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From Antitrust Law Daily, April 24, 2019

Health information technology company Surescripts charged by FTC with abusing monopoly

By Jeffrey May, J.D.

FTC alleges that the provider of e-prescribing solutions has used exclusive long-term contracts with customers and other tactics to suppress competition from rivals.

Surescripts, LLC has engaged in a long-running anticompetitive scheme to maintain its monopolies over two separate, complementary markets: electronic prescription routing and eligibility, which are often collectively referred to as "e-prescribing," according to a federal district court complaint announced by the agency today. The complaint, which was filed in the federal district court in Washington, D.C. on April 17, seeks injunctive relief to bar the challenged practices and other equitable relief, including monetary relief, to prevent unfair methods of competition (FTC V. Surescripts, LLC, Case 1:19-cv-01080-JDB).

The FTC alleges that Surescripts maintains at least a 95 percent share (by transaction volume) in each of the two alleged relevant markets: routing and eligibility. As explained in the FTC's complaint, routing is the transmission of prescription and prescription-related information from a prescriber (via the prescriber’s electronic health record (EHR) system) to a pharmacy. Eligibility is the transmission of a patient’s formulary and benefit information from a payer (usually the patient’s pharmacy benefit manager or PBM) to a prescriber’s EHR.

Surescripts has allegedly taken steps to protect and maintain its monopolies and to prevent meaningful competition in the markets for routing or eligibility. Surescripts changed its pricing policies to require long-term exclusivity from nearly all of its routing and eligibility customers, according to the agency. Its pricing purportedly ensured that customers would pay a higher price on all of Surescripts’s transactions unless they were "loyal" to Surescripts, i.e., used Surescripts exclusively. The loyalty provisions in contracts with customers on both sides of the routing and eligibility markets conditioned discounts or payments on actual or de facto exclusivity.

In addition, the FTC contended that Surescripts used threats to prevent Allscripts, a large EHR customer of Surescripts, from also working with Emdeon (n/k/a eRx Network), which apparently offered lower prices and greater innovation. Emdeon attempted unsuccessfully to expand its presence in the routing and eligibility markets. The complaint quotes a Surescripts vice president gloating about how Surescripts’s loyalty contracts scheme excluded competitor Emdeon: "It[’]s nice when a plan comes together."

The FTC also outlined alleged efforts to address competitive threats raised by RelayHealth, a subsidiary of McKesson Corporation, in routing. In order to eliminate this competitive risk, Surescripts entered into an agreement that prohibited RelayHealth from competing in the routing market for six years, it was alleged.

"Chicken-and-egg" problem/two-sided networks. The complaint also discussed the so-called "chicken-and-egg" problem that exists in the industry. According to the agency, providing routing requires building a two-sided network (or platform) linking EHRs to pharmacies and providing eligibility requires building a two-sided network (or platform) linking EHRs to PBMs. For many two-sided networks, customers on one side of the network will not join the network unless they are confident that they will be able to access enough customers on the other side and thereby derive enough value from using the network. Neither side will join unless they believe the other side will. This gives rise to what economists refer to as the "chicken-and-egg problem," the FTC explained. This chicken-and-egg problem serves as a barrier to entry in each of the markets for routing and eligibility. According to the FTC, Superscripts’s tactics significantly elevated the critical mass a Surescripts competitor would need to become a viable network in either routing or eligibility.

FTC Bureau of Competition Director's remarks. "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 FTC 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 case is No. 1:19-cv-01080-JDB.

Attorneys: Bradley Albert for the FTC.

Companies: Allscripts Healthcare Solutions, Inc.; Surescripts, LLC; McKesson Corp.

MainStory: TopStory Antitrust FederalTradeCommissionNews

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