The Big Opportunity in Medication Adherence

For the first of the deep dive verticals in the Technology and Wellness theme, I wanted to write about the opportunities in increasing medication adherence in patient.  Surprising to most – patients not taking or missing is a widespread and costly issue for the United States and Globally.

Specifically, according to the Center for Technology and Aging, of the 3 billion medication prescriptions issued annually in the U.S., 12 percent are never picked up by the patient and 40 percent are not taken correctly. More startling, non-adherence is responsible for up to 69 percent of medication-related hospital admissions and 23 percent of all nursing home admissions annually, emphasizing just how important it is for consumers to follow their medication guidelines.

Suboptimal medication use can increase the burden of illness and result in higher costs to families and society. In one study, the risk of hospitalization was twice as high in chronically ill individuals who did not take their medications as directed, compared to chronically ill individuals who did.

Increasing adherence helps consumers through reminders and additional access to information offers a huge value add for consumers – and offers a great opportunity to keep healthcare costs down.

Opportunity for Pharmaceutical Manufacturers and Pharmacies

Non-adherence costs the global pharmaceutical industry an estimated $30 billion a year. However, this creates an opportunity. Increased adherence for a product with approximately $1 billion in sales would translate to an additional $30 to $40 million in annual revenue. Moreover, since it costs six times more to attract new patients than to retain current patients, increasing the focus on yields from adherence means additional money saved and earned. With increasing pressure to maintain top-line growth in the face of shrinking pipelines and expiring patents, increasing revenue through increasing adherence offers a great opportunity for drug manufacturers to generate revenue by helping its consumers.

The emergence and adoption of new media and an increasing culture of self-service put the Internet in a significantly better position to move the needle on adherence today – both through dedicated services and by shaping consumers’ attitudes about treatments. Adherence programs offer a huge opportunity for pharmaceutical manufacturers to cut costs while increasing revenue through a truly relationship-driven marketing program. Some facts in a recent study by Epsilon clearly illustrate the potential value for pharmaceutical companies:

  • 44 percent of people said they’re more likely to stay on a drug from a pharmaceutical company that sends them permission-based email;
  • 60 percent of people said they have a more favorable opinion of pharmaceutical companies that send them permission-based email;
  • 53 percent of people said they’re more loyal to pharmaceutical companies that send them permission-based email.

Opportunity For Employers, PBMs, and Insurance Companies

According to the Center for Technology and Aging, non-adherence to medication protocol results in an additional $290 billion spent on healthcare annually – money that would not have been spent if patients had followed their medicines protocol. Employers, PBMs, and insurance companies subsidize this additional cost and are forced to foot the bill for extra time in the hospital, more specialized procedures, or longer treatment periods.

More over, pharmaceutical companies are beginning to link the price of their drugs to performance of patients. However, unlike similar programs found in the UK and Europe, rather than getting paid more for good results, pharmaceutical companies will grant PBMs and insurance providers bigger discounts if more people diligently take the drugs as prescribed. Since the discounts are tied directly to patient adherence, there is a huge incentive for PBMs and Health Insurance companies to push for patient compliance programs.

A system which creates incentives for consumers to adhere to their medication protocol offers huge direct cost savings for employers, insurance companies, and PBMs as well as additional indirect benefits to employers as their employees will be happier, healthier, and more productive.

Core Causes of Non-Adherence

After outlining some of the cost saving opportunities, its important to outline what the core causes of non-adherence are in society today.  A complete solution should work to address all four as part of a holistic program designed to motivate, educate and remind the patient about their medication.

  • Forgetfulness
  • Poor education / No incentives
  • No accountability
  • Inconvenience of getting a refill

What Works in Adherence

Specifically, the process for medication adherence is three fold:

  • Maintaining accurate medication history
  • Dispensing the Medication and providing the patient with medication information
  • Administering the medication at the right time, in the right dose, in the right way

Any system or reminder that works to help patients with any of the above processes can be considered part of an adherence program.

Beyond the potential health impact, the broader economic impact of this type of solution creates a wide variety of potential economic buyers for this type of solution beyond the end user – from employers to insurance companies to PBMs to pharmaceutical companies – the desire to keep the end consumer safe and healthy will generate a great market opportunity for a company in this space.

As always, please leave thoughts and feedback in the comment section.  To connect with me directly, please follow me on Twitter or directly email me via my page.

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I work for True Ventures, an early-stage venture capital fund with offices in San Francisco and Palo Alto. We partner with promising entrepreneurs at the earliest stages in the technology market providing hands-on management support to guide our portfolio companies through the challenges of early growth.