FTC Slams Surescripts' E-Prescribing Networks, Says 'Web Of Loyalty Contracts' Blocks Competition

Surescripts maintained a monopoly on electronic prescription routing and eligibility markets through exclusive contracts with pharmacies and PBMs, complaint alleges.

The US Federal Trade Commission alleges that Surescripts LLC implemented a "web of exclusive contracts" with pharmacies and pharmacy benefit managers to eliminate competition in two electronic prescription markets.

In an April 17 complaint, FTC claims the company monopolized the market for routing electronic prescriptions, which uses technology to allow health care providers to send e-prescriptions directly to pharmacies, and the market for determining patients' eligibility for prescription coverage through access to insurance coverage and benefits information.

Routing requires building a two-sided network linking electronic health records to pharmacies, and determining eligibility requires building a two-sided network linking EHRs to PBMs. The complaint notes that the value to participants on one side increases when there are more participants on the other side. And customers on one side of the network will not join the network unless they are confident that they will be able to access enough customers on the other side, which the complaint says economists refer to as the "chicken-and-egg problem."

The complaint says that when a new network starts, it can achieve critical mass either by getting customers who have not signed onto any platform or getting customers from an existing platform. It says customers of an existing platform face less cost and risk when they can use both the current and new platform. The use of more than on platform simultaneously is called "multihoming."

FTC alleges that Surescripts used loyalty and exclusivity contracts to increase the costs of multihoming and thwart competitors. As a result, the agency says Surescripts was able to maintain at least a 95% share in each market over many years.

Surescripts was established in May 2008 through a cashless merger of RxHub LLC and SureScripts Systems Inc. Surescripts Systems was formed in 2001 by the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) to facilitate the exchange of prescriptions and other information. RxHub was established the same year by three major PBMs. (Also see "PBMs, Retail Pharmacies Vow To Cooperate On Electronic Prescribing" - Pink Sheet, 22 Jul, 2004.)

Surescripts is currently owned by CVS Health Corp., Express Scripts Holding Co., NACDS and NCPA.

Higher Fees For Non-Exclusive Customers

The FTC said the commission voted 5-0 to file the complaint. It seeks to permanently enjoin Surescripts from engaging in similar conduct in the future, as well as equitable monetary relief.

The complaint notes that Surescripts charges pharmacies (either directly or indirectly via a reseller or other third-party intermediary, such as a pharmacy technology vendor) a fee for each routing transaction and charges PBMs a fee for each eligibility transaction. The complaint redacts the amount Surescripts received in routing and eligibility fees in 2016. It also redacts the incentive payments Surescripts paid prescriber EHR systems; Surescripts pays a fee for each routing and eligibility transaction, but only if the EHR system uses Surescripts exclusively.

FTC alleges that the company requires its customers to pay a higher price on all of Surescripts' transactions unless they use Surescripts exclusively.

The complaint also claims that Surescripts entered into an agreement with McKesson Corp. subsidiary RelayHealth Corp. that prohibited RelayHealth from competing in the routing market for six years. It says the non-compete provision is no longer in the agreement, but strict contract provisions continue to prevent RelayHealth from competing against Surescripts in routing.

The suit cites the growth in the e-prescribing markets. It says that from 2008 to 2016, the number of routing and eligibility transactions grew over 23-fold, from 147 million (the 2016 figure is redacted), and the percentage of US physicians e-prescribing grew to nearly 70%. In 2017, 77% of all prescriptions were delivered electronically, the complaint says.