requirement tipped the scales in the customer's favor.

Whether Albertsons wins or loses this case, its customer relationships may be severely affected. Our health-care professionals are held to higher standards, and rightfully so. It's about earning and maintaining our trust. Other similarly situated health-care providers should think about giving their customers and patients choices. It's a matter of respect.

Return to main story: "The Privacy Lawyer: HIPAA: Who Can You Trust?"

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