The Federal Trade Commission (FTC) has filed suit against Surescripts, LLC, (Surescripts) an Arlington, Virginia based information technology company that supports e-prescription, the electronic transmission of prescriptions between health care organizations and pharmacies, as well as general health information exchange of medical records, for unfair competition. CVS Health, Express Scripts, the National Association of Chain Drug Stores and the National Community Pharmacists Association currently own Surescripts. The FTC is seeking a permanent injunction and monetary penalties against the company.
FTC alleges that the company utilized “illegal vertical and horizontal restraints” to maintain its monopoly over two significant pieces of the “e-prescribing” market – routing and eligibility. The routing piece of e-prescribing enables health care providers to utilize technology to send electronic prescriptions directly to pharmacies. One the eligibility side, the company provides a separate service that works with PBMs and insurers to determine a patient’s eligibility for prescription coverage. Surescripts currently maintains a 95%-plus share of both the routing and eligibility markets in a business that has seen routing transactions grow from 70 million in 2008 to more than 1.7 billion by 2017.
The lengthy and detailed FTC complaint alleges that Surescripts intentionally utilized complex exclusivity and loyalty agreements, threats, and other exclusionary tactics to keep other potential e-prescription companies out of the market. The agreements specifically penalized attempts by companies on either side of the routing or eligibility market to “multihome” the e-prescription process, i.e. utilize companies or platforms other than Surescripts, by imposing increased per-transaction pricing on “non-loyal” customers.
“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. “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.”
The complaint against Surescripts follows several other recent actions by the FTC to tackle anti-competitive behavior in the healthcare sector. Earlier this year, the FTC settled with Teva Pharmaceutical Industries over its practice of utilizing reverse-payment patent settlement agreements that served to block consumers’ access to lower-priced generic drugs. In addition, the FTC recently barred Impax Laboratories (another pharmaceutical company) from entering into similar reverse-payment patent settlements that blocked consumers’ access to a generic version of its extended-release opioid pain reliever Opana ER.
Surescripts CEO Tom Skelton issued a statement expressing disappointment in FTC’s action and indicating that the company is “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.”
For questions regarding the subject matter of this alert, please contact any of the FisherBroyles Pharmacy and Health Care Law team.