In the recent Ernst & Young Life Sciences Annual Report Progressions (found here: www.ey.com/p12 ), my colleagues and I argue that the single biggest opportunity to improve health outcomes and reduce the growth in healthcare expenditures is behavior change.  As a result life sciences companies, and indeed all players in the health ecosystem, must consider themselves in the business of helping patients change their health behaviors.  We further make the case that as companies adapt their business models, much can learned from the emerging field of behavioral economics in designing effective solutions (product, service, education) that seek to improve patient behaviors.

To explore these concepts further, on June 4^th we hosted an interactive client seminar that featured Dr. George Lowenstein from Carnegie Mellon University, and Dr. Katrina Firlik and Tom Kottler, founders of the start-up company Healthprize.  Dr Lowenstein, along with colleagues at UPenn, Harvard, MIT and elsewhere, has conducted some of the foundational research in applying behavioral economics principles to health.  The team from Healthprize has launched a business that seeks to leverage some of the techniques that have emerged from this research to impact the “real world” issue of drug adherence.  

Dr. George Lowenstein, Carnegie Mellon University

My colleague Gautam Jaggi, the Managing Editor of Progressions, kicked of the session by laying the foundation for the need to change health behaviors – including the fact that 75% of all healthcare expenditures result from chronic diseases (many of which can be considered “lifestyle diseases”) and that behavior drives 50% of all health outcomes.  While many in the audience were part of teams tackling the challenge of drug adherence for their companies, the principles and techniques are more broadly relevant to helping patients manage their overall health – diet, adequate exercise, etc.  – and we believe will be an important tool to improve outcomes while helping reduce total healthcare expenditures. 

Dr. Lowenstein picked up the dialog by explaining that traditional economics is not well equipped to deal with problems caused by self-destructive behaviors because it assumes that people know what is best for themselves and are able to act on that understanding.  As such, economic theory holds that there is little need for intervention and the focus should be on providing information so that people can make informed choices that they believe are in their best interest.  In fact, the reality is quite different and Dr. Lowenstein  went on to explain how studies have shown that providing more information, for example on diet – from food labeling to calorie counts on restaurant menus – has had little impact on dietary choices , or at times has proven counterproductive. Why?  Because the big problem is not information (we usually know what the right choice is) but lack of self-control. 

Behavioral economics, on the other hand, starts from the premise that people often don’t know what is best for themselves or if they do, can’t implement.  The trick is to leverage the biases we all have – a bias for the present over the long-term, overweighting small probabilities, loss aversion, regret aversion etc. – to design programs that both engage individuals and nudge them towards improving their behaviors.  Dr. Lowenstein walked us through several case studies from his research (including a Warfarin adherence that is described in Progressions).  The findings to date are very promising and have generated a lot of interest, but from the overall discussion it was also clear that there are still many unanswered questions in applying the knowledge to the health space – for example do these techniques lead to habit formation or must they be continued in perpetuity?  Dr. Lowenstein commented that he was surprised how little of this type of research is conducted in a formal way (i.e. randomized trials) by companies in the industry.  This lead to a discussion of research priorities and how companies could productively reallocate a relatively small portion of their R&D budgets towards testing various techniques to modify patient behaviors that might late be scaled to have a meaningful impact on outcomes.  While there is perhaps an opportunity to include testing of behavioral economic techniques on patient behavior in drug clinical trials, a more practical approach would be to conduct such trials with approved products in “real world” settings, uncoupled from the structure of an FDA approved trial design.  Such an approach would allow for more adaptive approaches that extend beyond drug adherence to more holistic view of the patient.

The team from Healthprize then walked through their approach to improving drug adherence which employs multiple techniques designed around the known biases.  The basis of the program is self-reporting by patients that they have taken the medicines or refilled their prescriptions, tasks that earn the participants points towards various rewards.  The patient dashboard below provides other ways to earn points and to compete against other participants (see www.healthprize.com). Importantly the Healthprize system incorporates multiple techniques into the design of their system to maximize patient engagement (i.e a immediate feedback, point lotteries that play on our bias towards overweighting small probabilities, loss aversion, etc.).

All in all, it was a very engaging afternoon of discussion and learning. The techniques covered in the session have great promise to improve outcomes and reduce costs by encouraging patients to focus on effectively managing their conditions (or preventing them in the first place).  However, it is also clear that we are in the early days of understanding how best to implement this knowledge and the ultimate impact and sustainability of the resulting programs. Academics and companies across healthcare – life sciences companies, pharmacies, payors and providers – must continue to do research to better understand the patient and which techniques and approaches are truly scalable.  Ultimately, these players may find it necessary to collaborate to have the desired impact – both during the research and implementation phases.

We are also committed to continuing the conversation regarding this approach and to that end, Gautam Jaggi will be launching a dedicated Behavioral Economics in Health Blog in the next month.  Stay tuned.

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