Allegations Against Alphabet's Verily Over HIPAA Violations in Legal Dispute

An executive from Verily asserts that the company misused health data from over 25,000 individuals without proper authorization, and then attempted to conceal these infractions.

Ryan Sloan, who previously held an executive position at Verily, alleges that his dismissal came after he uncovered these violations related to the Health Insurance Portability and Accountability Act (HIPAA) and informed the higher-ups at the firm.

In the United States, HIPAA protects patient information by ensuring that sensitive data is not disclosed without explicit consent from the patient.

The claims made by Sloan are part of an ongoing federal lawsuit in San Francisco, initiated late last year, which had not been disclosed to the public until now.

Earlier this week, a judge decided against Verily's attempt to have the case dismissed or moved to arbitration, allowing Sloan’s claims to proceed.

Verily has publicly stated that the claims brought forward in this employment case from 2023 are entirely baseless. The company is committed to vigorously defending itself in court. As the situation is legally sensitive, Verily will refrain from additional comments for the time being.

Sloan’s representatives have not offered any remarks about the matter.

Originally launched in 2015 as part of Alphabet's innovation arm, Verily evolved into its independent entity under the tech giant's "Other Bets" segment.

In 2020, Verily brought Sloan on board to lead its diabetes and hypertension initiative, Verily Onduo, as the Chief Commercial Officer.

By the start of 2022, Sloan and Julia Feldman, then Onduo’s general counsel, flagged that Verily had been mishandling patients' protected health data for its projects and communications. These breaches reportedly impacted thousands of patients involved in the Onduo diabetes program.

Their findings were brought to Verily's senior management, according to the amended charge submitted in June, which corroborates multiple HIPAA violations through an internal examination.

According to the records, from 2017 to 2021, Verily breached fourteen separate HIPAA Business Associate Agreements with large clients such as Highmark Health and Walgreens, among others.

Companies that provide access to Verily's Onduo, including Walgreens and Highmark Health, may have inadvertently exposed patient information due to these infractions.

Delta Airlines has commented that while they have no direct statement on the legal proceedings, they prioritize the privacy of their employees’ data.

Quest Diagnostics indicated they are not acquainted with the specific allegations detailed in the complaint.

Despite repeated requests, Highmark chose not to comment, and Walgreens did not respond to inquiries from CNBC.

HIPAA mandates firms like Verily to report data breaches to relevant parties within 60 days of discovery, yet it's alleged that Verily postponed informing the parties involved.

In negotiation sessions with Highmark Health during August 2022, Verily is accused of falsely claiming HIPAA compliance while concealing prior breaches.

In August of the same year, two staff members, including Feldman, known to be aware of the violations were terminated from Verily.

It is claimed that in October 2022, when Sloan revisited his concerns about these breaches with Lisa Greenbaum, Verily's then chief revenue officer, she rationalized the company’s choice to not disclose, citing potential reputational harm as a reason.

Greenbaum has since moved on to take a new role as Chief Commercial Officer at a different health-tech organization.

In November 2022, Verily is accused of retracting a press release to avoid attention toward prior marketing studies breaching HIPAA agreements.

Sloan's termination from Verily was finalized in January 2023, while he was on a leave of absence to care for his critically ill mother.

The lawsuit represents another hurdle for Verily, a company attempting to establish a successful product despite having secured over $1 billion in investment backing.

Transitioning towards a corporation structure to attract new financial support, Verily has struggled to find stability in its evolving business pursuits.

The firm pivoted from hardware development to pandemic response during the COVID-19 outbreak, and has since refocused on precision health challenges.

Last year, Verily announced its latest development in health tech, an AI-driven system aimed at chronic care management, and also decided to offload its Granular Insurance unit.