Surescripts: The FTC Monopolization Lawsuit Against the E-Prescribing Network That Controls 95 Percent of U.S. Electronic Prescriptions

The Federal Trade Commission filed a monopolization lawsuit against Surescripts LLC — the company that routes approximately 95 percent of all electronic prescriptions in the United States and operates the dominant network for real-time pharmacy benefit eligibility checks — alleging the company had unlawfully maintained its monopoly positions in both markets through exclusivity contracts and loyalty penalty structures that prevented pharmacies, pharmacy benefit managers, and electronic health record vendors from working with competing e-prescribing networks even when those competitors offered better pricing or services.DOCUMENTED

The Surescripts case represented an important application of antitrust enforcement to healthcare information technology — a sector where network effects, data concentration, and switching costs create natural monopoly tendencies that can be reinforced or exploited through exclusionary contractual practices. The FTC's lawsuit challenged not just Surescripts' market position, which was the result of legitimate network growth, but the practices the company used to maintain that position against competitive challenges.

How E-Prescribing Networks Work

Electronic prescribing — the direct transmission of prescriptions from physician prescribing systems to pharmacies without paper — has become the dominant mode of prescription generation in the United States, with the large majority of prescriptions now generated electronically. E-prescribing requires an intermediary network that routes prescription messages from the EHR or prescribing system in the physician's office to the pharmacy's dispensing system, translating between different technical formats and ensuring the message reaches the correct destination. Surescripts built and grew the dominant routing network by achieving connectivity with nearly all pharmacies and prescribers — a network effect that made Surescripts the path of least resistance for EHR vendors and physician practices seeking to send electronic prescriptions: if all pharmacies were connected to Surescripts, using Surescripts meant the prescription could reach any pharmacy, while using a smaller network meant the prescription might not be routable to all destinations.REVIEWED

The eligibility network is a distinct service: real-time queries from prescribers or pharmacies to pharmacy benefit managers asking what medications are covered under a patient's specific insurance plan, at what tier, and what the patient's expected out-of-pocket cost would be. This information is valuable at the point of prescribing because it allows physicians to select medications their patients can afford and that are covered by the patient's insurance — reducing prescription abandonment when patients arrive at pharmacies and discover that their prescribed medication is not covered or is prohibitively expensive. Surescripts also dominated this eligibility network through connectivity with most major pharmacy benefit managers.DOCUMENTED

The Exclusionary Conduct

The FTC's complaint documented two primary categories of exclusionary conduct through which Surescripts had maintained its monopoly positions. In the routing market, Surescripts imposed exclusivity requirements on pharmacy benefit managers and pharmacies — contractual provisions that prevented those entities from using competing routing networks or, in some cases, from even connecting to competing networks — with financial penalties triggered when entities worked with competing routing providers. These penalty structures meant that a PBM or pharmacy that connected to a competing routing network would pay Surescripts more for its Surescripts connectivity, effectively making competition economically untenable even for firms that preferred a competing network on price or quality grounds.REVIEWED

In the eligibility market, similar loyalty structures gave Surescripts discounts or rebates to pharmacy benefit managers that steered all or a dominant share of their eligibility query traffic to Surescripts, with those discounts reducing as the PBM's Surescripts share declined — creating financial disincentives for PBMs to support competing eligibility networks even when competitors offered better pricing or technical capabilities. The FTC's complaint argued that these arrangements were not the result of Surescripts winning business on the merits of its price and quality, but of contractual structures specifically designed to make switching to or supporting competitors financially prohibitive regardless of the competitor's relative merit.

A network that wins business by connecting more participants is building a legitimate marketplace. A network that keeps business by penalizing participants who talk to competitors is building a cage — and antitrust law calls that a monopoly maintained by exclusion.

The Competitive Harm

The FTC's complaint identified several categories of harm to competition and consumers from Surescripts' exclusionary practices. Competing e-prescribing routing and eligibility networks that had entered the market with lower pricing or better technical capabilities were unable to scale because the exclusivity arrangements prevented them from reaching the participation levels needed to be viable alternatives — a chicken-and-egg problem where each potential participant who wanted to switch was deterred by the financial penalties the Surescripts contracts imposed. The absence of effective competition allowed Surescripts to maintain pricing levels that could not have survived if pharmacies, PBMs, and EHR vendors had been free to route business to lower-cost competitors. This pricing effect ultimately flowed through the healthcare system to patients, payers, and employers who absorbed the cost of an uncontested monopoly in infrastructure that processes virtually every electronic prescription in the country.DOCUMENTED

The ownership structure of Surescripts — jointly owned by CVS Health and Express Scripts, the two largest pharmacy benefit managers — added an additional dimension to the FTC's concern: competing eligibility networks were attempting to gain business from the same PBMs that owned Surescripts and that had financial interests in Surescripts' continued dominance. The integration of network ownership and customer relationship in the hands of the same entities created structural competitive barriers beyond the contractual exclusivity provisions.

Settlement and Market Reform

The FTC's lawsuit against Surescripts was resolved through a consent order that prohibited Surescripts from enforcing the exclusivity provisions and loyalty penalty structures identified in the complaint, and required the company to allow pharmacies, PBMs, and EHR vendors to work with competing e-prescribing networks without financial penalty. The order also imposed monitoring and reporting requirements to ensure that Surescripts' contracting practices remained compliant with the antitrust standards the consent order established. For the e-prescribing market, the settlement opened the door to competitive entry by removing the contractual barriers that had made it economically impractical for participants to support competing networks — though whether effective competition actually developed would depend on whether new entrants could achieve the network connectivity needed to be viable alternatives at scale.

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