Dive Brief:

• Surescripts, a company formed in 2008 that quickly came to dominate the digital prescription market, has agreed to settlement terms with the Federal Trade Commission to stop practices that are alleged to have blocked competitors from diminishing its 95% market share. The agreement is pending approval in federal district court.
• “The FTC will not hesitate to take action in enforcing the antitrust laws to protect health care consumers,” said Holly Vedova, director of the FTC’s Bureau of Competition. “The proposed order is a victory in creating a fair and competitive playing field in the e-prescription drug market.”
• “We’re pleased that this agreement brings an end to the FTC’s litigation, formalizing changes to our business practices that we started several years ago, including the elimination of loyalty provisions in contracts,” Frank Harvey, Surescripts CEO, said in a statement emailed to Legal Dive. “We are committed to continuous innovation and remain focused on serving our customers who make up the Surescripts Network Alliance and ultimately the patients they serve.”

Dive Insight:

The FTC sued the company in 2019 under anti-monopolization provisions in the Sherman Act. It was granted partial summary judgment earlier this year and directed to work out an agreement with the company with a mediator.

The deal that created Surescripts in 2008 was structured as a cashless merger between RxHub and SureScripts Systems and avoided Hart-Scott-Rodino antitrust review even though the combined company immediately had a 95% share of digital prescriptions just as the market was exploding in growth.

Starting that year, Congress passed laws encouraging the growth of digital prescriptions on the grounds they were more efficient and less error prone than manual prescriptions, among other things.  

To keep other companies from gaining a market foothold, the FTC said in its complaint, the company created a loyalty program in which customers entered into a long-term contract to get preferred pricing if they used the company’s network exclusively. Customers that split business with other companies, in a practice known as multihoming, faced steep fees under the contract terms.

“If [a customer] decides to multihome and use Surescripts for less than 100% of its transactions, Surescripts terminates incentive fees,” the FTC said in its complaint. “In other words, Surescripts raises the [customer’s] price by reducing … incentive fees to zero.”

The FTC named two companies — Emdeon and RelayHealth — that tried to enter the market offering lower fees and differentiated services, but the restriction on multihoming made it difficult for them to pull away customers for even a small portion of their transactions.  

“When Allscripts, a large … customer of Surescripts, attempted to enter into a non-exclusive agreement with Surescripts in 2014 so [it] could use Emdeon, Surescripts launched a series of threats — what senior Surescripts executives called their ‘nuclear missiles,’” the FTC said. “These threats were intended to secure Allscripts’s continued exclusive use of Surescripts and quash the threat from Emdeon.”

In the settlement, Surescripts would be prohibited from entering into its loyalty agreements or implementing other types of problematic agreements and it wouldn’t be allowed to threaten customers who don’t want to do business with it exclusively, among other things. 

The restrictions apply to other services the company provides in addition to its core digital prescription transactions.  

The agreement also restricts the company from using noncompetes to prevent employees from working for competitors.

“The proposed order would eliminate the anticompetitive restraints Surescripts has imposed on its customers since 2010 and would create conditions that allow competition to flourish for the benefit of anyone who gets a prescription filled at a pharmacy,” Vedova said.