As the U.S. government considers reclassifying cannabis from a Schedule I to a Schedule III substance, the conversation around patient privacy and data protection in the cannabis industry is more relevant than ever.
HIPAA was established in 1996 to protect patient health information and prevent unauthorized sharing of sensitive data. The law applies to what it calls covered entities, which include healthcare providers, health plans, and healthcare clearinghouses that manage electronic health information. For medical marijuana dispensaries, the question is whether they meet HIPAA’s definition of a covered entity.
To qualify as a covered entity under HIPAA, two main factors are considered:
Given these factors, while dispensaries may offer health-related products, they generally don’t qualify as covered entities under HIPAA, meaning they’re not required to follow its strict data protection rules.
Read more: What is a covered entity?
The possible reclassification of cannabis to Schedule III would mark a shift in federal recognition of its medicinal benefits, which could lead to broader acceptance within the medical field. However, this change wouldn’t necessarily impose HIPAA compliance on dispensaries. Without electronic claims submission, dispensaries would still operate outside HIPAA’s jurisdiction.
Even if federal laws don’t mandate HIPAA compliance, state laws often come into play. Many states have enacted privacy laws that regulate how personal data can be collected and used, especially by companies dealing with sensitive information. These laws may require cannabis businesses to adopt strict policies around:
Medical marijuana companies frequently collect personal information, including names, government IDs, payment details, and sometimes health histories. This data makes them prime targets for cybercriminals, reinforcing the need for strong privacy practices even without HIPAA compliance.
Read also: The HIPAA Privacy Rule's preemption of state law
The sensitive nature of data handled by cannabis companies puts them in a position similar to healthcare organizations, which are frequent targets of cyberattacks. Many cannabis companies store data in the cloud, where data breaches are increasingly common. The high stakes of securing this information make cybersecurity a top priority, even without federal regulations like HIPAA. To minimize risks, companies should focus on:
Related: Why healthcare is a major target for cyberattacks
Cannabis companies often rely on vendors for various services, from point-of-sale systems to inventory management. While these partnerships can boost efficiency, they also introduce additional data security risks. To protect sensitive information, cannabis companies should thoroughly vet their vendors’ data security practices, create clear agreements outlining data protection responsibilities, and routinely check vendor compliance with privacy regulations.
The regulations for medical marijuana are constantly changing, and companies in this sector need to stay adaptable to new compliance demands. To tackle future challenges, companies can benefit from:
According to The Hill, while presidential candidates' cannabis stances capture attention, real legislative power over cannabis laws resides with Congress, not the Oval Office. Presidents may back rescheduling or legalization, but lasting protections for medical cannabis patients rely on Congressional action. Amendments like Rohrabacher-Farr have shielded patients from federal interference, yet many still face issues in housing, employment, and healthcare.
Medical marijuana companies can adopt best practices from HIPAA, such as encrypting data, controlling access, and using secure communication channels, to protect sensitive information even if HIPAA doesn’t directly apply.
Yes, while HIPAA may not apply, employee training on data privacy is beneficial to ensure that sensitive information is handled securely. Many states require businesses handling personal information to provide training on privacy and security protocols.
Yes, state and federal laws may impose penalties for mishandling personal information, even if HIPAA doesn’t apply. Penalties can vary widely depending on the state and the nature of the data breach.
In the event of a data breach, a company should follow state-specific breach notification laws, which may include notifying affected individuals and, in some cases, regulatory bodies.
Learn more: HIPAA Compliant Email: The Definitive Guide