The Federal Trade Commission announced Thursday that it intends to ban BetterHelp from data sharing for advertising purposes.

The regulatory body further calls BetterHelp to pay $7.8 million to consumers as a part of a settlement over allegations it shared sensitive health information with third parties such as social media platforms and digital advertisers.

The settlement will be subject to final approval by the FTC following a 30-day public comment period on the Federal Register. The proposed settlement and an administrative complaint were approved on a 4-0 vote by the organization’s commissioners, with the fifth commissioner concurring with the move.

BetterHelp, a subsidiary of Purchase, New York-based telehealth company Teladoc Health Inc. (NYSE: TDOC), denies wrongdoing and claims it was never paid to share “private information such as members’ names or clinical data from therapy sessions,” according to a statement from the company.

“This industry-standard practice is routinely used by some of the largest health providers, health systems, and healthcare brands,” the statement reads. “Nonetheless, we understand the FTC’s desire to set new precedents around consumer marketing, and we are happy to settle this matter with the agency.”

While it’s unclear what effect the ban will have, Teladoc has relied heavily on ads and marketing to support the growth of BetterHelp.

BetterHelp is one of the largest virtual mental health providers in the U.S. and a key part of Teladoc Health’s business. In 2022, BetterHelp garnered $1.02 billion in revenue, about 42% of Teladoc’s total revenue, and grew paid monthly users to 450,000, up 28% year over year, during the fourth quarter.

Teladoc posted a net loss of $13.7 billion in 2022, according to financial filings. Part of that was driven by a 50% increase in advertising and marketing which totaled $624 million.

“This increase was substantially driven by higher digital and media advertising in support of BetterHelp, as well as higher engagement member marketing in the Integrated Care segment,” the financial disclosure states. 

The FTC’s investigation is part of the heightened scrutiny surrounding mental health companies that solely or heavily operate via telehealth, especially new entrants seeking to grow their patient count via digital marketing.

In June, several Democratic U.S. senators demanded answers from BetterHelp and virtual mental health competitor Talkspace Inc. (Nasdaq: TALK) as a case study of how similar companies handle patient data in digital marketing as well as Big Tech’s association with mental health companies.

An expose released by STAT News and The Markup found dozens of telehealth companies, including several behavioral health companies, shared data with tech and marketing firms. 

“When a person struggling with mental health issues reaches out for help, they do so in a moment of vulnerability and with an expectation that professional counseling services will protect their privacy,” Samuel Levine, the FTC’s Bureau of Consumer Protection director, said in a news release. “Instead, BetterHelp betrayed consumers’ most personal health information for profit. Let this proposed order be a stout reminder that the FTC will prioritize defending Americans’ sensitive data from illegal exploitation.”

More details on the FTC-BetterHelp settlement

The FTC’s settlement agreement with BetterHelp would forbid it from sharing ” individually identifiable information” about its users with any third party for advertising. It would also prohibit sharing the data of those previously used the  BetterHelp app or website, a practice called retargeting. 

The FTC alleges that BetterHelp “continually” broke its privacy policies by sharing and monetizing consumers’ health information from 2013 to 2020. In a statement, BetterHelp said the settlement is related to advertising practices that were in effect at the company from 2017 to 2020.

“To capitalize on these consumers’ health information, [BetterHelp] handed it over to numerous third-party advertising platforms, including Facebook, Pinterest, Snapchat, and Criteo, often permitting these companies to use the information for their own research and product development as well,” an administrative complaint issued by the FTC on Thursday states. 

For example, the FTC alleges that BetterHelp “disclosed to Snapchat the IP addresses and email addresses of approximately 5.6 million visitors

to retarget them with advertisements for the service” and “uploaded lists of over 7 million visitors’ and users’ email addresses to Facebook” between 2017 and 2018.

The settlement agreement would also require BetterHelp to obtain “affirmative express consent” and detail what data and how it be used if shared with any other third parties that aren’t related to advertising.

Also, the agreement would require BetterHelp to do the following for the next 20 years after the settlement agreement comes into effect:

— Tell the FTC to which organizations BetterHelp shared patient information without consent and then ask those organizations to delete that data

— To make no other misrepresentations about data and privacy practices

— Inform users who joined before Jan. 1, 2021, that their data may have been disclosed

— Create a comprehensive privacy program

— Get and cooperating with third-party privacy assessments every other year

— Have a company executive certify the company’s compliance with the agreement and disclose breaches

Growing skepticism of telehealth

The FTC’s settlement with BetterHelp comes just days after the Drug Enforcement Administration issued proposed rules that would harshly cut back on prescribing controlled substances via telehealth.

During the pandemic, demand for behavioral health services exploded while restrictions and even bans on most in-person care strangled access to care. By necessity, several segments of health care shifted to telehealth. The federal government and several state governments loosened restrictions on telehealth to enable some care to occur during the most acute and earliest times during the COVID outbreak.

Billions of dollars of venture capital and other forms of investment poured into existing and new companies seeking to meet the need for telebehavioral health services and take advantage of the more friendly growth environment.

From 2019 to 2021, mental health funding quintupled during the same period to $5.1 billion, according to Rock Health. The proliferation of unicorns landing huge investment rounds and even larger valuations got a lot of attention, not all of it positive.

The heightened scrutiny on telehealth companies was magnified following public scandals and eventual law enforcement scrutiny of the startup Cerebral, a San Francisco-based virtual mental health provider.

TruePill, an online pharmacy partner to several telehealth companies including Cerebral, is at risk of losing its DEA license to prescribe controlled substances following a DEA investigation into potentially inappropriate prescribing practices.