First healthcare futures market planned for Chicago

Chicago is the historical birthplace of futures contracts related to grains, stock indices, interest rates and various other assets. What about futures contracts related to medical procedures or promising new drugs?

Investors and executives have filed for regulatory approval to form the first healthcare-related futures market. They call it Intelligent Medicine Exchange, or IMX, and claim it can help control rising prices.

Health care accounts for 20% of the US economy, but there is no financial risk hedging system, said James Plante, CEO of the proposed exchange and managing partner of Thynk Capital, the leading investment firm. IMX investment. He said pharmaceutical companies, insurance companies, hospital chains and large employers are among the businesses that need protection against rising medical costs.

Plante compared health care to the oil industry before getting futures contracts in the 1980s. “Oil was seen as health care today. It’s just a cost. When you hold a futures contract that you own, you benefit from cost increases and own it as an asset. You can short that if you think prices are going to go down,” he said.

IMX has asked the federal futures regulator, the Commodity Futures Trading Commission, to operate as an exchange. Plante and Felix Carabello, chief commercial officer at IMX, said they hope to be in business by the first quarter of 2023.

They declined to speculate on the exact contracts offered by the exchange. Each type would require regulatory approval. But they gave examples of how a healthcare exchange could be used.

A pharmaceutical company needing to offset research costs and obtain funding could sell a contract related to a treatment it is working on, obtaining cash. Insurance companies and employers expecting higher medical costs could buy contracts linked to cost indices. A patient awaiting knee surgery can redeem a contract tied to the number of operations performed. Examples involve anticipating future costs, something farmers have been doing for decades in commodity markets.

A health care exchange may exist now thanks to available anonymized data on costs and medical procedures, Plante and Carabello said. They said IMX had developed patent-pending cost indices that would underpin its futures contracts.

“Usually higher prices are an advertisement for more capacity,” Carabello said. “So the healthcare market is asking for more capacity, and with our tools, we can then put investors first. [and] hope to stabilize these prices.

Plante said it was possible the exchange would offer futures contracts related to the COVID-19 outbreak or other infections.

IMX operates from offices located at 141 W. Jackson Blvd., also known as the Chicago Board of Trade Building. It has a dozen employees and plans to increase hiring as it gets closer to launch, Plante said.

The company has no financial ties to CME Group, owner of the Chicago futures markets. But some people involved in the company worked for this company.

They include Carabello and strategic advisers Phupinder Gill and Kim Taylor. Gill is a former CEO of CME Group, while Taylor is a former chairman of the exchange firm’s clearing house.