Behavioral Economics: Significant Growth Beyond The Pill

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Robin Robinson

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According to EY, the single biggest opportunity to improve health outcomes and reduce the growth in healthcare expenditures is behavior change. As a result, life-sciences companies must begin to think of themselves in the business of helping patients change their health behaviors, rather just than in the business of selling pills or devices. While some companies have begun to use behavioral economics (BE) as part of their compliance and adherence programs, there are larger implications for the industry’s business model that have yet to be addressed. “We are in the early days of applying behavioral economics to healthcare, and to its credit the pharma industry is beginning to look beyond the pill and experiment with patient services and apps,” says Gautam Jaggi, managing editor of life sciences thought leadership at EY. “The first place the industry is using behavioral economics is adherence.” By using behavioral economics to determine the best way to communicate and reach patients, pharma is hoping to stem the financial loss from patient nonadherence. “Nonadherence is a big challenge and a $290 million a year problem in the United States alone, so nipping it in the bud with BE is a win-win for everybody, but there are also other opportunities where behavioral economics could apply,” Mr. Jaggi says. While some companies in pharma have taken advantage of what Mr. Jaggi calls the low-hanging fruit of prevention and adherence, there are more opportunities especially for chronic diseases, to modify behavior across the spectrum of care. One of the reasons that pharma has been slow to the table is that not everyone in the industry is aware of these opportunities, and others may be having difficulty getting stakeholders onboard. Plus there is a big disconnect between the industry’s current business model and where its focus has to be to embrace BE. “Large organizations find it challenging to invest adequately in strategies that go beyond what has historically been their core business,” Mr. Jaggi says. “It is challenging for large mature companies to disrupt their business models and turn their focus from their traditional revenue source to opportunities that are removed from that. This is where the dots aren’t being connected. The industry has many changes to make before it will be in a position to use behavioral economics to drive business model innovation.” According to Daryl Travis, founding partner and CEO at Brandtrust, the pharma industry is still on pace with most industries in terms of applying behavioral economics principles, except for the financial services and insurance sectors, which are ahead of the curve. “We work across many leading industries and have found behavioral economics awareness and implementation to be much more prevalent in financial services and insurance sectors,” Mr. Travis says. “As behavioral economics awareness grows within pharma, the potential applications will gain momentum, but currently there is a lot of headroom and low-hanging fruit that could easily be realized.” Novartis and Sanofi are two of the very few companies that have implemented BE principles in their compliance and adherence programs. As more companies follow suit, Mr. Travis predicts that innovation and various applications will soon follow as a result of the increased awareness and greater realization of the benefits behavioral economics can provide. Behavior economics has been around in theory since the 1970s, but it has only gained mainstream implementation in the past decade, Mr. Jaggi says. Its application to healthcare is being driven by the combination of rising healthcare costs, the emergence of BE in the mainstream, and enabling technology. “The mainstream awareness of behavioral economics at the same time as the industry is trying to meet the huge challenge around healthcare costs makes this a very happy confluence,” he says. “The timing could not be better.” Mr. Jaggi predicts that the practice will continue to grow within the industry, because both the need and the opportunity are huge. “It seems inevitable that BE is going to grow because people have been trying to improve adherence for decades with little success,” he says. “Healthcare systems will have to focus on BE more, especially as incentives are changing in that direction.” According to Eric Althoff, head of Novartis global media relations, Novartis is one company that is embracing the principles of behavioral economics and applying them to its outcomes-oriented strategies in both clinical trials and external operations, which range from novel technologies to collaborative work within healthcare systems. “With the growing demand for healthcare and increasing patient expectations, the pharmaceutical industry has been undergoing a transition away from the traditional transactional approach, which centers on selling pills, toward a greater focus on bettering patient outcomes,” Mr. Althoff says. “Novartis has developed its focus to encourage improvements in treatment and adherence, and to facilitate treatment progress by making it easier for patients and physicians to monitor and assess results.” For example, Novartis is increasing transparency around clinical research through alliances with public and private institutions. By pooling knowledge and resources, researchers and doctors are given not only a better understanding of who is at risk for which diseases, but also knowledge of how to more effectively treat patients once affected. This awareness, in turn, can better guide physicians toward superior treatment regimens for their patients. Additionally, Novartis has worked to create new technologies, such as tablet programs and mobile apps, that strengthen caregiver communication and empower individuals to better manage their own health and monitor long-term outcomes. The American Academy of Family Physicians Foundation, with support from Sanofi US, launched a diabetes management program as a result of an innovative discussion held at the 2011 Behavioral Economics Roundtable on Diabetes. (See the digital edition, for exclusive bonus content.) Out of 50 cities, Birmingham, Ala., was selected to pilot the program, called Cities for Life. The city was selected because it has one of the highest rates of diabetes in the country and for its visible commitment to improving the lives of its citizens. Cities for Life has both a clinical and a community component. The clinical component includes local family medicine practices that refer patients living with or at risk for type 2 diabetes to patient navigators. The patient navigators have special training and an extensive knowledge of existing programs and services within the Birmingham community that can help patients manage their disease or reduce their risk for developing diabetes. The patient navigator works with patients to identify the best programs in their local areas, encourages program participation, and serves as a resource for patients in addition to their physician. A community-action team of more than 80 organizations have joined together for the community component of the program. They include local primary care, health, civic, business, faith, and media organizations. The community action team informs the local community through events and a free, customizable website called, which alerts people to the availability of programs and services in Birmingham. Principles Behind BE Several studies have already proven that applying the principles of behavioral economics to disease management can improve patient adherence and compliance. One study in Denmark — the Steno-2 study, which was a randomized, open, parallel trial undertaken by the Steno Diabetes Center in Copenhagen — showed that addressing several risk factors reasonably well actually pays greater dividends than doing one thing perfectly. The study reports that a key part of behavioral economics approaches to change behavior for better outcomes focuses on encouraging small, achievable goals. Progress with small steps reinforces them and encourages additional improvements. A good example of this principle is the Cities for Life program, says Edwin Fisher, Ph.D., professor of health behavior, University of North Carolina, and global director, Peers for Progress, American Academy of Family Physicians Foundation. Specifically, the program creates linkages between existing community resources and family physicians, ensuring that people living with diabetes or at risk for diabetes are aware of and have access to the programs they need to effectively manage their condition. “Within Cities for Life, the principle of small steps resulting in broader and larger ones is very much at play,” Dr. Fisher says. “People living with diabetes who may not have seen their disease as manageable are receiving encouragement and being pointed to community resources to help them start those small steps, such as joining a neighborhood walking group. Success in one area leads to success in others; this and the encouragement of family, health providers, friends, and the broader community can become a powerful cycle of change.” Jeff Elton, Ph.D., managing director, Accenture Life Sciences, agrees that successful patient adherence and compliance to treatment is through small, tightly integrated steps, which may lead to better outcomes for patients and the healthcare system, but also for the industry. “The thinking behind this approach is that by providing tools and encouragement for the patient’s own ability to manage care, it will increase patient activation and improve long-term health metrics,” Dr. Elton says. “The ability to more effectively engage patients will likely not only improve patient health but provide payers and health systems with less costly overall costs of care by avoiding emergency room visits, readmissions, and progression of disease to a more ‘expense state,’ with the further potential to generate value to pharmaceutical companies by increasing the adherence of patients who are beneficiaries of a company’s therapeutics.” According to Sanofi’s Dennis Urbaniak, VP and head of the U.S. diabetes patient-centered unit, the company is taking a leading role in the industry by applying the principles of behavioral economics to managing diabetes and helping physicians and patients to reach better health outcomes through the Cities for Life program. “Cities for Life links primary care practices to community resources by creating partnerships that increase potential for patient-centered care both inside and outside of the exam room,” Mr. Urbaniak says. “Patients living with diabetes or at risk for diabetes are benefitting from increased engagement with community resources. The primary care practices are also benefiting from these enhanced relationships.” However, encouraging patient adherence and activation is not a one-size-fits-all solution, Dr. Elton says. It requires stratifying patients, not only by disease state, but also by social and economic factors, as well as access to care. “Behavioral economics provides a new way of thinking about health and about the entire continuum of diabetes — medically, socially, and culturally,” Mr. Urbaniak says. “Healthcare stakeholders, particularly the pharmaceutical industry, must help create an environment that supports and constantly reaffirms healthy choices.” Despite Effectiveness, Challenges Stymie Industry Attempting to modify and predict patient behavior has always been a big challenge to the industry. “As a species, we have solved the most difficult challenges of infectious diseases, but our healthcare advances are in danger of being undone by what appears to be relatively easy challenges: eating healthy, exercising regularly, taking our medications on time,” Mr. Jaggi says. ”But these seemingly easy challenges have proved stubbornly hard to fix.” It is incredibly difficult to modify human behavior, but before the industry can get patients to change, companies must make some changes of their own. “Beyond the changes in strategy, stakeholders must also change their mindset around what will engage and motivate them to improve behavioral outcomes,” Mr. Jaggi says. “This is all relatively new for pharma. Companies have always worked closely with providers, but now they must get closer to patients and develop an understanding of the real end user.” The industry has always played a significant role in the treatment end of chronic diseases, and its new challenge will be to remain relevant throughout the patient journey. Companies will need relevant products and services for each stage — when the patient moves from being in the general population to being at risk, becoming diagnosed, gaining control of the disease, having relapses and comorbidities. “The challenge for companies is to remain connected across the whole spectrum,” Mr. Jaggi says. “As payers focus on prevention and better disease management — which are typically much more cost-efficient than treatment — pharma has to not just be in the pills business but learn how to participate across the entire span of the disease.” These care delivery solutions will allow companies to move from their reliance on products to potentially entering the market of product-plus-service to a model that is sustainable and scalable, Dr. Elton says. As large pharma companies engage in behavioral economic pilots to learn where unmet patient needs are and test innovative care delivery solutions to address these needs, they will be effecting change throughout the entire healthcare system. Besides looking beyond the pill, pharma will also have to expand its view of the patient. Programs will need to consider the many facets of a patient’s life, such as his or her community, family, caregiver, and healthcare provider. According to Dr. Fisher, behavioral economics and behavior science in general both recognize that rarely is there just one reason for any choice or action; behavior is determined by a number of factors ranging from communities to genetics. Dr. Fisher notes that it is important for industry to recognize that healthy communities, healthy behaviors, healthy lifestyles, and following a medicine regimen all go hand-in-hand. “The more communities encourage healthy lifestyles including healthy eating, physical activity, and nourishing social relationships, and the more individuals are able to adopt such lifestyles, the more they will also benefit from the medications they need,” he says. “It makes good sense for all of us to encourage the kinds of healthy communities and healthy lifestyles that will enable people to live healthier lives.” Pharmaceutical companies and physicians may also need to change their perceptions of the true value they bring to the patient. According to Dr. Elton, some companies tend to believe they bring ample resources to the partnership with their assets being the pill and information-focused care services. Along the same lines, providers have the bias that they offer high-value patient access and data. “The reality is, however, that the pill and data are only as valuable as their collective ability to generate practical insights on how to generate more value for the patient, provider, and payer,” Dr. Elton says. Dr. Elton adds that he has witnessed a rise in these types of collaborations and agrees that they are necessary for success. “Pharmaceutical companies alone cannot engage in behavioral economics to encourage patient behavioral change,” he says. “It requires coordination and close collaboration with providers, health systems, payers, and other patient services entities. Stakeholders are beginning to agree on the importance of this research, and collaborations are increasing in frequency and scope.” Dr. Elton also raises the challenge of legal and compliance restrictions in allowing ideas and concepts to advance to pilot or practice. It is not uncommon for pilot programs that look to test behavioral economic thinking to sit in legal review for several months, and as more collaborators are added across the continuum of care, this wait time increases significantly. “Many great hypotheses or new care management models have been brought forward, but one of the biggest challenges is the current restrictions on how different collaborators can come together,” he says. “While these restrictions are meant to protect patients, they may also have the unintended consequence of slowing the speed to market of new interventions and approaches that can improve patient health, decrease the costs of care, and improve provider and patient satisfaction. “This is still a new frontier, rapidly evolving, with the promise of assuring that needed therapeutic innovations can be accelerated to patients, increase their engagement, and increase the value realized by the healthcare system,” Dr. Elton concludes. But facing these daunting challenges is worth the effort, says Mr. Travis. A deeper understanding of cognition, biases, and decision science offers significant opportunities to improve compliance and adherence issues and will provide pertinent information to create and build greater brand preference. Using these approaches will also lead to greater awareness, understanding, and acceptance of various disease states, he says. Going forward, the understanding, application, and democratization of behavioral economics will improve health outcomes as new methods gain traction. “As we gain critical knowledge, we can construct better incentives to steer consumers toward healthier behaviors,” Mr. Jaggi says. “It is critical that we no longer create incentives based on how we think people behave, which is common sense, but rather based on validated empirical evidence about how they actually behave. Behavioral economics has shown repeatedly that, when it comes to human behavior, “common sense” is anything but. Those companies that crack the code of behavioral change will not only create tremendous growth opportunities for themselves, but will also positively contribute to society in significant ways.” The promise behind behavioral economic principles can bring big wins to all healthcare stakeholders. Behavioral Economics: Significant Growth Beyond The Pill Robin Robinson “Those who crack the behavior modification code will not only ­create tremendous growth ­opportunities for themselves but will positively contribute to ­society in significant ways. ” Gautam Jaggi / EY @GautamJaggi or @BE4HC “Behavioral economics provides a new way of thinking about health choices and about the ­entire continuum of ­diabetes — medically, ­socially, and culturally. ” Dennis Urbaniak / Sanofi US Broadening Behavioral Economics to Business Models Beyond the low-hanging fruit of compliance and ­adherence, pharma must also address the principles of behavioral economics in its business models. To achieve this, companies need to significantly extend their ­business models to be: » Data-centric to harness and monetize insights from data obtained from sensors, devices, social media threads, etc. » Behaviorally savvy to better understand and ­influence patient behaviors. » Experience-focused with personalization, mass ­customization, and an increased focus on industrial design. » Holistic with approaches that encompass the cycle of care and the life cycle of the patient. » Revenue-flexible as companies capture value in ­different ways, reflecting the changing ways in which they are creating and delivering value. Source: EY, Progressions: Global Life Sciences Report 2012. For more information, visit “It is important for industry to ­recognize that healthy ­communities, healthy behaviors, healthy lifestyles, and following a medicine regimen all go hand-in-hand.” Dr. Edwin Fisher American Academy of Family Physicians Foundation “Novartis is embracing the ­principles of behavioral ­economics and applying them to its ­outcomes-oriented strategies in both clinical trials and external operations. ” Eric Althoff / Novartis “As behavioral economics awareness grows within pharma, the potential applications will gain momentum, but currently there is a lot of ­­ low-hanging fruit that could easily be ­realized.” Daryl Travis / Brandtrust Five Steps to Enable Behavioral Changes To help patients adopt healthy lifestyles, ­companies can use behavioral economics levers through ­technologies, social networks, ­gamification, and contracts. A number of pilots and start-ups have creatively combined multiple behavioral levers to achieve significant ­improvements in household savings, drug ­adherence, weight loss, and exercise. To help patients process information in areas where there is considerable uncertainty and an overabundance of data, companies need to focus on communicating in clear and neutral ways. ­Individual preferences will need to be kept in mind, instead of aiming for a one-size-fits-all ­solution. These following five principles can be used as guidelines for implementing behavioral change: 1. Communicate clearly. Empower patients to make better decisions with relevant, concise, ­neutrally framed information. 2. Account for individuals’ preferences with ­customer segmentation, mass customization, and more. 3. Learn from behavioral economics, a field that has actionable insights on the behavioral levers that actually motivate patients. 4. Experiment and be flexible. There’s much to learn about patient behavior, but companies have a trove of information about their customers. 5. Extend your business model with more ­patient-centric value propositions and enduring ­relationships with customers. Source: EY, Progressions: Global Life Sciences Report 2012. For more information, visit Best Practices in Behavioral Economics Thought leaders offer best practices and examples that demonstrate the evolution of behavioral economics in the industry. Eric Althoff Head of Global Media Relations, ­Novartis Novartis is currently exploring technologies in clinical trials that allow for remote monitoring of drug safety and efficacy and encourage better patient compliance. These could improve patient outcomes by simultaneously encouraging ­patient adherence to treatment and allowing healthcare professionals to evaluate treatments and identify problems remotely and in real time. Some of Novartis’ most innovative work ­toward improving patient outcomes is being ­implemented throughout its chronic obstructive pulmonary disease (COPD) portfolio. Novartis is addressing the unmet needs of patients with COPD through a range of medicines, devices, and services. For example, the Breezhaler device, used by patients to administer treatment, provides multiple forms of feedback. It encourages ­compliance by allowing the patient to see when the capsule inserted into the inhaler is empty and emitting a distinctive sound and taste when ­administered properly. Novartis has also developed the Exelon Patch, the first and only transdermal therapy approved to treat all stages of Alzheimer’s disease that ­releases medication continuously for 24 hours making it a good alternative for patients who have trouble swallowing pills. By writing the date and time on the patch, caregivers also have ­visual reassurance of when the patient was last given the ­medication. Novartis also designed a ­mobile app, called the PatchMate App, to help keep track of when and where the patch was ­applied. This ­allows caregivers to better organize and record patients’ use of the patch, including when and where it was placed on the patient’s body. Edwin Fisher, Ph.D. Professor of Health Behavior, University of North Carolina; Global Director of Peers for Progress, AAFP Foundation The Cities for Life diabetes management ­program has already achieved a great level of success at the community level by hosting 36 local events and speaking engagements, ­reaching more than 7,400 people in the ­community and using six participating physicians to refer more than 160 patients to patient ­navigators. How does all of this come down to the ­individual and the behavioral economics of their choices and lifestyles? By making resources not only available but salient, by providing ­encouragement and assistance in accessing those resources, by linking all of this with ­encouragement from patients’ family doctors, and by wrapping it all with a community that ­understands diabetes better so it can encourage better diabetes care. By doing all of these things, Cities for Life brings incentives, opportunities, and facilitation together to help individuals make — and sustain — the choices that will advance their health. Gautam Jaggi Managing Editor of Life Sciences Thought ­Leadership, EY Life-sciences companies can learn from other ­sectors whose business models have been ­disrupted by similar forces. These sectors include newspapers, electronic gaming, retail trade and commercial banking. In these industries, ­information technology — a trend that is now disrupting health care — has empowered ­customers with transparent information and greater control, compelling companies to revamp their value propositions, change the relationship with the customer, and expand their sources of revenue. For example, the retail and advertising industries are leaders in using BE to become close to their customers and price and position their products. Pharma now needs to do the same, to understand the patient and design ­products and services around that understanding. It’s also important to appreciate that not all ­patients are identical. Each one has different ­preferences and medical decisions should not be made based on the masses. For example, three different doctors treating the same condition may prescribe three different interventions, none of which might be the patient’s preference. To empower patients to make decisions that ­reflect their own preferences and values, the ­industry and ­physicians need to communicate clearly in ways patients can understand. There is a lot that pharma can be doing in this area, but it is just getting started. Daryl Travis Founding Partner and CEO, Brandtrust For the past 15 years, we have ­routinely used ­social psychology and behavioral economics ­research methodologies to gain deeper ­understandings of the psychological and ­emotional motivations and barriers influencing clinicians and patients. We’ve discovered how emotional and psychological factors influence motivations and drive behaviors in more than 40 disease states and clinical specialty areas. These insights have revealed significant ­implications and advantages for marketing and brand positioning and, in some cases, led to behavior changes for adherence and how patients access various health and wellness ­services. Dennis Urbaniak VP, Head of U.S. Diabetes Patient Centered Unit, Sanofi US The Cities for Life diabetes management program is demonstrating and documenting the value of innovative approaches in working through the primary care setting in which most patients ­receive their care. The program then links patients to community resources that can help them ­sustain their daily diabetes management. As full program results are identified and evaluated in Birmingham, Ala., a new model for diabetes ­management can be developed for other ­communities across the country to follow. AAFP Foundation and Sanofi US’ Behavioral Economics Roundtable According to Dennis Urbaniak VP, head of U.S. diabetes patient centered unit at Sanofi US, the Behavioral Economics Roundtable on Diabetes was a valuable reminder that a holistic approach is necessary when managing diabetes. It requires behavior change among multiple players, including individuals living with diabetes, their families, their healthcare providers, hospitals, employers, communities, and policymakers. “Each one of these players is part of an intricate web of social, psychological, economic, and biological factors affecting individual health decisions,” Mr. Urbaniak says. “When it comes to health decisions, the roundtable reinforced the idea that behavioral economics can help explain why people make seemingly irrational decisions regarding their health.” BE practices also show how behaviors can be changed to improve health outcomes by suggesting incentives and other strategies for promoting healthier choices. One example discussed was the power of substitutes. “Simply asking people to give up foods they love to eat will not result in much success, but if you replace these behaviors with healthier but still attractive alternatives, it can lead to incremental progress,” he says. “Small changes across several behavioral measures add up to making a big difference over time, both at the individual and population levels.” Another event hosted by Cities for Life this past May brought together a diverse group of physicians, healthcare professionals, practice managers, diabetes educators, and faith-based, health and community organizations. This group discussed the importance of community collaboration and peer support and how to help those living with diabetes manage their disease outside of the doctor’s office. “The energy of this group and their recognition that, by collaborating, they can accomplish great things, was inspiring,” says Edwin Fisher, Ph.D., professor of health behavior at the University of North Carolina, and global director of Peers for Progress, American Academy of Family Physicians Foundation. “We think that we can make important contributions by helping to jump start, if you will, this kind of collaboration that will lead to organizations and leaders recognizing how they can build on each other’s resources and strengths to lead to a healthier community.” One of the greatest challenges of managing diabetes is that it is a 24/7 disease, he adds. People living with diabetes likely only see their primary care physician three to four times a year. Even if they spend six hours a year with their physician and clinical team, that leaves 8,760 hours each year in which they are largely on their own to manage their disease. During this time, individuals can turn to family members, colleagues, and other sources of community peer support to help them better manage their diabetes. For example, family members can help to encourage healthy eating, while colleagues can start walking groups during their lunch hour. “It’s this 24/7, 365-day-a-year environment of diabetes management that Cities for Life is looking to enhance and link with medical care to create a powerful collaboration for healthy lives and a healthy Birmingham,” Dr. Fisher says. The Cities for Life team has defined specific metrics to determine the success of the project and the AAFP National Research Network (NRN) will conduct practice-level evaluations. Measurement at participating physicians’ offices will include physician and staff interviews at baseline and endpoint to gauge satisfaction and/or areas for improvement with the program; perception of assistance for patients and evaluation of patient navigation model; site visits to collect process and workflow data; and evaluation of the referral and tracking system. At the patient level, the AAFP NRN will evaluate by conducting a historical review of patient charts from pre-Cities for Life to endpoint; a review typical clinical markers; A1C, random or fasting glucose levels, body mass index, blood pressure, and documentation of referral to program and follow-up; and baseline and endpoint patient surveys and/or one-on-one interviews to assess patients’ self-perception of self-efficacy and self-management skills. On June 2, 2011, the American Academy of Family Physicians Foundation hosted the ­Behavioral Economics Roundtable on Diabetes in Washington, D.C. The roundtable, made ­possible with support from Sanofi US, gathered more than 30 primary care physicians, ­diabetologists, behavioral economists, public health and behavioral scientists, government officials, and diabetes stakeholders to explore applications of behavioral economics to ­diabetes management and care. In addition, several NIH studies with strong behavioral science components have ­demonstrated the success of diabetes ­management. The Diabetes Control and ­Complications Trial showed that a coordinated, comprehensive approach to intensive diabetes management, including extensive patient ­education and support could improve patient adherence to complicated treatments and achieve substantial improvements in clinical status. The Diabetes Prevention Program ­illustrated that a modest amount of weight loss through dietary changes and increased ­physical activity sharply reduced the chances of people at increased risk of diabetes actually developing diabetes. To translate these findings into practice, the NIDDK, part of the NIH, and the CDC jointly created the National Diabetes Education ­Program, which includes participation by more than 200 health professionals, community ­organizations, consumer groups, and private-sector organizations that want to help address the problem of diabetes. Additionally, in 2010, the Affordable Care Act authorized the CDC to implement the National Diabetes Prevention Program and establish a network of evidence-based lifestyle intervention programs for those at high risk for developing type 2 diabetes. Critical to all the areas in which these ­programs have shown success are behavior and motivation. Source: AAFP Summary Report

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