Medication Adherence: Pharma’s $637 Billion Opportunity
Medication non-adherence is one of the most serious problems in healthcare, posing a heavy financial impact on all constituencies. On the cost side, the New England Healthcare Institute estimated that medication non-adherence is responsible for $290 billion in “otherwise avoidable medical spending” in the US alone each year. (1)
On the pharmaceutical revenue side, however, the impact of medication nonadherence had yet to be accurately quantified. The market assumption relied upon to date, and quoted extensively, has been $30 billion globally, (2,3) which we felt was a gross underestimate-prompting our analysis of true costs of nonadherence to pharma.
According to our analysis, the US pharmaceutical industry alone forfeits an estimated $250 billion annually in potential revenue due to medication non-adherence. This represents 59% of the $425 billion in total US pharmaceutical revenue in 2015 and 37% of the $508 billion US annual total potential revenue.
Extrapolated to the global pharmaceutical market, revenue forfeiture is estimated to be $637 billion, or 59% of the $1.1 trillion in total global pharmaceutical revenue in 2015 and 37% of the $1,520 billion global annual total potential revenue.
There are a wide diversity of reasons as to why a patient will fail to take a medication. In any discussion of the causes of nonadherence, however, it is important to consider the form of nonadherence at hand.
For example, simple forgetfulness is certainly the most common reason that an otherwise diligent patient will accidentally miss a dose here and there. Although a common focus of adherence interventions, these transient gaps in day-to-day compliance are unlikely to lead to poor outcomes or increased healthcare spending for most chronic conditions.
The more significant forms of nonadherence-especially as they relate to poor outcomes and expenditure-are primary nonadherence (failure to fill at all) and non-persistence (failure to continue to refill). For these forms of nonadherence, simple forgetfulness does not make sense as a root cause. In these cases, out-of-pocket cost is often cited as a driver, which does make particular sense in the low-income population and in the case of very high co-pays.
However, for the average population with average co-pays, cost is less likely to be a major driver. A well-publicized trial of free medications for patients leaving the hospital after a heart attack, published in the New England Journal of Medicine, achieved a relatively small uptick in adherence: an increase of 4-6 percentage points in patients who received their medications for free (over the control group, which demonstrated adherence rates between 36-49%). (4)
As further evidence that cost is a lesser factor than often believed, countries with universal healthcare and little to no co-pays have similar adherence rates as the US. In a 2008 study published in the Journal of Hypertension, adherence rates were nearly identical for participants age 65+ in the U.S., Canada and the Netherlands. (5) Another study published in the European Journal of Hospital Pharmacy notes that up to 50% of medicines in England aren’t taken as intended, paralleling U.S. adherence rates. (6) Finally, the NHS notes that 30 to 50 percent of prescribed medications are not taken as recommended in England. (7)
In some cases, primary nonadherence (failure to fill at all) can be attributed to a fear of side effects or an inability to properly weigh the risks of the condition versus the risks of the medication. This can also be considered to be a deficit in patient education.
Actual side effects, of course, can also loom large as a cause of non-persistence, particularly for more toxic medications. In some cases, patients quit over relatively minor side effects that would have been transient (again pointing toward a deficit in patient education).
In other cases a drug is stopped at the request of the physician, in which case a patient should not be “counted” as nonadherent. Unfortunately, in studies based on simple pharmacy claims, disentangling true nonadherence is typically impossible.
A major cause of nonadherence that is increasingly recognized as contributory across all conditions and demographics is more of a motivational factor. In a wide diversity of cases, human psychology is largely the culprit, and specifically “present bias,” or the preference for short-term rewards over longer-term gains. This is particularly problematic in the case of asymptomatic conditions, for which the payoffs may be years down the line in the form of decreasing a risk for heart attack or stroke.
This is the same psychological shortcoming that makes it difficult for people to save for retirement.
With this insight, it becomes clear that simple reminders, cost reductions, and even education are insufficient to motivate patients towards higher levels of adherence. It requires interventions with a greater understanding of human psychology, a leveraging of short-term rewards, and education specifically tailored toward an internalization of the longer-term payoffs.
While adherence represents the single greatest financial opportunity for the pharmaceutical industry, no company has yet approached it with an organized, well-funded approach led by the C-suite. Rather, efforts have largely been left to brand and innovation teams who operate on a tactical and not strategic level, resulting in under-funded programs that lack the capacity for enterprise-level scale and impact.
Pharma has long felt that its most important customer is the physician who writes the script, not the patient who takes the medication. Because of this bias, the industry is late to the party in terms of scaling engagement to increase medication adherence, which, by the way, is the only way a patient can receive the tremendous health benefits offered by the medication.
Increasing revenues by improving medication adherence makes sense. A dollar in revenue from increased drug utilization represents one of the highest margin dollars pharma can generate. Because the medication is already FDA approved, there are no technical, regulatory or clinical risks. And because the initial script has already been written, there are no marketing costs to bear. The only costs are the cost of goods and the adherence program.
For example: if a company that loses $40 billion a year to nonadherence could recoup just 10% of that amount ($4 billion) at a maximum cost of $2.4 billion ($1.6 billion for the enterprise adherence initiative; $400 million for the cost of goods), it would generate $1.6 billion in revenue to the bottom line at 40% operating margins. That’s nearly twice the average for a large cap pharmaceutical company.
Some of the world’s largest pharmaceutical brands, including Humira, have reported significant success in developing impactful adherence programs. The Humira patient support program is successful because it originated from a corporate commitment to patient support across all brand efforts. This support has been consistent across the various teams that manage the multiple indications for the drug, with budgets being supported for multiple years, above-brand teams being stable and supported from senior executives, and having the capacity to try and learn without failures affecting the whole patient support continuum.
It is this type of high-level, consistent, senior support that has distinguished the broad-based Humira patient support program from others that are more tactical, less stable from a support and budget perspective, and lack cross-enterprise and senior support sufficient to create lasting benefits for the brand and the patients it serves.
True and measurable success in improving adherence has been reported for HealthPrize-powered programs as well. A recent pilot program for medication for a serious respiratory condition, for example, resulted in an average increase of 2.8 prescription fills per person for the 9-month program.
It is now time to take the lessons learned from these programs in order to scale adherence across the enterprise. With a true enterprise-level approach, pharma will be able to generate more and higher margin revenues, improve outcomes and lower costs to the healthcare system – the pharmaceutical triple aim.
(1) New England Healthcare Institute, Thinking Outside the Pillbox: A System-wide Approach to Improving Patient Medication Adherence for Chronic Disease. August 12, 2009
(2) Cutting Edge Information. Pharmaceutical Patient Adherence and Disease Management: Program Development, Management and Improvement. October, 2006.
(3) Datamonitor. Addressing Patient Compliance: Targeted Marketing Driving a Shift in Focus From Acquisition to Retention. August, 2004.
(4) New England Journal of Medicine. Full Coverage for Preventative Medications after Myocardial Infarction. December 1, 2011.
(5) Journal of Hypertension. A Cross-national Study of the Persistence of Antihypertensive Medication Use in the Elderly. January 2008.
(6) European Journal of Hospital Pharmacy. Medication Adherence: Where are We Now? A UK Perspective. June, 2014.
(7) NCCSDO. Concordance, Adherence and Compliance in Medicine Taking. December 2005.