When Surescripts settled its case with the Federal Trade Commission (FTC) in July, regulators praised the ruling and the effect it would have limiting Surescripts' monopolistic power.
But Chris Blackley, CEO of Prescryptive Health, said in an interview with Fierce Healthcare that the ruling should’ve done more to invite healthy competition in the market.
The FTC had filed its complaint in April 2019, alleging that the health tech company was excluding competitors from certain e-prescribing markets and enforcing noncompete agreements. It kicked off years of legal contests that culminated in a March 2023 order from the court granting the commission’s motion for partial summary judgment and referring the dispute to mediation.
The settlement mandates Surescripts follow a set of requirements including not entering or enforcing contracts that impose a majority share requirement on routing and eligibility customers, stopping the practice of preventing customers from promoting competitors’ services and banning noncompetes for current and former employees from working for rival e-prescribing service providers.
“As a monopoly, Surescripts offered them [the pharmacies] a discount on their price per transaction if the pharmacy agreed to an exclusive arrangement that they would not use any other electronic prescribing network for receiving prescriptions,” said Blackley. “If the pharmacy ever chose not to use them exclusively, they would have to repay or refund back that accumulated savings of that discount over the course of time. So, you can imagine that over time, the option of changing to another service provider became financially impossible.”
He believes the settlement did well to eliminate this financial penalty, removing a costly barrier to entry. However, he feels the settlement doesn’t address the root problem of Surescripts' monopoly.
“It’s kind of like Airbnb,” he said. “If you have no listings, customers aren’t going to come back to look for listings. You can’t get any listings because you don’t have any customers. If you have no prescribers writing prescriptions on your network, the pharmacies won’t connect to you. If you have no pharmacies connected to your network, the prescribers won’t send prescriptions on your network.”
This chicken-and-egg advantage Surescripts maintains is arguably in place because of the financial barrier Surescripts created years ago, Blackley argued. Even though the financial barrier is now prohibited, the underlying advantage Surescripts holds is still monopolistic in nature and should’ve been addressed in the settlement.
Blackley likens the Surescripts network advantage to Microsoft’s antitrust rulings in the 1990s, a company he served for as senior director in numerous roles from 2004 to 2018. One action Microsoft took at the time to seize market share was by pushing Internet Explorer onto every operating system as well as requiring manufacturers to install the browser on new products through bundling. There were also allegations that Microsoft made it difficult for consumers to install competing software such as the now-defunct Netscape.
“We had to open up our APIs (application programming interfaces), we had to open up the thing to our competitors that we built off of the behavior that was deemed to be anticompetitive,” he explained.
Pharmacy benefit managers have faced intense scrutiny over the years for their role in pushing down the reimbursement rate pharmacies get paid for drugs through health benefit plans, as PBMs then mark up the drug’s cost to the employer. Since 96% of prescriptions are transmitted between the prescriber and the pharmacy, “there’s a whole bunch of pricing information, payment options, therapeutic alternatives and ways to reduce the cost of drugs,” said Blackley.
However, the healthcare consumer is often not informed about the cost of different drugs.
Surescripts delivered nearly 2 billion electronic prescriptions in 2020 alone but has long dominated the handling of patient information in electronic health records for payers and pharmacies. Its ownership structure is unusual—half owned by the National Association of Community Pharmacies and the National Association of Chain Drug Stores and half owned by Express Scripts and CVS Caremark.
“If you're trying to solve this problem, and you own the information that allows you to inform patients of choices, options, price and get the control into the patient's hands, you would think you'd want to do that,” said Blackley. “But the fact is Surescripts is 50% owned by two of the PBMs that are making money on drugs. That conflict of interest is very real and has materially affected the marketplace.”
PBMs have been the subject of various federal hearings in front of congressional members in recent months, but Blackley said many of the elements in the proposed bills just address symptoms of larger problems.
He believes there are three ways to make PBMs operate better: Give employers a statutory right to ownership in their claim level data for what they pay for drugs, give patients right to pricing information and break up the three biggest PBMs, coincidentally owned by the three biggest health carriers. This should keep PBMs accountable for what they bill pharmacies, improve price transparency for customers and give healthcare insurers that don’t own PBMs a more equal footing.
If those changes aren’t enacted into law, he fears that even more consolidation of medical plans will happen, resulting in less competition and higher healthcare costs for consumers.
The PBM space is dominated by three large firms, all of which are vertically integrated with major health plans: CVS Caremark, a sister company to Aetna; Optum Rx, which is owned by UnitedHealth Group; and Express Scripts, which is owned by Cigna.