Rite Aid Fined $1 Million for Improperly Disposing Personal Information

• implement policies and procedures to dispose securely of such information, including, but not limited to, policies and procedures to render the information unreadable in the course of disposal;

• adequately train employees to dispose securely of such information;

• use reasonable measures to assess compliance with its established policies and procedures for disposing such information; and

• employ a reasonable process for discovering and remedying risks to such information.

Under the HHS resolution agreement, Rite Aid agreed to pay $1 million to settle potential violations of the Health Insurance Portability and Accountability Act Privacy Rule.  Rite Aid also agreed to distribute policies and procedures for protecting protected health information (such as the patient information improperly disposed in this case), train employees on the policies and procedures, monitor for violations, sanction employees who commit violations, and hire a third-party auditor to conduct periodic compliance reviews.  The HHS resolution agreement applies for three years.

In its consent order, the FTC accused Rite Aid of committing both unfair and deceptive trade practices in violation of Section 5 of the FTC Act.  Specifically, the FTC claimed that Rite Aid committed unfair trade practices when it failed to employ reasonable and appropriate measures to prevent unauthorized access to the personal information, and committed deceptive trade practices when it recklessly disposed of customers’ health information despite making claims it would responsibly protect such information. 

In addition to the penalties imposed by HHS, the FTC ordered Rite Aid to cease misrepresenting its information security practices to consumers, establish a comprehensive information security program reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers and employees, and obtain biannual audits of its information security program for the next 20 years.

These settlements were similar to those imposed on CVS Caremark in February of 2009, which also stemmed from a joint investigation of the HHS and the FTC into reports of improperly disposed patient and employee information into publicly accessible dumpsters.  While many of the procedural requirements of the settlements are similar, in that case HHS required CVS Caremark to pay $2.25 million to settle the charges.

These cases reaffirm the agencies’ commitment to investigating and punishing improper data disposal practices, especially in light of high-profile media reports discovering sensitive consumer information in dumpsters and boxes left by the side of the road.  In order to avoid these types of high-profile investigations, organizations should implement and enforce data retention policies and always destroy sensitive customer and employee data prior to disposal.

Authored by Bret Cohen.