I was having a conversation with Mike, a colleague of mine who has been in the pharmaceutical industry for over 15 years, and I tried to impress on him the potential I saw for blockchain in health care and more specifically pharma. After several attempts at explaining how blockchain works and its benefits, it was clear he was not getting it. I was struggling to get through to him, and he was getting frustrated. “I don’t understand how it’s supposed to deal with issues like security and patient privacy,” he finally said.
After doing some research, I realized Mike and I were not the only ones struggling. Many different sources cite the single biggest challenge to adopting blockchain technology is explaining how it works. My discussion with Mike inspired me to write this blog.
With CVS-Aetna and ESI-Cigna potentially merging, we could be entering a world where three PBMs would manage 72 percent of all pharmacy benefit claims. Greater market consolidation, both vertical and horizontal, should not be unexpected. This follows a trend for scale in provider consolidation, as seen in the earlier part of the decade, first with medical practices and more recently with hospitals and hospital systems (e.g., Adventist Health and St. Joseph Health).
Whether by merger or through collaborative arrangements, these partnerships are being pursued to gain economy of scale and for strategic reasons. For example, to gain the capabilities to participate in value-based health care, or to access to new markets. Also, worth noting this would lead to a highly concentrated Medicare Part D marketplace. Four payers, United Health Care, Humana, ESI-Cigna and CVS-Aetna would manage over 70% of Medicare Part D beneficiaries.