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RENT SEEKING TRUMPS HEALTH: DNA VENDORS AND BLOCKCHAINS

RENT SEEKING TRUMPS HEALTH: DNA VENDORS AND BLOCKCHAINS

From both individual patient and population health perspectives, blockchain technology offers, for the first time, the prospect of patients owning and controlling their own health data. The prospect can only be realized if property rights are assigned to the patient.  Medical record data are a valuable commodity. Unfortunately, the value implicit in health data means that property rights, whether real or perceived, will not be surrendered.

The recent announcement by Companies, a leading DNA vendor, gives us a foretaste of actions likely to be undertaken to protect revenue streams. Rather than allowing individuals, who have purchased a DNA profile from Companies to benefit from sale of their DNA profile to third parties Companies has imposed unilaterally, arbitrary (and not particularly subtle) barriers to data to protect their revenue stream. The patient is exploited by Companies capturing rent that otherwise should accrue to the patient who has purchased the assay.

There is no justification for the Companies action other than an to inhibit the emergence of a DNA marketplace. If there are barriers to market entry, then just as a monopolist can protect its exorbitant pricing policies and resulting excess profits, the DNA vendor can effectively forestall any action by patients to realize the value of their DNA.

The prospect of a patient or patient groups, possibly in association with providers, enforcing property rights is anathema. Why? Because if property rights are assigned to the patient, the vendor will have to contract with the patient for access. If the market is competitive third parties will engage in a bidding war until a market clearing price is established (remember your Economics 101). Until a market is in place we will have no idea of the value of DNA data.

The current market model is for a client to purchase a DNA profile (with the incentive of summer special sales). The DNA vendor is then in a position, subject to permission from the patient to waive property and monetization rights, to sell the DNA profiles of millions of patients to third parties. The DNA vendor wins on two counts:

(i) the profits from a DNA profile (which probably costs less than $20 but with a market price of, say, $100) and

(ii) profits from selling the DNA profile to third parties.

This must be the only market place where production costsare paid for by one party with the DNA vendor making a profit on the profile and at the same time on-selling the data and capturing almost pure rents as the vendor has (effectively) no costs of production. The DNA patient through purchasing a profile is subsidizing the profitability of third party sales. Needless to say, in asking patients to waive property rights the DNA vendor does not mention the possibility to patients of reimbursing them from sales of their DNA data to pharmaceutical manufacturers and others.

If there are sales to third parties of DNA profiles, then there is no reason to pay for a profile in the first place. The DNA vendor, in this case Companies, should pay clients for access to their DNA. These are costs of production and would then be recouped from sales to third parties. If DNA profiles have substantial value to third parties such as pharmaceutical manufacturers, then (remember again Economics 101) we would expect new DNA vendors to enter the market place to purchase DNA profiles. Rather than you buying a profile, you would search for vendors who are in the market to contract and purchase your profile and assign property rights. Manufacturers would compete to purchase profiles for target patient groups. Market clearing prices would be established. Profiles would be logged to the blockchain with the opportunity for further monetization under market prices. The pure rent that accrues to vendors would be eliminated.

Is this likely to occur? Quite probably. After all, if a DNA profile Companies is in the process of maximizing value from third party sales, then it is likely to be selective in its choice of client base and the sophistication of its assay. Additional information on clinical and other markers may be sought from potential DNA profile patients with their health records lodged on health blockchain. Blockchain owners would act as agents for the individual blockchain members to identify target patient groups and negotiate smart contracts. Once target populations for DNA profiling are identified through the blockchain the net result will be a win for all parties – patients, providers and DNA vendors – with values established to claw back rents with market clearing monetization in third party sales.

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