Irrationality: Looking at nonadherence through the lens of behavioral economics

BY Jim Frederick

Call it the triumph of irrationality over self-interest.

Healthcare experts and pharmacy leaders have been grappling with the challenge of patient nonadherence for decades. They’ve spent countless hours trying to understand why patients often don’t act in their own therapeutic best interests, even when they know the health risks they incur by failing to take their medicines as prescribed.

Pharmacy operators, in partnership with drug manufacturers, health plan payers, accountable care organizations, insurers, technology vendors, colleges of pharmacy and other health stakeholders have thrown an arsenal of automated tools, ideas and systems at the problem — automated refill reminders, personal follow-up by phone, medication synchronization programs, dosage-timer devices on pill bottles, etc. — with mixed results. The path from prescriber to proper drug utilization by patients, all the way through to the end of the medication therapy, is still fraught with pitfalls.

IMS Health calls it the “leaky bucket challenge,” and acknowledges the path to improved adherence is steep. This, despite the fact that most patients have been warned often enough and are aware of the risks nonadherence can pose to their long-term well-being and, in some cases, to their long-term survival.

So what’s going on? Some of the answers to the nonadherence puzzle can be found at the intersection of economics and psychology, in the science of behavioral economics, said Douglas Hough, PhD, associate scientist and associate director of the Master in Healthcare Management program at Johns Hopkins University’s Department of Health Policy and Management in the Bloomberg School of Public Health.

Established as a formal discipline only three decades ago, the theories behind behavioral economics help explain the gulf between rational and irrational behavior. And they could point the way to some promising approaches to improving medication adherence.

“People aren’t always rational,” said Hough, author of “Irrationality in Health Care: What Behavioral Economics Reveals About What We Do and Why.” “They may not act rationally in their own self-interest.”

That includes not filling newly written prescriptions, or failing to take medicines that are critically important to long-term health even after filling the script. “Patients are only filling 75% of the scripts they’re getting,” said Hough, who spoke at this year’s World Congress Summit to Improve Adherence and Enhance Patient Engagement. As for why, he added, “A standard economist would say, ‘They cost too much,’ or ‘There’s not a pharmacy nearby.’”

“Those are issues. But … if you take those issues away, there are still a lot of people who are not adherent,” the economist said. Behavioral economics provided some reasons why, by taking into account psychological factors and ways of thinking — often subconscious or automatic — that people frequently employ.

“Standard economics … assumes that everybody is rational — that they know what their preferences are, that they have full in formation, and … that everybody knows what they want, and that they go about getting it in a deliberate, thoughtful, logical way.”

“Behavioral economics says, ‘Not so fast,’” Hough said. “People are going to do things that a truly, full-time rational person would not do.”

Hough said all human beings employ both “System One” and “System Two” modes of thinking, a concept advanced by behavioral economist Daniel Kahneman, winner of the 2002 Nobel Prize in economics.

“System Two is the standard economist’s view of how people think: It’s deductive, deliberate, thoughtful; it takes a while; and it’s self-aware,” Hough said. “Economists for 150 years have presumed this is how people make decisions. But there’s also System One, which … is automatic thinking with rapid decision-making.”

System One thinking, Hough said, is “like driving a car; it’s just automatic. You know how to process the information.”

“With medication adherence, it’s incumbent on the profession to figure this out,” he said. “For the most part, taking medications is a System Two function. It involves rational, deductive thinking and … uses a lot of energy.”

“If, somehow, you can convert medication adherence to System One thinking, you’ve now made it easy. You’ve made it a habit. You just do it, like going to Star-bucks in the morning. You make it automatic,” he said.

To encourage patients to adhere to their drug regimens, Hough added, pharmacies also are going to have to counter what economists call “hyperbolic discounting.” The term refers to the tendency of most people to “discount the future … at a much higher rate than economists expected.”

“People really prefer the present to the future,” Hough said. “It makes it tough to encourage adherence because certain illnesses are asymptomatic, like high blood pressure or high cholesterol, in which you see the cost of taking the med, and the time and bother of opening up the pill bottle every day, and you don’t see any results. There’s no salience to it, as opposed to taking something like Celebrex or ibuprofen, where you feel better.”

“The thing to do is find a way to emphasize the short-term benefits of adherence,” Hough said. “It’s telling patients, ‘Here’s why your life is going to be better if you’re adherent to your medication, and not just because you’ll live a couple of years longer.’ The challenge is defining short-term benefits for drugs that truly have long-term benefits and that to the patient, have few short-term, salient benefits.”

“That’s why behavioral economics is not a magic bullet,” Hough said. “This is not going to take medication adherence from 50% to 100%. The best we’re trying to do is ‘silver buckshot.’”

One finding of behavioral economics that Hough said could be effective as an adherence tool is the concept of loss aversion. “People really hate to lose. In fact, if they lose ‘X,’ they’ll feel twice as bad as if they had gained ‘X,’” he said.

That means that the stick may be more effective than the carrot as a mechanism for getting patients to adhere to their medications. “How we can use that is … through the concept of a commitment device,” Hough said. “If patients have skin in the game, they’re going to be more committed to action than if they don’t.”

One such commitment device, he said, could be giving patients “an amount of money or a reward for being adherent. And if they aren’t, they’ll have to give the money back.”

Another potential adherence mechanism, Hough said, is “the power of the default.” For instance, establishing a default system through which people are automatically opted in for organ donation when they apply for a driver’s license — a system practiced by most European countries — as opposed to the default opt-out donation system in the United States, in which applicants have to check a box to agree to donating their organs.

In the pharmacy arena, that could apply to the automatic 90-day script renewals generated by some pharmacy benefit managers who operate mail-order pharmacies for their members. In those cases, Hough said, “The default is the drugs come unless you tell them to stop. It improves adherence.”

“We have enough evidence that these things work — not 100% of the time — but they’re most likely to move the needle on adherence,” Hough said. “These are some levers you might want to consider using.”


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Which area of the industry do you think Amazon's entry would shake up the most?

Connecting in real time

BY Rob Eder

I have long believed that the lines that traditionally divided one channel of retail from another are long gone. It’s almost like looking at the business through the Hubble telescope; like looking into the farthest reaches of the galaxy, the view is already ancient history.

And that was even before e-commerce was much of a factor.

In real time, I believe the relationship between the customer and the retailer is evolving at a rate much faster than our ability to measure it.

According to new research from PricewaterhouseCoopers, to optimize against today’s consumer requires a “total retail” view of the business.
“It’s more about customer centricity than channel centricity,” said Tom Johnson, advisory principal PwC Consumer Practice. “It drives the next level of a connected experience, which could play out in terms of personalization; it could include loyalty; it could start to include some customization.”

What has been largely overlooked, according to Johnson and the PwC research, is a need to reinvent the stores “around total retail and the customer-centric approach,” and with that, to maximize sales across all channels — stores, web, mobile and social.

Some eye-openers from the report:

  • Customers are reducing the number of brands they shop — both online and physical stores. Between 2012 and 2013, the number of consumers who said they only shopped with one retailer over the last 12 months through any channel climbed from 8% to 15%.
  • Favorite retailers are a dime-a-dozen. If their favorite retailer shut down their closest store, 42% of consumers said they would find the next closest retailer.
  • Consumers want two-way engagement when it comes to social media — they don’t want their favorite brand to just speak at them, but to hear them as well. That’s where customization can play a stronger role; 61% said attractive deals are what attract them to a brand’s social media presence.

That had me thinking about some other recent news — the agreement between Amazon and Twitter that will allow Twitter users to shop directly from posts on the micro-blogging site by replying with the hashtag “#AmazonCart.” It’s part of a push to add e-commerce options for Twitter advertisers, according to a Bloomberg report.

Twitter won’t make any money off the purchases, but it will keep users on the site longer, and also it will learn a lot more about its users’ interests and shopping habits. That will help it sell more ads long term.

Welcome to the word of total retail. Just don’t get used to it. Because by the time you do, it will have changed again.


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Which area of the industry do you think Amazon's entry would shake up the most?

Budweiser’s patriotic motif signals continuing support of military families

BY Ryan Chavis

ST. LOUIS — Budweiser’s limited-edition, red, white and blue cans and bottles have started arriving on store shelves just in time for Memorial Day. The packaging also marks the brand’s commitment to assisting military families: Budweiser and its wholesaler family will donate more than $3 million to the Folds of Honor Foundation.

Beginning now through Aug. 15, fans can enter a code contained inside specially marked packages of Budweiser on, which will trigger a $1 donation to Folds of Honor. Budweiser and its wholesalers have managed to raise almost $10 million for military families since first partnering with the organization in 2010.

"The most important thing we as Americans can do is let military families know we haven’t forgotten the sacrifices they and their loved ones have made for our freedom," said Major Dan Rooney, founder, Folds of Honor Foundation. "Thanks to the longstanding commitment of Budweiser and its network of wholesalers, thousands of people have been able to pursue their dreams and recognize achievements that may have before seemed impossible."

Budweiser also is encouraging consumers to support military families through a series of auctions on Bids can be placed on exclusive experiences from Budweiser, which range from a go-cart race with Kevin Harvick to tickets to a MLB All-Star game.

"Budweiser celebrates America and our military every single day, but this summer is especially important as we welcome thousands of troops home from overseas," said Brian Perkins, VP Budweiser. "Our ultimate goal is to make it possible for everyone to say thank you, whether it’s by triggering a donation to Folds of Honor with a case of Budweiser, bidding on an auction item or attending an event with the Budweiser Clydesdales. The sacrifices made by our military and their families are deserving of a nationwide salute."


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Which area of the industry do you think Amazon's entry would shake up the most?