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A $637B Annual Loss or Opportunity?

PHARMACEUTICAL

Nonadherence presents the industry with a big challenge Based on Capgemini Consulting and HealthPrize Technologies’ Research Paper

Estimates are that in 2015, global pharmaceutical revenue lost $637 billion due to nonadherence to medications for chronic conditions. This has increased from $564 billion in 2012, with US-based revenue losses increasing from $188 billion in 2012 to $250 billion in 2015.

“Medication nonadherence is a serious global health issue,” said Tom Kottler, CEO of HealthPrize Technologies. “It also happens to be a critical business issue for pharmaceutical companies and represents the ‘final frontier’ for them—the only area of their business where they can generate significant top- and bottom-line growth, improve outcomes, and create substantial savings for the healthcare system—all at the same time.”

“This is the only area where [companies] can generate significant top- and bottom-line growth, improve outcomes, and create substantial savings for the healthcare system—all at the same time.”

Tom Kottler, CEO, HealthPrize

By focusing on and boosting adherence across their portfolios, pharmaceutical companies can provide unparalleled benefits to both patients and shareholders. Pharmaceutical companies have historically focused on the physician as their “customer” and bringing products to market to treat more complicated chronic conditions with smaller patient populations, often neglecting strategies that involve patients and their behaviors that could improve outcomes and reduce healthcare expenses. “The tremendous human toll that results from nonadherence has been known for some time, but until we released our report with Capgemini, the business cost to the life science industry was not,” Kottler said. “With our updated analysis, we have shown that this business challenge continues to grow for pharmaceutical companies, while at the same time presenting them with their most significant opportunity to simultaneously support patients and shareholders.”

When the 2012 report was published, the pharmaceutical industry took notice. Luckily, at that time, industry trends already favored a stronger focus on the adherence problem than in years past because of the critical role adherence plays in drug efficacy, clinical outcomes, and healthcare costs. This growing recognition within the industry of its importance led to an expansion of adherence-related services, the initiation of commercial pilots to test novel strategies, and the creation of dedicated adherence teams to function across brands.

According to recent IMS figures, total US pharma revenues on an invoice basis were $425 billion in 2015. Compared with the $320 billion figure used in the analysis for the 2012 report, this represents a revenue increase of 33%.

Assuming that medication adherence rates have remained relatively unchanged since 2012, this means that pharma revenue losses attributed to nonadherence have also increased by the same percentage, from an estimated $188 billion to $250 billion forfeited in the US alone. Globally, according to CMR International, pharma revenues hit $1.1 trillion in 2015, which is a 13% increase from the $956 billion figure used for the 2012 report. This means that estimated revenue losses globally due to non-adherence are now $637 billion, a steep increase. Although much new adherence research has been published since the 2012 report, the authors have not detected any measurable trend toward increasing adherence rates—at least not yet.

There has been, however, recent adherence work worth highlighting that allows for a more nuanced understanding of typical pharmacy claims–based adherence data.

INTRODUCTION

Medication nonadherence is one of the most serious problems in healthcare, posing a heavy financial impact on all constituencies. For insurers, employers, and patients, nonadherence significantly increases healthcare costs as a result of disease-related complications. For pharmaceutical companies, pharmacies, and pharmacy benefits managers, nonadherence significantly erodes profit due to prescriptions not being refilled and medications not taken often enough.

Nonadherence is also to blame for immense personal and societal costs beyond the financial, in the form of poor health outcomes, untimely death, lost productivity, and compromised quality of life. These downstream effects are particularly tragic given their preventability.

Given the growing interest among pharmaceutical companies in exerting a greater influence in promoting better outcomes—and in selling wellness in addition to medication—a focus on medication adherence is a natural fit. In this setting, a more accurate estimate of the impact of nonadherence on profit can serve as further motivation to allocate resources accordingly and perhaps as stimulus for a greater sense of urgency.

The healthcare industry as a whole—and most importantly, patients—would benefit from pharma shifting away from raising drug prices as a revenue-enhancing strategy and instead toward boosting adherence interventions to accomplish the same goal.

ESTIMATE OF REVENUE LOSS BY INDUSTRY EXECUTIVES

Below are the highlights from surveying a number of pharmaceutical executives across divisions and companies regarding their thoughts on several issues:

• Regarding the priority level given to nonadherence initiatives, 60% felt that adherence was a “high” priority for their company, whereas 20% responded “highest” priority and another 20% respondents felt the priority level was “medium.” None felt that it was “low” priority.

• As for whether or not the industry bears some responsibility to intervene to improve adherence, all responded “yes.” One respondent stated, “I believe the pharma industry, healthcare professionals, and payers all bear an equal responsibility for promoting improved adherence to medication.”

• Twenty percent remain “slightly skeptical” that nonadherence can be significantly improved, and 40% were “not sure,” whereas 40% were either “confident” or “very confident.” Regardless, one respondent stated, “It is the biggest issue affecting positive treatment outcomes for most chronic therapies.”

Most interestingly, the range of estimates of revenue loss by the pharmaceutical industry due to nonadherence was very broad, from “many millions” to $100 billion.

In specific therapeutic classes, such as respiratory agents and antidepressants, more than 200% of total current revenues are lost due to nonadherence. How can that be? To understand this seeming paradox, it is important to consider this: The calculation of losses due to nonadherence are based on revenues that could have been earned, not actually earned.

As a simple illustration, consider a fictional medication with an adherence rate of 50%, and consider that the brand earns $100 million per year on that medication. If all patients were, instead, fully adherent (if adherence was 100% rather than 50%), revenue would double, to $200 million. However, as actual adherence is only 50%, the brand earns only half of its potential. Another way to express the same thought is this: When adherence equals 50%, the ratio of revenue earned to revenue lost is 1:1. If adherence is lower than 50%, the brand actually loses out on more than it earns.

In diabetes, total US pharmaceutical revenues totaled $19.6 billion and chronic use approximately $17.6 billion. Considering an estimated mean adherence rate of 60.7% across medications, the estimate of revenue lost in this therapeutic area alone is $11.4 billion, or 58% of total revenue.

There are four main factors that make the report’s estimate of revenue loss conservative. One, it focused only on chronic conditions. Two, the way it estimated revenue loss due to primary nonadherence (initial prescriptions never filled) was extremely conservative. Three, most secondary adherence studies include only patients who have filled a prescription at least twice (the initial fill, with at least one refill). And four, it did not account for the fact that in any given year, there are patients who were prescribed a medication the prior year and dropped off, but who should have remained on that medication through years two, three, and beyond. See figure 1.Pc0600100

Figure 1. Calculation of US pharmaceutical revenue loss due to non-adherence


IMPLICATIONS

Although a number of pharmaceutical companies have established adherence teams, they are often underfunded, slow moving, and prone to recommending traditional tactics, such as reminder programs, cost reductions, and isolated educational campaigns. These strategies are insufficient and often do not address the root of the problem.

Interestingly, regardless of condition, cost of therapy, or demographic, a common shortcoming of human psychology is the difficulty in following through with taking a medication (or with any healthy behavior) in the present for a health-related payoff in the distant future. This is a psychological reality that tends to resist simple reminders, cost reductions, and even educational efforts.

A common shortcoming of human psychology is the difficulty in following through with taking a medication (or with any healthy behavior) in the present for a health-related payoff in the distant future.

However, even the most innovative and effective solution will not “cure” the problem. The goal is to raise adherence rates compared with baseline, not to perfect adherence, which is impossible. Given this reality, how much of the $564 billion ($188 billion US) lost each year can pharma reasonably expect to recoup in the best-case scenario? This remains unknown. However, if pharma were able to reduce the adherence gap by a tenth across the board, it would net an additional $41 billion in revenue to the US pharmaceutical industry each year. And, with this lift in adherence and revenues, a corresponding boost in clinical outcomes and decline in healthcare spending would be realized, benefiting patients and the healthcare industry as a whole. Future efforts, based on better data, will offer the industry even more accurate insights into the nature of the problem, its magnitude, and the efficacy of new interventions.

WHAT TO DO ABOUT NONADHERENCE

Because there are numerous causes of nonadherence, there is no silver bullet solution. Pharmaceutical organizations should seek flexible, multidimensional approaches to the complex challenge of motivating patients to fill their prescriptions and stay on their medications. Three guiding principles are offered for pharmaceutical organizations seeking to improve the performance of their adherence initiatives.

Make adherence a strategic priority for your organization.

Adherence interventions to date have predominantly been implemented at the brand level. This cautious approach allows for the piloting of new and innovative programs, but offers only short-term improvements that are inherently limited in scope. Pharmaceutical organizations that elevate the issue of adherence to the executive level are able to implement solutions that leverage resources and align priorities across departments and brands, affecting diverse patient populations beyond the limited reach of any single brand.

Focus on enrollment strategy early. “If you build it, they will come” isn’t true.

No adherence intervention will work unless it is marketed successfully and made easy for patients to enroll. Start thinking about enrollment plans well before the official program start date. Develop strategies to promote adherence programs directly to healthcare providers and make it easy for them to promote enrollment among their eligible patient populations. Additionally, seek ways to integrate adherence programs with other marketing initiatives, including direct-to-consumer advertisements and copay programs. Link to a program’s enrollment page from digital advertisements and integrate it with existing copay and other program online enrollment forms. Many otherwise effective programs have failed due to poor enrollment efforts.

Patients have diverse reasons for not taking their medications; interventions should be just as diverse.

There is no single cause of nonadherence.Although some patients do simply forget to take their medications on occasion, this is probably the least clinically significant of adherence problems. Many patients never fill their prescription in the first place or stop taking it altogether within a few months.Adherence solutions need to tackle both the easy and the hard adherence challenges to make a clinically and economically meaningful difference.

HealthPrize has enjoyed success across multiple chronic conditions by employing a multifaceted approach. Various forms of reminders are incorporated within a robust platform based the understanding that motivation is often the deficient element in the adherence equation. Disease-specific education, combined with short-term rewards and gamification, make for a compelling program across diverse patient populations. Pharmaceutical organizations should seek solutions that work at scale and provide multiple approaches to motivate patients to adhere to their medications. •


1 IMS Institute for Healthcare Informatics. Medicines Use and Spending in the U.S.: A Review of 2015 and Outlook to 2020. Parsippany, NJ: IMS Institute for Healthcare Informatics; April 2016. http://www.imshealth.com/en_IE/thought-leadership/quintilesims-institute/reports/medicines-use-and-spending-in-the-us-areview-of-2015-and-outlook-to-2020. Accessed November 8, 2016.

2 Thomson Reuters. CMR International Pharmaceutical R&D Factbook Executive Summary. London, UK: Thomson Reuters; August 2016. cmr.thomsonreuters.com/pdf/2016_CMR_Executive_Summary.pdf. Accessed November 8, 2016.

(https://www.ncbi.nlm.nih.gov/pubmed/16973166)

(http://www.ajpb.com/journals/ajpb/2016/ajpb_marchapril2016/outcomes-associatedwith-primary-and-secondary-nonadherence-tocholesterol-medications)

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