Colin Loyd, MJLST Staffer
Remember 23andMe—the genetic testing company that once skyrocketed in publicity in the 2010s due to its relatively inexpensive access to genetic testing? It’s now heading toward disaster. This September, its board of directors saw all but one member tender their resignation.[1] At the close of that day’s trading, 23andMe’s share price was $0.35, representing a 99.9% decline in valuation from its peak in 2021.[2] This decline in valuation suggests the company may declare bankruptcy, which often leads to a sale of a company’s assets. Bankruptcy or the sale of assets present a host of complex privacy and regulatory issues, particularly concerning the sale of 23andMe’s most valuable asset—its vast collection of consumer DNA data.[3] This uncertain situation underscores serious concerns surrounding the state of comprehensive privacy protections for genetic information that leave consumers’ sensitive genetic data vulnerable to misuse and exploitation.
23andMe collects and stores massive amounts of user genetic information. However, unlike healthcare providers, 23andMe does not have to comply with the stringent privacy regulations set out in the Health Insurance Portability and Accountability Act (HIPAA).[4] While HIPAA is designed to protect sensitive health data, its protections apply only to a small subset of healthcare related entities.[5] HIPAA only regulates the use of genetic information by “group health plan[s], health insurance issuer[s] that issue[] health insurance coverage, or issuer[s] of a medicare supplemental policy.”[6] 23andMe does not fit into any of these categories and therefore operates outside the scope of HIPAA protections with respect to genetic information, leaving any genetic information it holds largely unregulated.
The Genetic Information Nondiscrimination Act (GINA), enacted in 2008, offers consumer protections by prohibiting discrimination based on an individual’s genetic information with respect to health insurance premium amounts or eligibility requirements for health insurance.[7] GINA also prohibits any deprivation of employment opportunities based on genetic information.[8] However, GINA’s protections do not extend to life insurance, disability insurance, or long-term care insurance.[9] This leaves a gap where genetic information may be used against individuals by entities not subject to GINA.
This regulatory gap is a major concern for consumers, especially with a potential bankruptcy sale looming. If 23andMe sells its assets, including its database of genetic information, the new owner would not have to adhere to the same privacy commitments made by 23andMe. For example, 23andMe promises not to use genetic information it receives for personalized or targeted marketing/advertising without a user’s express consent.[10] This policy likely reflects 23andMe’s efforts to comply with the California Privacy Rights Act (CPRA), which grants consumers the right to direct a business to not share or sell their personal information.[11] However, this right under the CPRA is an opt-out right—not an opt-in right—meaning consumers can stop a future sale of their information but by default there is no initial, regulatory limit on the sale of their personal information.[12] As a result, there’s nothing stopping 23andMe from altering its policies and changing how it uses genetic information. In fact, 23andMe’s Privacy Statement states it “may make changes to this Privacy Statement from time to time.”[13] Any such change would likely be binding if it is clearly communicated to users.[14] 23andMe currently lists email or an in-app notification as methods it may notify its users of any change to the Privacy Statement.[15] If it does so, it’s highly possible a court would view this as “clear communication” and there would be little legal recourse for users to prevent their genetic information from being used in ways they did not anticipate, such as for research or commercial purposes.
For example, say a life insurance company acquires an individual’s genetic data through the purchase of 23andMe’s assets. It could potentially use that data to make decisions about coverage or premiums, even though GINA prohibits health insurers to do the same.[16] This loophole highlights the dangers of having genetic information in the hands of entities not bound by strict privacy protections.
In the event of an acquisition or bankruptcy, 23andMe’s Privacy Statement outlines that personal information, including genetic data, may be among the assets sold or transferred to the new entity.[17] In such a case, the new owner could inherit both the data and the rights to use it under the existing terms, including the ability to modify how the data is used. This could result in uses not originally intended by the user so long as the change is communicated to the user.[18] This transfer clause highlights a key concern for users because it allows their deeply personal genetic data to be passed to another company without additional consent, potentially subjecting them to exploitation by organizations with different data usage policies or commercial interests. While 23andMe must notify users about any changes to the privacy statement or its use of genetic information, it does not specify whether the notice will be given in advance.[19] Any new entity could plan a change to the privacy statement terms–altering how it uses the genetic information while leaving users in the dark until the change is communicated to them, at which point the user’s information may have already been shared with third parties.
The potential 23andMe bankruptcy and sale of assets reveals deep flaws in the current regulatory system governing genetic data privacy. Without HIPAA protections, consumers risk their sensitive genetic information being sold or misused in ways they cannot control. GINA–while offering some protections–still leaves significant gaps, especially in life and disability insurance. As the demand for genetic testing continues to grow, the vulnerabilities exposed by 23andMe’s potential financial troubles highlight the urgent need for better privacy protections. Consumers must be made aware of the risks involved in sharing their genetic data, and regulatory measures must be strengthened to ensure this sensitive information is not misused or sold without their explicit consent.
Notes
[1] Independent Directors of 23andMe Resign from Board, 23andMe (Sept. 17, 2024) https://investors.23andme.com/news-releases/news-release-details/independent-directors-23andme-resign-board.
[2] Rolfe Winkler, 23andMe Board Resigns in New Blow to DNA-Testing Company, WALL ST. J. (Sept. 18, 2024) https://www.wsj.com/tech/biotech/23andme-board-resigns-in-new-blow-to-dna-testing-company-12f1a355.
[3] Anne Wojcicki (the last remaining board member) has consistently publicized her plan to take the company private, which is looming larger given the current state of the business financials. Id.
[4] See 42 U.S.C. § 1320d-9(a)(2).
[5] See generally 42 U.S.C. §1320d et seq.
[6] 42 U.S.C. § 1320d-9(a)(2).
[7] Genetic Information Nondiscrimination Act of 2008, Pub. L. No. 110-233, 122 Stat. 881.
[8] Id.
[9] Jessica D Tenenbaum & Kenneth W Goodman, Beyond the Genetic Information Nondiscrimination Act: Ethical and Economic Implications of the Exclusion of Disability, Long-term Care and Life Insurance, 14 Personalized Med. 153, 154 (2017).
[10] How We Use Your Information, 23andMe, https://www.23andme.com/legal/how-we-use-info/ (last visited Oct. 14, 2024).
[11] Cal. Civ. Code § 1798.120(a) (Deering 2024).
[12] Id.
[13] Privacy Statement, 23andMe (Sept. 24, 2024) https://www.23andme.com/legal/privacy/full-version/.
[14] See Lee v. Ticketmaster LLC, 817 Fed. App’x 393 (9th Cir. 2019)(upholding terms of use where notice was clearly given to the user, even if the user didn’t check a box to assent to the terms).
[15] Privacy Statement, supra note 13.
[16] See K.S.A. § 40-2259(c)-(d) (carving out the ability for life insurance policies to take into account genetic information when underwriting the policy).
[17] Privacy Statement, supra note 13.
[18] See Ticketmaster, 817 Fed. App’x 393 (2019).
[19] Privacy Statement, supra note 13.