Wall Street Journal Op-Ed: “LabMD finally won its six-year battle with the FTC, but vindication came too late.”
Sometimes winning is still losing. That is certainly true for companies that find themselves caught in the cross hairs of the federal government. Since 2013, my organization has defended one such company, the cancer-screening LabMD, against meritless allegations from the Federal Trade Commission. Last Friday, the FTC’s chief administrative-law judge dismissed the agency’s complaint. But it was too late. The reputational damage and expense of a six-year federal investigation forced LabMD to close last year.
While the Atlanta-based company was in business, its work required securely storing personal-health data and medical records in compliance with Health and Human Services Department regulations under the Health Insurance Portability and Accountability Act, often known as HIPAA.
So it was alarming when, in May 2008, LabMD was contacted by Tiversa, a company that describes itself as a “world leader in P2P cyberintelligence,” alleging that it had found on the Internet a LabMD insurance-agent file containing the names, dates of birth and Social Security numbers of about 9,000 patients. Oddly, Tiversa wouldn’t disclose where or how it discovered the file. But the company demanded a fee of $40,000 to mitigate the situation.
After leading its own thorough review that turned up no sign that any patient information had been exposed online, LabMD refused to pay. Little did it know that this would lead to a yearslong fight with the federal government that would bring down the company.