Settlement talks on a disputed health data rights agreement between Quintiles Transnational Corp., the international healthcare informatics firm, and e-health pioneer WebMD have broken down, with both companies announcing they plan further legal action.

WebMD claims that the data rights agreement raises vital constitutional and legal issues about the collection and use of sensitive patient data, while
Quintiles Transnational chairman, Dennis Gillings, said: “This is a business dispute. I believe WebMD is using privacy as a pretext to avoid their contractual obligations."

The increasingly acrimonious dispute centres on an exclusive data rights agreement that formed a key part of Quintiles’ sale of Envoy Corporation, an electronic data interchange company, to WebMD in May 2000.

Envoy is the largest processor of healthcare electronic interchange (EDI) transactions in the U.S., including pharmacy, medical, dental and patient statement transactions. In 1999, Envoy’s network processed over 1.4 billion transactions involving approximately 250,000 physicians, 4,500 hospitals and 35,000 pharmacies.

Quintiles says that the data rights agreement requires WebMD to deliver de-identified healthcare claims data to Quintiles. Settlement talks between Quintiles and WebMD had been under way since March, when a US federal district court judge ordered WebMD to deliver data to Quintiles. In a company statement Quintiles stated that injunction remained in effect.

Quintiles has now filed an amended complaint in the US District Court for the Eastern District of North Carolina seeking continued enforcement of its Data Rights Agreement with WebMD and asserting further claims in its litigation with WebMD that began in February 2001.

WebMD in turn has filed a brief in the United States Court of Appeals for the Fourth Circuit seeking to vacate the preliminary injunction issued by the US District Court for the Eastern District of North Carolina, which forced WebMD, through Envoy, to transmit certain de-identified healthcare information to Quintiles.

Martin Wygood, chairman of WebMD, said the litigation raised "fundamental constitutional, legal and public policy issues" about the collection and use of sensitive healthcare data.

WebMD said its litigation focuses on "whether Quintiles has the right to use and sell claims data without the knowledge or express authorisation of the healthcare providers and pharmacies that send the data, the payers that receive it, or the patients to whom it relates".

David Boies, a partner at Boies, Schiller & Flexner, who represents
WebMD, said in a statement: "States across the country have passed laws limiting access to people’s medical records. In this litigation, Quintiles seeks the wholesale invalidation of those laws. WebMD is committed to defending those laws and the policy they represent."