Surescripts ups its battle with Amazon PillPack: 'We are turning the matter over to the FBI'

Key Points
  • Amazon-owned PillPack found a way to access its patients' prescription information via a third-party called ReMy Health.
  • Surescripts, which contracts with ReMy, said this represents "unauthorized access" to its network. Surescripts is the largest e-prescribing company in the United States.
  • Amazon threatened to sue Surescripts. In turn, Surescripts claimed fraud and said it's turning the matter over to the FBI.
Kyle Walsh | CNBC

Surescripts is upping its battle with Amazon-owned PillPack, accusing a third company of providing PillPack with patient prescription information "fraudulently," and turning the matter over to the FBI. It's the latest in a series of moves that could make it harder for Amazon to enter the prescription drug market.

Americans are spending an excessive amount on prescription drugs, the cost of which likely topped $330 billion in 2018. Amazon made its first steps into the space in 2018, when it acquired online pharmacy start-up called PillPack.

A year later, Amazon is engaged in a tense battle with one of the largest incumbents in the space. Surescripts is owned by a coalition of potential PillPack competitors, including CVS and ExpressScripts, and manages about 80% of all U.S. prescriptions. It is such a dominant force that in April, the Federal Trade Commission sued the company, alleging "illegal monopolization of e-prescription markets."

The battle is the latest in a string of disputes between Amazon and the established pharmacy companies since the PillPack deal — a deal that sent shares of pharmacy owners and pharmacy benefit managers tumbling. Earlier this year, CVS filed a lawsuit against a former employee after he told the company he would be taking a job at PillPack. A judge blocked the employee from working for PillPack for 18 months.

The battle centers on prescription information

The dispute centers on how PillPack gets information about customers' prescriptions, so it can provide them automatically when users sign up, rather than making them enter each prescription by hand.

Until recently, PillPack contracted with a company called ReMy Health, which in turn gets information about customer prescriptions from Surescripts.

In July, CNBC reported that ReMy was cutting PillPack off from this data. Amazon suspected Surescripts was behind the move, and sent a cease-and-desist letter to the company, according to a person familiar with the deliberations who asked not to be named discussing private business matters.

Now Surescripts, in a statement issued on Monday, says ReMy Health gave "fraudulent information" to Surescripts to get the prescription data, in violation of the companies' contracts.

Specifically, Surescripts says that ReMy claimed to be getting the prescription information for "providers caring for patients in hospitals," when in fact it was providing it to PillPack. Surescripts also claims that PillPack was using National Provider Identifiers (NPIs) that belonged to health-care providers who had never seen the patients. PillPack, in response, noted all requests for patient information are made with "explicit consent of our customers and all information we provide is accurate."

In a statement, Surescripts added: "We are still investigating the full scope of these improper activities but today are taking immediate steps to protect the data our partners entrusted to us and the privacy of our patients they serve. Specifically, we have suspended ReMy Health from our network, are terminating their contract, and are turning the matter over to the FBI for further investigation."

Surescripts told CNBC in an interview that its counsel has been in touch with Amazon's lawyers, but declined to comment further.

"It's not lost on us that PillPack is owned by one of the largest industrial organizations in the country but our focus is not on what they want. It's on the trust associated with the network and the privacy of patients," said CEO Tom Skelton in an interview with CNBC.

A PillPack spokesperson said in response that, as a pharmacy, it needs to check the medication histories of patients in case there are issues related to drug interractions, and that customers authorize them to analyze their personal data.

"Given that Surescripts is, to our knowledge, the sole clearinghouse for medication history in the United States, the core question is whether Surescripts will allow customers to share their medication history with pharmacies," the spokesperson said. "And if not, why not?"

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