The fact that affordable healthcare schemes in the United States carry the names of Presidents is resounding testimony to the importance of the industry and business. However, it cannot be denied that the healthcare industry is tarnished with bloated cost, bureaucracy, and middlemen. Given these properties, healthcare is a segment that is perfectly set for disruption.
The landscape of healthcare is expected to drastically change in the near future. Amazon has been considering entering the prescription drug market. This might, on the surface, seem like a drastic blow for traditional retail pharmacies. This would also be a threat to Pharmacy Benefit Managers (PBMs).
To counter this move of Amazon, CVS and Aetna are diligently preparing to merge. This is a vertical integration which will provide tremendous marketing power to the newly created company.
CVS, as it is quite well known, is a pharmaceutical or rather healthcare giant. CVS has its subsidiaries spread across the retail chain of pharmaceuticals, retail medical clinics, prescription benefit management, drug stores, rare disease care management and everything else you can possibly imagine in the healthcare sector. The Minute Clinic, which is the retail medical clinic chain owned by CVS is so omnipresent that 50% of the entire population of the United States lives within 10 miles of at least one Minute Clinic.
Aetna, on the other hand, is massive healthcare insurance or health payer. Aetna’s network includes more than 20 million medical members and 5000 hospitals.
It is not difficult to imagine the magnitude of the business merger. CVS will be we able to create healthcare plans with incentives for members who utilize the clinics in the CVS network. Aetna’s members can be brought into the CVS retail pharmacies and the merged company can sell the drugs manufactured by CVS at very high margins to Aetna’s customers. On top of this, the vast amount of data can be used to gain better insight and to improve the managed customer care services. Passively, it could also be used for marketing and advertising efforts as well.
How Does the Current Healthcare System Work?
The way in which the healthcare system works is pretty simple and straightforward. The customers pay monthly premiums to the health payers and also pay the co-pays to the health care providers and pharmacies.
PBMs negotiate the prices with drug manufacturers and they place the negotiated list of drugs on their database of drugs that are preferred by the health plan. This database is technically referred to as the formulary. The PBMs also receive rebates from drug manufacturers and they share the profits with the health payers. They also reimburse pharmacies for drug prescriptions.
The healthcare payers receive claims from providers and also reimburse them for the care and PBMs for prescribing certain drugs.
The Costs Involved
While this system seems pretty straightforward, the fact that the consumers are used to this magnitude of cost is the cause of concern.
PBMs hold enormous power in negotiating with their clients. Their role lies in the negotiation of the prices with the manufacturers and pass the savings to health plans. While this idea seems to be a cost saving on the surface, their primary aim is to earn bigger rebates so that they can gain profits out of it.
Pharmacies mostly function in the control of PBMs. A lot of them use their own mail order, specialty, or retail pharmacies. Since they are more incentivized to increase the profitability through their own pharmacies against the method of negotiating the lowest cost method of drug distribution, the end consumers end up paying higher cost for the drugs.
Even outside the ecosystem of pharmacies and PBMs, the hospitals, physicians, health plans and the healthcare ecosystem at large need a significant increase in transparency.
Managing Healthcare and Blockchain
Given the requirement for trust and transparency, blockchain technology could very well be the Panacea that the healthcare industry needs. Blockchain can be a viable solution in places where there is a need for multiple entities to view and edit the same data. This process is executed, leaving a record of who edited the data – the transactions are sequential and interdependent at every step.
Blockchain also eliminates the cause involved in the need for third parties who exist in the ecosystem only to establish trust between the transacting parties. The new technology can also increase the financial gains by decreasing the time taken to complete a transaction.
The Classic Application
The very mention of healthcare and blockchain in a single sentence conjures up memories of patient record keeping. If a healthcare facility can get patient records which have been edited and manipulated only by doctors, the services that they provide the patient is found to be better. There are a lot of healthcare institutions that have resorted to this method of keeping medical records. This storage is also secure because of decentralization.
Even outside this, smart contracts can be leveraged to enhance the benefits of blockchain in the healthcare industry.
Smart Contracts and Healthcare
Smart contracts are essentially codes that govern the functions of a blockchain. The code has the capacity to execute itself only upon the satisfaction of certain conditions. Without the smart contract executing itself at a certain stage, it is impossible to make the next level of progress.
The health payers and drug manufacturers agree upon pricing and a list of drugs under a specific plan, also called the formulary. A smart contract can be written regarding this and can be fed into the blockchain. The blockchain ensures that the contracts are encrypted and only authorized users to access these entries.
The health payer can reimburse the drug manufacturer if patients order a prescription drug that is included in the formulary. The payment can be triggered by a smart contract when certain conditions are met. The smart contract between a customer and the drug manufacturer can also ensure that a small amount of co-pay is transferred from the consumer to the manufacturer directly.
The healthcare providers can have contracts set up so that every time a patient receives a medical service, an entry is made in the blockchain. The contract executes itself and claims their investments from the payer to the provider and also transfers the co-pay from the patient to the provider.
The Future of Blockchain in Healthcare
Blockchain in general and smart contracts in specific can significantly attenuate the inefficiency and waste of time and money in the healthcare ecosystem. With miscommunication and lack of trust being the biggest challenge among the stakeholders, blockchain can be the silver bullet that addresses the pain points precisely. This shared ledger can provide the highest degree of transparency and trust. Also, since the smart contracts can automate a lot of processes, it would make the entire process of healthcare seamless and extremely efficient.
Blockchain App Factory is committed to creating blockchain applications and smart contracts for the healthcare industry. Our team of expert developers ensures to gather your requirements and also give inputs regarding your business to create the perfect application of smart contract that suits your needs!