FTC sues Surescripts, charges company with illegally monopolizing e-prescribing market

Doctor computer keyboard
The Federal Trade Commission is suing health IT company Surescripts, accusing the company of employing illegal vertical and horizontal restraints to maintain its monopolies over the e-prescribing market. (Getty/jacoblund)

In its latest move to rein in what it views as anticompetitive tactics in the healthcare industry, the Federal Trade Commission filed a lawsuit against Surescripts, charging the health information company with illegally monopolizing the e-prescribing market.

The FTC alleges that the company employed "illegal vertical and horizontal restraints in order to maintain its monopolies over two e-prescribing markets: routing and eligibility."

E-prescribing is growing rapidly as healthcare providers and payers are using the technology to process patient prescriptions in a more streamlined and cost-effective way compared to paper prescriptions. As a dominant player in the market, Surescripts has maintained at least a 95% share over many years, according to the FTC's complaint (PDF), filed in federal court April 17 but released to the public on Wednesday. 

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And the FTC accuses the company of maintaining this dominant position through "anticompetitive tactics" that "thwarted competitors from gaining share in the routing and eligibility markets."

In filing the lawsuit, the FTC said it is seeking to undo and prevent Surescripts’ unfair methods of competition, restore competition and provide monetary redress to consumers.

“For the past decade, Surescripts has used a series of anticompetitive contracts throughout the e-prescribing industry to eliminate competition and keep out competitors,” Bureau of Competition Director Bruce Hoffman said in a 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’s conduct has caused.”

RELATED: HIMSS19 Q&A: Surescripts CEO Tom Skelton on efforts to take on high prescription drug prices, interoperability

In a statement sent to FierceHealthcare and posted to the company's website, Surescripts chief executive Tom Skelton said the company is "very disappointed at the allegations."

"We are making an important change to our 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," Skelton said in the statement.

Surescripts processes more than 5 million e-prescriptions a day, according to Skelton. Since 2009, Surescripts has reduced the price of electronic prescribing by 70%, he said, and has driven significant improvements in the accuracy of its electronic prescriptions.

Skelton said Surescripts has been cooperating with the FTC throughout its investigation. "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," he said.

According to the complaint, Surescripts monopolized two separate markets for e-prescription services: the market for routing e-prescriptions, which uses technology that enables healthcare providers to send electronic prescriptions directly to pharmacies, and the market for determining eligibility. That's a separate service that enables healthcare 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 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 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.

"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," the FTC stated in the lawsuit.

According to the FTC complaint, Surescripts also engaged in a long-running campaign of threats and other non-merits-based competition to ensure that no other competitor could get a toehold in either market.

"As one example, when Allscripts, a large EHR customer of Surescripts, attempted to enter into a non-exclusive agreement with Surescripts in 2014 so Allscripts could use Emdeon, Surescripts launched a series of threats—what senior Surescripts executives called their 'nuclear missiles.'  These threats were intended to secure Allscripts’s continued exclusive use of Surescriptsand quash the threat from Emdeon," the FTC alleges in the lawsuit. Emdeon is an e-prescribing network that is now a part of Change Healthcare.

As a result of these tactics, Surescripts succeeded in maintaining its monopolies in both the routing and eligibility markets, despite what the FTC describes as "explosive growth" of routing and eligibility transactions. From 2008 to 2017, the number of routing transactions grew from 70 million to more than 1.7 billion, the FTC says.

The complaint against Surescripts is the latest example of the FTC's moves to rein in the healthcare industry.

In February, the FTC reached a global settlement with the pharmaceutical manufacturer Teva Pharmaceutical Industries, barring the company from engaging in reverse-payment patent settlement agreements that block consumers’ access to lower-priced generic drugs. Last month, the FTC barred another pharmaceutical company, Impax Laboratories, from entering into reverse-payment patent settlements after concluding Impax used this tactic to block consumers’ access to a generic version of the extended-release opioid pain reliever Opana ER.

Last year, a federal court ordered another pharmaceutical company, AbbVie, to pay $448 million to consumers who overpaid for testosterone replacement drug Androgel because of AbbVie’s illegal tactics to maintain its monopoly over the drug.

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