Blockchain Technology has a Role to Play in Pharma

During a recent presentation at PBMI’s National Conference, Gregory O Callahan, MBA, consultant, and Brian N Anderson, MBA, principal, both from Milliman, a consulting and actuarial firm, discussed how blockchain technology will disrupt the pharmacy benefit manager (PBM), payer, and pharmacy relationship, and offered their thoughts on its potential benefits to the health care industry.

Can you highlight some of the top ways blockchain technology is going to disrupt the PBM/payer/pharmacy relationship?

Mr Callahan: It all depends on how it is set up. Who's going to be the first major entity, the first major entrants into using blockchain technology? Depending on how it's set up and depending on what PBMs do with this technology, it's going to directly affect their role in the future of the pharmacy supply chain.

If we look at other industries—we'll take banking for one, the middleman being the bank—blockchain technology can allow a transaction to happen between the person who is receiving the good and the person supplying the good, removing the need for an actual centralized bank to handle that specific monetary transaction.

This can also be true in pharmacy. You have the ability for either a member to directly have a transaction with the pharmacy without insurance involved, you have the ability for pharmacies to directly have transactions specific with manufacturers, and you have the ability for payers to have specific transactions with pharmacies.

In each one of those examples, the PBM isn't a part of that. Blockchain has that technology.

Mr Anderson: What we're seeing is that the PBM industry is in a perfect opportunity to see change. One of the key areas in the disruptor side is that we don't know where that exactly is coming from.

We’re trying to pair together many parties within the industry to try to generate that solution, vs being blindsided by where that change may come from, because that could be coming from anybody outside of the health care or pharmacy industry, such as a technology company, possibly a large wholesale company, or possibly some other avenues that we didn't expect that change to originate from. That's something we're trying to prepare for.

Our goal is to generate the conversation to get people thinking along those lines of disruption. It's going to come. It's just how do we work together to identify what shape and form that looks like.

One of the key areas is going to be between the payer, the PBM, pharma, and the pharmacies, and how that shapes out. The key cog in that is in the middle—the patient. Up to this point, the patient has been shielded from all cost and decisions, really, along the lines of pharmaceuticals.

Integrating the patient along with their physicians is going to be key in the disrupting side. We'll see what that looks like, but it's still in consumerism and finding the disruptor that allows that consumer being the patient to make informed decisions, just like they do with all their other areas.

You can make a decision, do I want to drive or take an Uber? What's more cost-effective? What am I going to be doing later? Or do I want to buy it on Amazon, Target, Costco, or at a mom and pop store?

Do I want to get my groceries on Prime Now or some other avenue? There's all these decisions being made that we're doing on a day-to-day basis, but when it comes to health care costs, we're just going along with, "OK, that's where I'll pick it up, because that's where I've always picked it up," and never asking, "How much does it cost?"

Am I saving my plan money? Am I saving myself money? Hopefully, we can get pharmaceuticals into that method of shopping and making informed consumer decisions just like we are in everyday life, no matter what we do.

Can you provide an example of some of the benefits of implementing blockchain technology in health care?

Mr Callahan: Some inherent attributes of blockchain are very attractive when it comes to health care. You have the varied way blockchain is set up and its inherent attributes.

For example, it's difficult to be corrupted. You need a key to be able to see into, for lack of a better word, the glass vase or the glass bank. You can see into, but you can't make heads or tails of what the information is. It's also decentralized, which adds to its security features.

Instead of having protected health information stored in one server, in one, for example, state in the United States, where a hacker can go in and target that one specific building, hack into their system, and then have access to anything and everything that they want, the nature of blockchain technology is that it's decentralized.

You have a network of computers and/or nodes, as they're called. They're set up everywhere, and they all need to agree with each other. There's essentially nothing to actually hack into, as it's not centralized. That's another attractive feature about it.

You have 100% consensus of all computers and nodes on everything inside the blockchain before another block can be added to the chain. That dynamic instills reliability and makes it efficient and trustworthy.

We also have this example of faster settlements. We know that PBMs do a wonderful job of adjudicating many claims per second or per minute, but the problem is health care in general is not as efficient.

It's because you have information, you don't have all entities in health care playing on the same leveling field when it comes to your information as a beneficiary or a patient. What that has caused is, specifically on the medical side, is it takes a long, long time for a claim to actually adjudicate and finish.

We all have examples of receiving bills in the mail from something that we did last year or the year before. It's a new bill, and how on earth am I just now receiving this experience? Blockchain, what it will allow for is for everyone to have the same amount of information when it comes to you as a patient or me as a patient.

That will directly result in faster settlements, where we don't have that lagging in everywhere else outside of pharmacy.

Mr Anderson: That was a key item that we identified in our presentation at PBMI: how do we simplify or reduce that friction in that process that Greg just laid out to allow the pharmacy benefit manager to become more of the manager?

Right now, they're spending most of their time as a claim adjudicator. A lot of our work is around pricing, speed of claims, how do we turn around prior authorizations, and those things, versus them being able to step back and be a true manager.

We do see a long-term role for the PBM to continue to play in the industry on their blockchain and the transaction technology, but I think the role is going to evolve and actually add more value to the PBMs as they can assume the role as a manager again, and managing costs, patient care, and access.

I think that's a key component, because when I go back and look at claims, we do audits, or whatever we're doing, we always go back and go, "Why wasn't the PBM managing?" They're too busy with the other areas to be a proactive manager.

Hopefully, as this friction's reduced within the industry on the claim adjudication, the data transmissions, the other things that do occur outside of just a click in the claim processes, there's a lot of time that's spent around just data transfers and other areas of communications that can be reduced through this process because of the deidentified nature of the blockchain and the crypto key.

That's where we see not blowing apart the pharmacy benefit management industry, but making it a solution that they can use.

If someone couldn't attend your session, what is the most important piece of information that you would want them to have taken away?

Mr Callahan: For me, it was researching this, writing a white paper on it, and just diving into the technology a seeing the other aspects of, the positive aspects, in other industries that are using blockchain technology.

It was then when it occurred to me that this could be the technology that allows everyone to be the owner of their own data. Imagine a world where you or I own our protected health information or our information in general.

We have laws in place that allow us to go get our information, but it's not our information. It's either the PBM's information, it's the hospital's information, it's your doctor's office information. This technology is—or could be, depending on how it's rolled out, again—it could be the cornerstone of health care.

One of the catch phrases that we're seeing in health care and on the pharmacy side is personalized. How much more personalized could you get if you owned your own information, you were in control of disseminating your information, and could see your information wherever it was at?

Just the implications of that are pretty exciting. Anyone who was not in attendance, that was a great conversation that we had as well when we presented.

Mr Anderson: I think a key item, too, is when we walk through the other industries that have been impacted through change, whether it's Internet or video, you have Amazon, you have Netflix, you have other things that have had huge disruptors within the industry.

You start looking at it, and you go, "Well, that's probably due within health care, at some level." That was a key item. One of the other areas is being prepared for change and making sure that the systems are able to accommodate that change.

That change will be through the dissemination of information, hopefully to the consumer level, where they can make informed decisions and be more in charge of their costs of care and quality of care. That's our key takeaways.

Thank you so much. Is there anything you’d like to add?

Mr Callahan:  For me, it would be that—and Brian said it at the beginning—we hope that PBMs are taking a look at this in a very serious way, because there is a place for PBMs to embrace this technology or a transformative technology that could specifically change their role as they know it currently, but still show a need for them.

This isn't our opportunity to bash PBMs or to say PBMs are going to be obsolete in five years. It's more of a shout-out that the industry is ready for a change. I don't know of anyone who would disagree with that statement.

There are some specific energies out there with state Medicaid programs towards PBMs, a lack of transparency, and a general mistrust. I've been in the industry, like I said, for 12 years. I came in, and PBMs, they provide a very worthwhile and critical service in our pharmacy economics here in the US.

They are the entity that is the one that says no. They're not a yes entity, they're a no entity. With that comes some bad PR, unfortunately. At the same time, they need to not be the blockbuster in the industry, when streaming was introduced to the marketplace.

They need to evolve, and it's going to be who's the first one to actually look at this seriously? We're looking forward to that. We love having the conversation, but it's going to take action to see where this actually goes.

Mr Anderson: You're exactly right, Greg. I think another key takeaway to add is that this is happening. When Greg and I started almost two, two and a half years ago, talking about this, and initially researching it, it was very early, and it hasn't occurred.

We're not seeing it happening on a grand scale, but we are seeing it happening on clinical reviews, supply chain management, transactional and data transfers. We're also seeing it happen big in the financial industry.

I do believe, at some point, the financial industry will realize that they're missing an opportunity within the health care sector for the transaction process. A lot of the MasterCards, the Visas, the American Expresses, and the other large banks are currently out of the health care and transaction process.

That's a lot of lost revenue or time, value, and money that they could retain. I just think it's something that we need to keep our eye on and recognize it is happening in very small niches. Those niches will eventually come together and disrupt the industry at a whole.

What's going to instigate that, I don't know, but I do believe that where that change is going to originate from is going to be coming from some aspect of technology sector or the financial institution sector.