FTC Files Antitrust Complaint Against Surescripts

April 25, 2019
Commission alleges e-prescribing behemoth used anticompetitive exclusivity agreements, threats and other exclusionary tactics

The Federal Trade Commission has sued Surescripts, alleging that the company employed illegal vertical and horizontal restraints in order to maintain its monopolies over two e-prescribing markets: routing and eligibility.

The FTC complaint, filed in federal court on April 17, said it is seeking to undo and prevent Surescripts’ unfair methods of competition, restore competition and provide monetary redress to consumers.

Arlington, Va.-based Surescripts is owned by the National Association of Chain Drug Stores (NACDS), National Community Pharmacists Association (NCPA), CVS Health and Express Scripts. Its Surescripts Network Alliance includes virtually all electronic health records, pharmacy benefit managers, pharmacies and clinicians, plus an increasing number of health plans, long-term and post-acute care organizations and specialty pharmacy organizations.

The network added 8 million unique patients to its master patient index in 2018, which it says now includes 258 million patients, or nearly 80 percent of the total U.S. population and 93 percent of all insured patients.

According to the complaint, Surescripts monopolized two separate markets for e-prescription services:

• The market for routing e-prescriptions, which uses technology that enables providers to send electronic prescriptions directly to pharmacies;

• The market for determining eligibility, a separate service that enables providers to electronically determine patients’ eligibility for prescription coverage through access to insurance coverage and benefits information, usually through a pharmacy benefit manager.

The FTC alleges that Surescripts intentionally set out to keep e-prescription routing and eligibility customers on both sides of each market from using additional platforms (a practice known as multihoming) using anticompetitive exclusivity agreements, threats, and other exclusionary tactics. Among other things, the FTC alleges that Surescripts took steps to increase the costs of routing and eligibility multihoming through loyalty and exclusivity contracts.

According to the FTC’s complaint, Surescripts successfully used these tactics to stop multiple attempts by other companies to enhance competition in the routing and eligibility markets. According to the FTC’s complaint, Surescripts’s anticompetitive tactics thwarted competitors from gaining share in the routing and eligibility markets, enabling the company to maintain at least a 95 percent share in each market over many years. The complaint alleges that Surescripts succeeded in maintaining its monopolies in routing and eligibility, despite the explosive growth of routing and eligibility transactions – from nearly 70 million routing transactions in 2008 to more than 1.7 billion in 2017.

Here is the paragraph that explains this aspect of the complaint:

Surescripts changed its pricing policies to require long-term exclusivity from nearly all of its routing and eligibility customers. Surescripts designed its new pricing to ensure that its customers would pay a higher price on all of Surescripts’s transactions unless they were “loyal” to Surescripts, i.e., used Surescripts exclusively. With its 95%-plus share in both markets, Surescripts knew that no competitor could ever offer customers enough savings to compensate customers for the skyrocketing costs the customers would face by paying Surescripts’s higher “non-loyal” price on their remaining Surescripts transactions. Surescripts’s web of loyalty contracts prevented competitors from attaining the critical mass necessary to be a viable competitor in either routing or eligibility. Those effectively exclusive contracts foreclosed at least 70% of each market, eliminating multiple competitive attempts from other companies, such as Emdeon, that offered lower prices and greater innovation. All of this was done intentionally, as one Surescripts vice president gloated about how Surescripts’s loyalty contracts scheme excluded a competitor, Emdeon: “It[’]s nice when a plan comes together.”

“For the past decade, Surescripts has used a series of anticompetitive contracts throughout the e-prescribing industry to eliminate competition and keep out competitors,” said Bureau of Competition Director Bruce Hoffman in a prepared statement. “Surescripts’s illegal contracts denied customers and, ultimately, patients, the benefits of competition – including lower prices, increased output, thriving innovation, higher quality, and more customer choice. Through this litigation, we hope to eliminate the anticompetitive conduct, open the relevant markets to competition and redress the harm that Surescripts’ conduct has caused.”

The Commission vote to file the complaint was 5-0. The complaint was filed under seal in the U.S. District Court for the District of Columbia on April 17, 2019. A redacted version of the complaint was also filed. The complaint alleges that Surescripts’ anticompetitive acts violate Section 2 of the Sherman Act, and thus constitute an unfair method of competition, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

Surescripts issued a statement noting that it "is very disappointed at the allegations made today by the Federal Trade Commission. For more than 18 years, we have operated fairly in an innovative and dynamic marketplace to increase patient safety, lower costs and ensure quality healthcare."

The company said it was changing its e-prescribing business agreements with pharmacies by removing the loyalty provisions in those contracts. "This step addresses one of the FTC’s chief concerns while reflecting the current dynamics of the healthcare industry and the state of electronic prescribing today," it said.

 Surescripts said it has been cooperating with the FTC throughout its investigation, and "we remain focused on meeting our customers’ needs. We take seriously our role in helping medical professionals better serve patients, who are the ultimate beneficiaries of our nationwide health information network.”

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