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Arizona high court: Phoenix man can sue Costco for health privacy breach

Shoppers walk into a Costco store, Wednesday, March 3, 2021, in Tacoma, Wash. Costco Wholesale Corp. reports earnings results, Thursday, March 4, 2021. (AP Photo/Ted S. Warren)

PHOENIX (AP) — Warehouse store chain Costco can be sued for privacy violations by a Phoenix-area man who alleges a pharmacist joked with his ex-wife about an erectile dysfunction prescription he had twice canceled, the Arizona Supreme Court ruled Monday.

The ruling allows the man’s lawsuit to proceed, but sets a high bar for him to win: He must show by “clear and convincing” evidence that the store and its pharmacist did not act in good faith when the woman was told about the prescription.

But it is an important decision, because for the first time the state Supreme Court ruled that lawsuits can be brought here under state law for violations of the federal health care privacy law commonly known as HIPAA. The company argued that the federal law does not allow private citizens to sue, but the court rejected that, saying the law’s standards can be used to show privacy violations in state court.

The company also argued that a state law provides broad immunity from lawsuits for providers that act in good faith, but the high court said the man has the right to have that claim tried in court.

The ruling mainly upholds a 2019 state Court of Appeals ruling that revived the lawsuit the man filed after the pharmacist told his ex-wife about the prescription when she went to pick up another prescription with his approval. The man had called Costco twice to cancel the prescription before his ex-wife went to the north Phoenix store in early 2016, but the pharmacist did not do so. The trial court had dismissed the case, citing the state immunity law and because HIPPA does not allow private lawsuits.

The rulings say the Phoenix-area man in his 50s received a sample for an erective dysfunction drug from his doctor in January 2016 and later got a call from Costco saying a full prescription he had not sought was ready for pickup. The man canceled the prescription, and then canceled it a second time about a month later when he called to check on an unrelated prescription and was told it was still there.

The man then authorized Costco to allow his ex-wife to pick up his regular prescription refill, and that’s when the pharmacist told her about the ED pills and they joked about them.

The ruling says the man was trying to reconcile with his ex-wife, but after the pharmacy incident that failed.

The man’s attorney, Joshua Carden, wasn’t immediately available Monday. But he said earlier that Costco apologized after the man complained, sending him a letter saying that telling his ex-wife this information violated both HIPPA and the company’s own privacy policies. He said the pharmacist clearly had a responsibility to protect his client’s privacy under both federal law and the company’s policies.

Costco management had no immediate comment on Monday’s decision.

The case now returns to a lower court for further proceedings. Carden said in 2019 he suspects the pharmacist never canceled the prescription because they may get bonuses for selling high-profit drugs like Viagra. He said that there is no other logical reason for the prescription not being canceled and he’ll try to show that at trial.

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