A little over a year after the merger of the two largest electronic prescribing exchanges, SureScripts and RxHub, the merged for-profit company is in line to benefit from the federal government’s financial push for physicians to e-prescribe.
Enormous push for e-Rx
Stimulus act gives vendors extra motivation to adopt
The privately held company, which now goes by Surescripts, already is growing quickly as a result of recent uptick in e-prescribing and from the economies of scale that resulted from the merger of the two competitors.
“E-prescribing volume has just skyrocketed, and we’ve handled that without adding a lot of new people,” said Harry Totonis, Surescripts’ CEO. “We’re processing twice as many transactions with relatively the same number of people. The efficiency we get is benefiting everyone.” Surescripts declined to provide financial data on the company.
The merger pooled the resources of two companies whose sponsors are either directly or indirectly still battling for market share in prescription drug sales. Both SureScripts and RxHub were formed in the aftermath of the 2000 bursting of the dot-com bubble that wiped out several e-prescribing startups.
In February 2001, the then three largest pharmacy benefit manager companies, AdvancePCS (later acquired by CareMark Rx, now CVS Caremark), Express Scripts and Medco Health Solutions formed RxHub to serve as their e-prescribing gateway.
With their members’ business interests thus threatened, two retail pharmacy trade groups, the National Community Pharmacists Association and the National Association of Chain Drug Stores in August 2001 launched SureScript Systems, doing business as SureScripts, a developer of its own two-way communications network between physicians and retail pharmacies.
The two rival exchanges competed for seven years, with neither gaining dominance, and each carrying on campaigns of network building, standards harmonization, systems development, and lobbying, marketing and public relations work.
Overall adoption of e-prescribing remained tepid. By 2006, according to Surescripts data, just 16,000 office-based prescribers were using e-Rx systems, a tiny fraction of the 611,000 physicians and other office-based clinicians that the company estimates have prescription-writing authority in the U.S.
On June 30, 2008, the two companies merged in what was described as a
The timing was good. Two weeks later, Congress overrode President George W. Bush’s veto and passed the Medicare Improvements for Patients and Providers Act. The act aimed to induce physicians to e-prescribe with a mix of financial incentives and penalties. Participating physicians can see a 2% increase in Medicare Part B charges in 2009 and 2010, with the bonus payment shrinking to a 0.5% increase by 2013. The law also calls for a 1% deduction in Part B charges, beginning in 2012 and increasing to 2% in 2014, for those failing to e-prescribe.
With e-prescribing embedded in the incentives that are part of the American Recovery and Reinvestment Act of 2009 that became law in February, e-prescribing is set to further increase. It’s estimated that $34 billion in healthcare information technology subsidy payments begin flowing in 2011, while its penalties for not adopting IT start in 2015. The stimulus law specifies e-prescribing by office-based physicians as one of the criteria for “meaningful use” of an electronic health record that physicians must meet to qualify for IT subsidy payments of up to $48,400 under Medicare and as high as $63,750 under Medicaid (June 22, p. 6).
Promoters of e-prescribing figure that the stimulus law will dramatically accelerate physician adoption of such systems. A March study funded by the Pharmaceutical Care Management Association, a trade group for a dozen of the largest PBMs, projects that 75% of doctors will be writing and sending prescriptions electronically by 2014.
Even without that money flowing yet, the company has become large enough in e-prescribing that some are starting to wonder if it needs more oversight, while other companies are eyeing its market.
Surescripts—though it might not yet hold an actual monopoly in the market—“acts as a monopoly and can set the rules for the entire industry,” said Justin Barnes, a vice president of Carrollton, Ga.-based Greenway Medical Technologies and chairman of the Electronic Health Record Vendors Association, a trade group for EHR vendors that is an arm of the Healthcare Information and Management Systems Society. And, since Surescripts is privately held, “Who has oversight in this arena?” he asked.
Vendors, Barnes said, while not hostile to Surescripts having such predominance, are “not completely comfortable” with the situation either.
“It’s kind of pushed on us,” Barnes said. “When you have no competition, they may not want to listen to people,” he said.
J.P. Little, president of the Minnesota division of Surescripts and the acting CEO of RxHub at the time of the merger, denies this, saying its “road map” of what it requires and where it is going is publicly available, adding that the company has semiannual meetings of its constituents and “every year the meetings get bigger and bigger. People know exactly what we’ve got going on,” he said.
Physician and e-prescriber Mario Motta, a Salem, Mass.-based cardiologist and president of the Massachusetts Medical Society, uses the EHR from Partners HealthCare System, Boston, which has an e-prescribing tool “baked in.” “It would not make any sense to do an electronic medical record without it.” Motta said he isn’t losing sleep over Surescripts’ dominance just yet. “My attitude is, competition is good,” Motta said. “The more players in the system, the better, but we’ve not heard any specific complaints about this issue.”
Motta also said that Surescripts may not enjoy its cozy market position for very much longer. “I think with $34 billion on the table, the competition is going to heat up,” he said.
In fact, it already has. Two of the few remaining Surescripts competitors became one earlier this month as claims clearinghouse Emdeon, Nashville, announced it had acquired pharmacy transactions services provider eRx Network, Fort Worth, Texas. Both firms are privately held and both brought their own e-prescribing capabilities to the deal.
In a July 2 news release announcing the acquisition, Emdeon CEO George Lazenby said that the combined companies “will enjoy a significant presence in e-prescribing, one of the fastest growing sectors in healthcare transaction processing.” In a June 16 Securities and Exchange Commission filing—Emdeon has pending an initial public offering of common stock—the company claimed nearly $854 million in revenue. It said it processed “approximately 1 million electronic prescriptions per month.” (In comparison, Surescripts reports it routed
68 million prescriptions electronically in 2008.)
Mark Lyle, the former CEO of eRx Network who is now senior vice president of the pharmacy services group for Emdeon, said that he believes the combined companies now provide the e-prescribing connectivity to 10 EHR vendors and stand-alone e-prescribing software systems used by high-prescribing, office-based physicians. “We believe that right now our volume is roughly 20% of the e-prescription transactions, Lyle said. That gives you an idea why we are mildly confident we have a shot at doing this.”
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