The Federal Trade Commission recently filed a proposed order that would prohibit health information technology company Surescripts from engaging in exclusionary conduct and executing or enforcing non-compete agreements with current and former employees. The FTC’s proposed order, filed in federal court, would resolve charges that Surescripts used anticompetitive tactics to illegally monopolize two e-prescription drug markets and would provide immediate relief to consumers.
The settlement follows a favorable federal court ruling that found that Surescripts possesses monopoly power in e-prescribing services with a 95 percent “supershare.” In adopting the Commission’s position, the opinion made important clarifications of the law, including on the establishment of monopoly power through market share and barriers to entry.
“The FTC will not hesitate to take action in enforcing the antitrust laws to protect health care consumers,” said FTC Bureau of Competition Director Holly Vedova. “The proposed order is a victory in creating a fair and competitive playing field in the e-prescription drug market. In large part because of Surescripts’ conduct, virtually everyone today who has a prescription filled electronically does so via the Surescripts networks. 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.”
In April 2019, the FTC sued Surescripts, alleging that the company employed illegal vertical and horizontal restraints in order to maintain its monopolies over two electronic prescribing, or “e-prescribing,” markets: routing and eligibility. The market for routing e-prescriptions uses technology that enables health care providers to send electronic prescriptions directly to pharmacies; whereas the market for eligibility enables health care providers to electronically determine patients’ eligibility for prescription coverage through access to insurance coverage and benefits information, usually through a pharmacy benefit manager.
In its suit, the FTC alleged that Surescripts intentionally set out to keep e-prescription routing and eligibility customers on both sides of each market from using competing platforms (a practice known as multihoming), by using anticompetitive exclusivity agreements, threats, and other exclusionary tactics to achieve its goal.
The Court denied Surescripts’ motion to dismiss in January 2020, and in March 2022 Surescripts and the FTC filed motions for summary judgement. In March 2023, the Court granted the FTC’s motion for partial summary judgment and encouraged the Commission and Surescripts to engage in settlement discussions. The district court then referred the case to mediation.
The FTC’s proposed order has a 20-year term and would prohibit Surescripts from engaging in the types of exclusionary conduct alleged in the FTC’s case. The proposed order also goes beyond routing and eligibility, extending the same prohibitions to Surescripts’ medication history services and the company’s on-demand formulary services, which uses data that identifies the patient’s group or plan level prescription benefit information for a specific or alternative drug.
Specifically, the proposed order would:
- Prohibit Surescripts from entering into, maintaining, or enforcing contracts that impose a majority share requirement (e.g., exclusivity or loyalty agreements) on its routing and eligibility customers, including through all-unit discounting.
- Prohibit Surescripts from implementing other problematic provisions it has used in the past to prevent or limit the ability of customers to do business with Surescripts’ competitors.
- Bar Surescripts from preventing customers from promoting competitors’ services; preventing and limiting customers’ ability to communicate with competitors;and requiring that customers provide Surescripts a right of first refusal.
- Bar Surescripts from entering into, maintaining, or enforcing agreements that prevent rivals from competing with Surescripts in routing and eligibility.
- Prohibit Surescripts from discriminating against or threatening customers who refuse to agree to a majority share requirement.
- Extend the same relief to Surescripts’ medication history and on-demand formulary services.
- Bar Surescripts from entering into or enforcing any employee non-compete agreement with current and former employees that would prevent those employees from working for a competing e-prescribing service provider.
The Commission vote authorizing staff to file the proposed order for permanent injunction and equitable relief in the U.S. District Court for the District of Columbia was 3-0.