On Thursday, Chicago’s Intelligent Medicine Exchange (IMX) announced that it has filed for regulatory approval with the U.S. Commodity Futures Trading Commission (CFTC) to launch the first financial exchange for futures contracts based on the U.S. health care ecosystem. Specifically, the company is seeking official status as a Designated Contract Market (DCM), enabling it to facilitate the trading of contracts by individual and institutional market participants for purposes of risk management and investment.
Per IMX, health care represents nearly 20 percent of the U.S. gross domestic product (GDP), but there is currently no dedicated derivatives market to hedge risk. IMX says that a historic barrier to creating these markets has been a lack of reliable data on which to build tradable instruments based on industry trends, such as the cost of treating certain diseases and common medical procedures, the ability to invest in certain drugs and more. IMX says it has developed proprietary, patent-pending cost indexes that will underlie the futures contracts.
“Health care is the number one economic problem facing the country, and it’s almost 10 times bigger than the oil market but without a corresponding vehicle to manage risk,” said IMX CEO and Co-Founder James Plante, who is also Managing Partner of IMX’s lead venture capital investor Thynk Capital, in a comment on the filing. “We now have the data and means to create a trading venue for those whose businesses and livelihoods depend on the health care economy – whether they are suppliers, medical providers such as hospitals or physician groups, insurers or self-insured employers – or investors who want to take a position on the market.”
“The introduction of futures and other risk management instruments in multiple industries has helped stabilize prices, brought transparency and provided new investing opportunities. The time is right to leverage this valuable tool and manage health care costs as assets,” said Phupinder Gill, strategic advisor to IMX and former CEO of commodity exchange giant CME Group.
“Health care costs are the leading cause of bankruptcy in the U.S. The cost of new drugs, hospital procedures, hospital stays and insurance premiums seem only to go up. We believe IMX will lead to stable and lower prices for consumers and more predictability for drug companies, hospitals, providers and payers as they learn to do what farmers have done for decades – hedge the future,” added IMX Co-Founder Gregory Simon, former Senior Vice President of Global Policy at pharmaceutical giant Pfizer and former director of the White House Cancer Moonshot program, who now sits on IMX’s board.
According to figures from the U.S. Department of Health and Human Services and provided by IMX, U.S. health care spending in 2021 grew to $4.3 trillion, or 19 percent of the nation’s GDP. The department projects spending will reach nearly $6.2 trillion by 2028.
In January 2020, Simon and Feldman co-authored an article published in Fortune Magazine, titled “Why it’s time for a futures market in health care.“ The article was part of the magazine’s The Big Idea series, that puts forward “not-so-modest” proposals for making the world better.
