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Blockchain – Five Ways It’s Coming To Disrupt Healthcare

Like the internet of things, artificial intelligence, and big data before, a new technology has emerged with promises to transform the way U.S. healthcare is managed and delivered – blockchain.

It’s hard to read a headline across almost any industry where blockchain’s potential isn’t already touted. The Economist claims it will disrupt the ‘trust’ business. Others believe it will disrupt Google, Amazon, and the tech giants of our modern age. While these claims may all be true, my interest lies in blockchain’s ability to disrupt and transform the modern U.S. healthcare landscape.

Enter Blockchain

Many of healthcare’s largest issues stem from asymmetric information – i.e., one organization has information that another doesn’t – regarding a patient (clinical data), product (aggregated performance data), or service (formulary coverage). If U.S. healthcare companies are truly patient-centric, there should be a level of cooperation (given modern privacy laws) to orchestrate certain sets of data to improve clinical outcomes.

At its core, blockchain is a distributed ledger of information. Instead of one organization acting as a hub for information, the data is distributed amongst a network of computers that together maintain its integrity and privacy. Importantly, the distributed aspect of this software makes it impossible to alter a transaction once it is registered. It establishes transparent transactions, promotes efficiency in markets, and fosters tighter partnership.

Note: There are hundreds of extremely helpful videos and articles that describe how blockchain works and I would highly recommend checking them out to put the rest of the article in context.

The Bottom Line

Blockchain is an emerging disruptive force in healthcare, and organizations of all size and scope need to take note and plan. The disruptive potential it represents is unprecedented against the backdrop of the current healthcare industry structure, and no one is immune.  At the same time, the opportunities for disintermediation and greater value capture by existing players is possible if the technology is strategically deployed.

Not only is blockchain disruptive as a process, but in healthcare it is a key to unlocking the long-awaited shift from volume to value, as information becomes distributed and available at the individual patient level. The technology stands to connect clinical data with product and company performance in an immutable way and fundamentally modify a variety of information services between healthcare’s different stakeholders. When patient and clinical data are on the blockchain, all companies in the healthcare chain, from big pharma to wholesale distributors will be impacted. Successful internalization and appropriate implementation of the technology will serve to be a key factor for success when the technology becomes mainstream in 5-10 years.

Below are five areas where blockchain stands to be transformative:

#1 Clinical Trials via unified data interpretation

Clinical trials are key to the development of all medications, regardless if the candidate drug is an innovative drug or a generic equivalent. The modern clinical trial faces a series of fundamental data challenges relating to integrity, sharing, privacy, planning, audit, and analysis.

Researchers are starting to analyze the opportunity to create a “decentralized tracking system for data interaction that could occurring [during] clinical trials, with peer-to-peer inclusive network that enables data sharing on the research side and ensures all the needed transparency and care for privacy concerns on the patient community side”. Research is also showing that statistical plans and consent protocols could fit squarely into the remit of blockchain.

Data sharing and joint understanding of analysis is critical for stakeholders to bring a drug from trial to market. Blockchain’s decentralized and permanent nature could create an environment where stakeholders are more tightly aligned on every aspect of the trial – from patient selection to interpretation of clinical data.

#2 Drug Pricing via a new price-value equation

The most critical Pharmacy Benefit Manager (PBM) activity is formulary management – selecting what drugs insured patients can be dispensed. PBMs compare drugs of similar therapeutic composition on a price-value basis. For example, a PBM will decide if its members can buy a $50 drug with a 20% improved clinical profile compared to a $5 generic equivalent. Since PBMs control access, pharmaceutical manufacturers offer rebates to incentivize PBMs to select their product for formulary, especially when the clinical profiles are similar. The result is an arms race to offer the largest rebate, which translates to massively increased list prices.

This example of asymmetric information at the center of the PBM business model could be transformed by blockchain. Blockchain could stand to optimize the price-value equation, by driving transparency in this process and shining light on the products that work best for different situations. If clinical information about products could be entered into a block with a patient’s (situational) information, it could fundamentally impact the value equation and better inform formulary choices. This new degree of individualization could reduce prices in aggregate. Tied with risk sharing agreements, could be a key step to enabling the long-awaited volume to value shift in the entire healthcare sector.

#3 Population Health via a place for joint cooperation

Population health is the application of policy and programs aimed at improving the medical outcomes of whole communities (whether that’s a region, an ethnicity, a group with a certain disease, or any other group). Two key challenges underpin the effectiveness of population health initiatives. The first is that no one stakeholder maintains ownership and accountability for population health measures. Pharmaceutical companies produce medicines, insurance pays, and providers administer. Population health relies on joint cooperation and investment. The second is that the information required to make good decisions is decentralized and not coordinated.

Blockchain stands to fundamentally transform population health initiatives and improve the safety, quality, efficiency, and access of healthcare. Centralizing clinical data, and combining it with emerging big data approaches, will allow executives to prioritize and evaluate population health measures. As a byproduct, it will create a shared space for the development of simplified risk sharing contracts, cooperative planning, and improved reaction time for pandemics. In the process, blockchain could also disintermediate Health Information Exchange Organizations (HIEOs), the federal government’s expensive attempt to create greater information fluidity among healthcare stakeholders.

#4 Automated and Optimized Claims Processing via PBM disintermediation

Claims processing is the back-office process that links a PBM and a prescription dispenser (e.g. pharmacy or hospital). This PBM-owned process is triggered as a product is dispensed to a) confirm that the product is covered by the patient’s insurance, b) verify the price (that the PBM has negotiated on behalf of the insurance company), and c) authenticate the copay required.

The process is relatively simple. The dispenser transfers patient and product information to the PBM, it is compared with a formulary ledger, and is subsequently approved or denied. Each time that the process is activated the PBM charges a fee per-member, per-month (called a PMPM). A recent analysis presented at the Healthcare Financial Management Association revealed about $165B in hospital claims last year were submitted, denied, appealed, and then recovered. That cost the system about $9B in administrative PMPM fees, which are ultimately passed on by the hospitals to customers.

Blockchain has the potential to become an insurance-provided substitute for the service provided by PBMs – distributed information regarding patient coverage, clinical profiles of different drugs, and situational information. In terms of claims processing, the PBM is disintermediated, and the PMPM cost is eliminated.

#5 EMRs via data orchestration and instant transfer

A final area of interest is in Electronic Medical Records (EMRs) – the digital version of the sprawling filing cabinets in a doctor’s office. The purpose of EMRs is to provide individual patient decision support to providers in a way that is easily shared between stakeholders. If you were to suddenly go to the emergency room while traveling to another state, you want those doctors to have your full medical history immediately, don’t you?

Blockchain again stands to change everything when it comes to clinical data sharing. Distributed, individual-level information can be added to a central repository from dozens of separate sources. Imagine the real-time combination of basic medical information, genetic studies, allergies, problem list, medical imaging, pathology reports, and digital health data from wearables.

The data interoperability alone among stakeholders and the resulting improved clinical outcomes will drive billions in benefit. Providers, insurers, and other healthcare agents can abandon the expensive implementation and maintenance of localized EMRs, as continuous access to patient records can be maintained by a blockchain. As Humana CEO Bruce Broussard has noted it will “force the competition to truly work together for the patient.”


If the healthcare industry wants to realize its promise of patient-centricity, it should embrace the prospect of blockchain. By its very nature, the technology can become a key step in the industry transformation from volume to value. Decentralized information and synchronicity brings opportunity for improved outcomes and attention at the individual level.

While progress in the application of blockchain to processes that are currently owned by one stakeholder may be slow, they are necessary steps to make the system more effective at administering a new level of patient care. While full scale commercialization of the technology will take years, healthcare organizations must incorporate elements of this disruptive technology in their strategies, operations, and systems. After all, success in implementing and benefit from disruptive technologies does not come overnight.

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Tags: Supply Chain Technology