Politics

In 2020, COVID-19 derailed the privacy debate in the U.S.

From biometric monitoring to unregulated contact tracing, the crisis opened up new privacy vulnerabilities that regulators did little to address.

In 2020, COVID-19 derailed the privacy debate in the U.S.

Albert Fox Cahn, executive director of the Surveillance Technology Oversight Project, says the COVID-19 pandemic has become a "cash grab" for surveillance tech companies.

Photo: Lianhao Qu/Unsplash

As the coronavirus began its inexorable spread across the United States last spring, Adam Schwartz, senior staff attorney at the Electronic Frontier Foundation, worried the virus would bring with it another scourge: mass surveillance.

"A lot of really bad ideas were being advanced here in the U.S. and a lot of really bad ideas were being actually implemented in foreign countries," Schwartz said.

In China, where the virus first took hold, the country had already begun using draconian smartphone-based tools to track sick people's whereabouts and effectively force them to stay home. In Israel, lawmakers rushed through a proposal to give government officials access to Israelis' location data. As the White House met with tech giants including Facebook and Google to discuss ways they could help, Schwartz and others feared the U.S. might be next in allowing fear of the virus to subvert basic civil liberties.

Nine months into the crisis, Schwartz said, the "worst ideas" being deployed internationally have yet to take hold in the U.S. But that doesn't mean COVID-19 hasn't created a slew of smaller, but still insidious privacy setbacks for Americans who, in recent years, have become increasingly wary of all the intrusive ways that governments and private companies use their personal data. Since March, corporate offices and college campuses have been flooded with biometric scanners, employers have deployed software that lets them remotely monitor workers' keystrokes and giant corporations like Ticketmaster have contemplated linking people's negative COVID-19 tests to their tickets to gain entry to future events.

While many of these precautions are well-meaning attempts to preserve public safety and to use technology to get the economy up and running again, they can come at a cost to personal privacy. And yet, the crisis has once again relegated privacy legislation to the back burner in Congress as lawmakers battle over how to handle dueling health and economic disasters.

Albert Fox Cahn, executive director of the Surveillance Technology Oversight Project, says the COVID-19 pandemic has become a "cash grab" for surveillance tech companies. "I think this has been the most dangerous moment for civil rights since 9/11," he said. "When you're faced with impossible choices like whether or not to keep schools open and deprive kids of an education or put them at risk, it's so easy to be taken in by the allure of magical thinking and startups that say if you just install this tracking device you'll somehow be able to avoid doing the impossible."

Contact tracing has been a source of concern, as governments across the country work with a slew of private firms to manage manual contact tracing with no real guardrails in place. "People by the thousands are telling contact tracers where they've been, who they're with, and we don't think there are sufficient ways to secure that data, especially when private contractors or for-profit corporations are helping," Schwartz said.

In New York, Cahn's organization supported legislation that would have protected New Yorkers from having their contact tracing data used against them in court or administrative proceedings. That bill passed over the summer, but Governor Andrew Cuomo has yet to sign it into law, leaving that information vulnerable. "In most states, police or ICE can get contact tracing data with a subpoena," Cahn said. "This not only creates a privacy threat, but it's a public health nightmare. There are millions of Americans who would second guess whether to fully disclose their potential contacts."

Apple and Google partnered on a contact-tracing tool that went to extremes to ensure people's data wouldn't be centrally stored or shared with either company or with the government. But health officials, at least early on, scoffed at the limitations. "Digital apps and technology have struggled in the in-between space of wanting to track the path of this disease, this virus, while at the same time really struggling with very real privacy concerns," said Malkia Devich-Cyril, founding director and senior fellow at the advocacy group MediaJustice.

The imminent rollout of a vaccine presents even trickier questions, like what happens if businesses or governments begin requiring people to prove they've been vaccinated in order to access certain spaces. California's legislature already defeated a bill that would have created a blockchain-based system to create what Schwartz calls "immunity passports." EFF argued that requiring people to hand over their smartphones to prove their immunity would open them up to other privacy invasions and would require people to have a smartphone in the first place. "We view this as a horrible, horrible idea," Schwartz said, noting that EFF will be "in the trenches" if any similar proposals arise.

Over the course of 2020, there have been other, subtler attitudinal shifts too. In the spring, news outlets that, in the past, criticized apps for surreptitiously tracking and selling people's location data, suddenly began tapping that same data to track where people were actually staying at home or whether anti-shutdown protesters might be spreading the virus. "We think there's a lot of COVID-washing going on," Schwartz said.

That COVID-washing hasn't been uniform though, Devich-Cyril said, noting that Black and brown communities with a long history of being surveilled remain wary of that kind of intrusion. "The simple fact of a medical disaster is not enough to turn people away from their desire for basic freedoms and rights," Devich-Cyril said.

Still, despite these setbacks, privacy advocates did score some wins in the midst of the chaos. On Election Day, Portland, Maine succeeded in banning facial recognition technology. Michigan voted to require police to seek search warrants before accessing electronic data. And California passed Proposition 24, a measure that rewrites the California Consumer Privacy Act and gives Californians new rights over protecting their data.

"That is the story of privacy in 2020," said Jim Steyer, CEO of Common Sense Media, which backed Prop. 24. "That was a significant step forward." It's worth noting that not all privacy groups celebrated the passage of Prop. 24. Some, like the American Civil Liberties Union, opposed it over concerns that it created new privacy loopholes for businesses.

Schwartz is at least relieved that so many of the "bad ideas" that emerged at the beginning of 2020 have not been adopted in the U.S. But as the pandemic rages on through 2021, the fight for privacy in the face of a global health crisis will undoubtedly continue.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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