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FTC Targets Mobile Health App Developer for Deceptive Practices

The FTC fines the makers of the Pact mHealth app $1.5 million for failing to pay promised rewards to users of the digital health and wellness tool.

Source: ThinkStock

By Eric Wicklund

- The Federal Trade Commission is sanctioning the developers of an mHealth app for allegedly failing to pay promised bonuses to users who met health and wellness goals – and in many cases charging them whether they met those goals or not.

Pact, Inc. owners Yifan Zhang and Geoffrey Oberhoffer have agreed to a $1.5 million fine as part of a settlement with the FTC over violations of the agency’s prohibition against unfair and deceptive practices and the Restore Online Shoppers’ Confidence Act (ROSCA). The two mHealth developers will pay more than $940,000 to those who used the now-suspended app, while the rest of the fine will be suspended.

The Pact app enticed users to enter into a pact to meet weekly exercise and/or nutrition goals, with the understanding that they would be charged $5 to $50 for each missed goal. If the goals were met, the users would receive a bonus – a share of the money collected from users who didn’t meet their goals.

According to the FTC, Zhang and Oberhoffer collected money from tens of thousands of consumers even when they met their goals, and sometimes after the users cancelled their service. The complaint cited one consumer who was billed more than $500 in recurring charges, while another was charged because the app didn’t recognize her gym – a facility on a military base where she was stationed.

“Consumers who used this app expected the defendants to pay them rewards when they achieved their health-related goals, and to charge them only when they did not,” Tom Pahl, Acting Director of the Bureau of Consumer Protection, said in an FTC press release. “Unfortunately, even when consumers held up their end of the deal, Pact failed to make good on its promises.”

Mobile health apps that encourage healthy behaviors and offer rewards are surging in popularity as health plans and self-insured businesses seek to improve member/employee health and wellness and reduce healthcare expenses.

But while these apps may push the needle on engagement, the sheer number of apps on the marketplace makes them difficult to verify. Health plan administrators and healthcare providers are often reluctant to recommend or prescribe an app that they can’t trust.

In the past, the FTC and U.S. Food and Drug Administration have gone after developers of mHealth apps measuring visual acuity, promising improved mental acuity and claiming to be just as good at measuring blood pressure as a blood pressure cuff, as well as several apps purporting to identify melanoma from a photograph of a mole.

In another notable case, New York state officials took action earlier this year against three health and wellness apps.

This past March, New York Attorney General Eric G. Schneiderman announced settlements with the developers of three cardiac care mHealth apps for making misleading claims. All three apps claimed to accurately measure certain biometric data – one targeted fetal heart rate, while the other two targeted heart rate and performance during stressful situations – but none were properly tested for accuracy.

Noting the growing number of apps facing federal scrutiny, the FDA and FTC joined forces last year to launch an online resource for mHealth developers.

“As Americans become increasingly engaged in managing their health through diverse health IT products, this tool will provide product developers with access to the critical information and consistent guidance they need in order to innovate,” said Lucia C. Savage, chief privacy officer for the Office of the National Coordinator for Health IT, which participated in creating the resource.

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