If you’ve been following the news, you know that the U.S. healthcare system has many, many inefficiencies. Some have gone so far as to claim that U.S. healthcare is flat-out broken. While that may be over-dramatization for political purposes, many of the arguments presented are entirely valid. With recent modifications to U.S. legislature, the healthcare market is slowly moving toward outcomes-based pricing, a trend seen in many of the world’s leading health systems. But shifting the entire financial foundation of a decades-old ecosystem of complex institutions is no easy task, requiring quite a bit of innovation. Digipharm is one such innovative company trying to take advantage of blockchain technology to eliminate inefficiencies in the healthcare economy. We recently had a chance to chat with Digipharm’s Founder and CEO, Ahmed Abdalla.
Mohammad Saleh, Medgadget: Can you tell us about your background and how you came to be a part of Digipharm?
Ahmed Abdulla, Digipharm: My background is in the healthcare industry – namely in health economics. I worked on the payer-side of things, reviewing various submissions from payers to the National Health Service in the UK. I then moved into the pharmaceutical industry, leading the global health economics team for a lung cancer drug at Roche. That was based in Switzerland. In my career so far, I have been involved in or overseeing more than 50 reimbursing submissions internationally from both the payer and manufacturer side.
What we’ve observed is a trend in healthcare towards outcomes-based pricing, outcomes-based contracting, and patient-access schemes. Even though a lot of payers and pharmaceutical companies are proposing these, the infrastructure to support the movement to these types of payments was essentially very limited. There is a huge administrative burden that really nullifies any benefit of moving to this type of payment approach. So, I decided to start Digipharm to essentially solve the problems that we see are keeping the industry from shifting to these different payment structures. We tried to scope out what the best way to do this was. It turns out that blockchain could provide a great vehicle to enable payment for your healthcare based on outcomes, not on the number of times you see a doctor or the number of drugs you take. To do this successfully, we needed to create a medical information infrastructure that all parties would trust.
Medgadget: Give our readers an overview on what Digipharm is. What is your mission, and how are working towards achieving it?
Abdulla: Our mission is to be the third-party solution provider that sits between all the key stakeholders within the health economy. We want to facilitate innovative pricing solutions and value-based pricing. We’ve built our platform in partnership with SwissCOM, the Swiss telecom provider. We’re now in discussions with specific organizations who are interested our solution, discussing pilot projects with eight out of the world’s top ten pharmaceutical companies (by revenue). We’re also working with more than ten international health authorities and also some of the largest insurers in the world.
We understand that this is quite a sensitive area for pharmaceutical companies and device manufacturers. Pricing is the thing that they hold most confidentially. Clinical data is all eventually published, but things like pricing strategies and net costs always remain confidential because it really affects their competitiveness.
Medgadget: It may be clearer if you walk our readers through how the healthcare economy works right now and what you want it to look like once your job is done.
Abdulla: Healthcare spending is currently unsustainable, both for patients and payers. This is having an effect on the whole industry, where innovation is essentially not rewarded because organizations cannot afford to reward them. A lot of money is being wasted on treatments and therapies that are not as effective as they should be. Once they go out into clinical settings, outcomes a very rarely tracked for a given treatment or therapy. So, what we’re seeing is the maturing concept of value-based healthcare and an increased acceptance over the last couple of years. But there really is no solution, at the moment, that removes the administrative burden and the barriers to its implementation.
What we want to do is open the door to seamless contracting by removing the need to input outcomes data manually from the provider side. We also want to remove the transactional inefficiencies, or the need for manual processing of agreements between different parties in the healthcare ecosystem. Typically, different patient groups will have different pricing agreements based on their characteristics. Currently, that requires employees dedicated to looking through outcomes, matching them up to certain agreements, and then process the invoicing and so on.
We are using smart contracts to create an automated invoicing system which we hope will remove the administrative and cost burdens associated with this process.
Medgadget: What is smart contracting and how are using it to achieve a value-based healthcare model?
Abdulla: Smart contracts are essentially digital representations of physical contracts. Once contract conditions are stipulated and coded into the platform, they are then run to interpret the relevant data derived from health information systems that feed into these agreements. When certain criteria are hit, these smart contracts then invoke some sort of invoice, alert or payment that was agreed upon between the parties. This is all on a blockchain platform. And the beauty of using smart contracts is no matter how complex the pricing agreement is, the administrative burden does not change. If you’re doing this manually, for a cancer drug for example, you could have a pricing agreement which states that you will only pay full price if the patient survives more than six months. Or you can now have an agreement that has additional conditions based on an adverse event of interest or re-hospitalization rates, and so on. No matter how many conditions you make within this contract, the administrative burden does not change. If such complex contracts were done manually, it just becomes essentially unworkable.
Medgadget: What would a hospital without your solution look like, compared to one that has your solution?
Abdulla: A hospital that would use our platform would be able to go into these pricing agreements and customize them to the patient cohorts they are dealing with. If they, for example, have a predominantly elderly population and they’re really concerned about some key performance indicators, they can get agreements with manufacturers or local distributors or suppliers that are based partially on these indicators and the problems they face within their patient cohorts. Where they also benefit is by increased savings on manpower and resource use to implement these agreements.
Medgadget: How would this solution affect patient lives?
Abdulla: So, from the patient side, there are huge benefits. They will be able to get access to high cost drugs without having to worry about the cost of things that do not work. Many people have experienced or witnessed having to worry about how to pay for very expensive drugs that are often not completely effective. Very recently, a family member of mine has had to pay many thousands of dollars to get life-saving treatment because their own insurance company refused to pay for these expensive drugs. This wouldn’t be an issue if these drugs were paid for according to performance as risk is shared by manufacturers and payers. Patients will also benefit from an increased competition between manufacturers to create the best drugs and benefit from this business model. They’ll also benefit from an accelerated access to new therapies because we’ll skip this long negotiation process that happens during the health technology assessment process. That’s when you have exhausting debates around pricing, due to uncertainty around data, long-term extrapolation of survival curves, and things like that. By rewarding the best therapies, you can also bring it faster to patients.
Medgadget: I understand this being a concern in a broken healthcare system like in the United States. But with other healthcare systems like in Canada or the UK, a lot of the life-saving drugs are not paid for out-of-pocket. Why do think those systems would also benefit from your solution?
Abdulla: Those are interesting, but what we observe is that patients don’t have access to a lot of the newer therapies. New therapies are often rejected because those decisions are based on the cost-effectiveness of the treatment. Institutions consider the resource use, the price of the drug, and the clinical effectiveness. Clinical trials are increasingly becoming more targeted and based on smaller and smaller patient groups. This leads to increasing uncertainty on therapy cost-effectiveness in real-world settings. So, government agencies cannot justify using public money to reimburse for these expensive therapies and insurers are struggling to manage the risk. However, these limits would not be imposed if these organizations knew that if these therapies don’t work, they would not pay for them. Our platform circumvents these current issues by tracking the success of drugs, and pricing the drug based on outcomes. This is essentially happening all over the world, but not as much as everyone would like because of the huge administrative burdens and issues around trust and transparency of outcomes data.
Medgadget: To me, it feels like pharmaceutical companies would not want to sign up for this. If you’ve spent upwards of 10 years developing a drug, you want to sell it at a premium. Why would they agree to the risk of having their product priced down?
Abdulla: What we know, having worked in this industry, is that companies themselves are preparing for this path of payment mechanism. They’re really actually pushing for it themselves. What harms a pharmaceutical company is the lack of market access and time remaining on patents. They’re counter-balancing the potential drop in price with the potential of having faster access to markets and a generally expanded market presence.
Medgadget: Are you building your own blockchain platform or using something that already exists?
Abdulla: We’re using Hyperledger Fabric, which is an enterprise-level blockchain solution, which provides a lot of the scalability that we need. It’s a private permissioned blockchain as well, so users can only join a private network if they receive permission from everybody on the network, as an additional layer of security around the data which is important for confidential pricing agreements.
Medgadget: Walk me through why you decided to create your own cryptocurrency.
Abdulla: Essentially, we created a utility token as the fuel to power our platform.
For the reimbursement platform, payers, manufacturers and providers will be required to use these tokens to initiate or execute smart contracts. They will also be required to enrol individual patients on smart contracts, facilitating the process of annexing patients to pricing and reimbursement agreement. We understand that none of the current stakeholders within the health economy are going to be comfortable using these tokens, so users will essentially pay a license fee that’s stipulated in US dollars and that will be converted to a quantity of tokens. We also hope to use tokens as a method of incentivization for stakeholders and patients.
Medgadget: Implementing tokens is not essential for the functioning of the smart contracts, though. Right?
Abdulla: It isn’t. But in the future, we would like to develop our own blockchain network, as well. We understand that there will be inherent volatility of the number of tokens that will be acquired according to the US dollar amount. The tokens obviously help us with the fundraising, as well – we’re not going to hide that fact. We wanted everyone to be able to invest and benefit from a project with high social impact. The way we see these tokens is they’re credits that enable you to use the software. The number of credits you own could be related to how many patients are on these platforms, how many smart contracts are running, or how many treatments are on our platform.
Medgadget: How dependent is your platform on the health of other cryptocurrencies?
Abdulla: I wouldn’t say it is, really. We initially built a federated Etherium layer on top of the Hyperledger platform. However, in the background we are working on other blockchain platforms, as well, so that we have fallback options if anything ever happens to a given network.
Medgadget: As we’ve previously covered at Medgadget, things are picking up in the blockchain healthcare scene. Where do you see this field, and Digipharm, in ten years?
Abdulla: I think that we see Digipharm as a pioneer in the value-based contracting space. Ten years is quite a long time, but we hope to be one of the market leaders as adoption of our platform becomes more mainstream. We are in discussion with some of the largest healthcare providers and insurance companies at a global level. It’s a very fragmented system everywhere, but it’s also a really cool challenge. There are a lot of organizations trying to work on integrating healthcare institutions and community care units, and we think those efforts will only aid what we want to do.
For more about Digipharm, check out their website or watch this webcast by the CEO…