Evan Schuman's StorefrontBacktalk

As punishment for the careless disposal of items containing personal information, CVS Caremark must pay a $2.5 million fine and establish a “comprehensive information security program” to protect both paper and electronic documents containing sensitive data, according to a government settlement announced Wednesday (Feb. 18).

The orders between the chain, the Federal Trade Commission (FTC) and the U.S. Department of Human Services followed a probe that found workers at the company’s pharmacies tossed into open garbage dumpsters many items containing highly sensitive consumer medical information.

“This is a case that will restore appropriate privacy protections to tens of millions of people across the country,” FTC Chairman William E. Kovacic said in a statement. “It also sends a strong message to other organizations that possess consumers’ protected personal information. They are required to secure consumers’ private information.”

The proposed settlement, open for public comment for 30 days, said the company’s failure to take reasonable and appropriate measures to protect financial and medical information of customers and employees violated federal law.

CVS issued a statement that didn’t say whether it was in the wrong, but did point out that the company has, throughout the case, “expressly denied engaging in any wrongful conduct and agreed to settle the matter in order to avoid the time and expense of further legal proceedings.” CVS is a $2.6 billion retailer, but even so, $2.5 million is hardly nuisance value.

The SEC issued a statement, which includes all of the key elements of the settlement. The commission also published its analysis of the key provisions of the settlement.

In addition to establishing the information security program, CVS must obtain within one year, and every other year for 20 years, an assessment from a third-party professional certifying that the security program is operating sufficiently.

What Can Be Found, Will Be Found

CVS Caremark operates about 6,300 CVS pharmacies nationwide and has a mail-order business. The FTC said its probe was inspired by media reports in 2006 and 2007 about personal information being found in dumpsters in at least 15 cities. The FTC found the discarded material included prescriptions, pill bottles, pharmacy labels, computer printouts, prescription purchase refunds, credit card receipts and employee records. It said the company failed to properly train employees or otherwise take necessary steps to properly dispose of the sensitive information, nor did it have a process for discovering which information was possibly revealed.

The FTC also took CVS Caremark to task for making deceptive and unfair claims to its customers, including “CVS/pharmacy wants you to know that nothing is more central to our operations than maintaining the privacy of your health information.” The proposed settlement bans CVS Caremark from making similar misrepresentations in the future.

In a statement, CVS Caremark said it responded to the media reports “by promptly enhancing its retail waste disposal policies and training programs and instituted a chain-wide shredding program for confidential waste to further guard against inadvertent disposal of confidential information in the regular trash.” The company, which did not mention the $2.5 million fine, said it “is not aware of any consumer harm arising out of, or related to, the alleged incidents” and vowed it “is committed to being an industry leader in privacy matters and places high priority on protecting the privacy of its customers and plan participants.”

Unimpressed with the company’s assertion, “Alarmed About CVS Caremark,” an initiative created by Change to Win, a public employee union-based lobbying group, criticized CVS Caremark’s mishandling of private information. “Consumers expect their private patient data to be protected but it’s not,” said Jasmin Weaver, Healthcare Initiatives Legislative Director at Change to Win, in a statement. “When people find out what corporations like CVS Caremark are doing with their prescription information, they are shocked and rightly so.”

The group noted CVS Caremark has access to private information from about 30 percent of all prescriptions in the country, or 1.2 billion prescriptions yearly. “CVS Caremark touches one out of every two Americans by giving prescriptions or health services to half of all Americans,” said an Alarmed About CVS Caremark statement.