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It’s Time to Let Pharma Use Rewards to Drive Adherence

How can we expect pharmaceutical companies to deliver greater value and improve health outcomes if we don’t allow them to take full advantage of financial rewards in driving medication adherence and related patient behavior? Consumers want them and virtually everyone in healthcare is allowed to offer them. Even Medicare!! Except pharmaceutical companies.  It’s time to change that.

There is little disagreement on the prevalence of non-adherence, the threat it poses to public health and the impact it has on the cost of health care. Consider:

  • 20% to 30% of first prescriptions are never filled
  • Half of the 3.2 billion annual prescriptions dispensed are not taken as prescribed
  • Only 51% of Americans treated for hypertension are adherent to their long-term therapy
  • About 25% to 50% of patients discontinue statins within one year of treatment initiation

If adherence improved, we could impact cost and save lives. Consider:

  • Direct cost estimated at $100 billion to $289 billion
  • The IMS Institute for Healthcare Informatics estimated that implementing improvements in medication adherence could mitigate $105.4 billion in avoidable costs
  • Lack of adherence causes approximately 125,000 deaths and at least 10% of hospitalizations
  • On average, non-adherent patients have higher health costs per year: $3,700 for diabetes, $3,900 for hypertension, and $7,800 for congestive heart failure
  • Adherence to diabetes medications alone could save $4.7 billion
  • Non-adherence to cardioprotective medications increased risk of hospitalizations (10% to 40%) and mortality (50% to 80%)

Sources: ; Osterberg 2005, NEJM; Ho 2009, Circulation; Choudhry 2011, N Engl J Med; Yeaw 2009, J Manag Care Pharm; Script Your Future press release, November 2, 2011; accessed here:

Every segment of healthcare recognizes the critical role that financial rewards and incentives play in driving patient and provider behavior.  (Be Healthy and Be Rewarded….Health Rewards Spreading To Every Corner of Healthcare, In each of these segments, regulators have recognized this fact and evolved the legislation and regulations to expand their use. This started with the provision in the Affordable Care Act expanding the use of rewards from 20 to 30 (and in the case of 50) percent of annual insurance premium. (Legislative History of Health Rewards – We’ve Come a Long Way Even in Medicare, which for decades had long-standing anti-reward rules due to concerns about consumer marketing practices, CMS in 2014 passed regulations expanding their use. CMS Long-Awaited Expansion of Medicare Rewards Adds Key Tool to Drive Behavior Change (

Not only are they being deployed in every other segment of healthcare, but they top the list of what consumers want from their pharmaceutical companies. According to an Accenture report entitled “Great Expectations: Why Pharma Companies Can’t Ignore Patient Services”, consumers ranked rewards as the top service they want from their pharmaceutical company. When asked “which of the following services would you like to receive from your pharmaceutical company?” rewards programs topped the list at 63 percent followed by product information (53%), financial assistance (51%) and measuring and tracking alerts (35%).


While 63 percent of the patients surveyed say they want to participate in customer rewards programs, only 10 percent say they have been offered the opportunity to do so. There are several reasons, but perhaps the most important is that under the current legal and regulatory framework, pharmaceutical companies view traditional reward programs as illegal.

The framework to allow pharmaceutical companies to use financial rewards can leverage some of the regulations currently in place.  Last year, when CMS loosened the regulations on rewards for Medicare (“Medicare Regulations”), they also expanded the use of rewards by retailers like Walgreens (“Retailer Regulations”).  Several concepts surfaced as pieces of one of both of  those regulations:

  • Rewardable Behaviors: the expansion of rewards to behaviors that addressed health or helps the consumer manage their health. This clearly included health promotion behaviors, and behaviors related to conditions but prohibited behaviors tied to the purchase of a service. For example, in the Medicare Regulations, rewards  may never be used to decrease cost-sharing or plan premiums or from charging enrollees of a plan different premiums or cost-sharing for the same service. Thus, a MA plan may not offer lower cost-sharing or premiums for plan benefits, as a reward or incentive.  Similarly, under the Retailer Regulations, a reward should not be conditioned on the purchase of goods or services reimbursed in whole or in part by a Federal health care program and should not treat federally reimbursable items and services in a manner that is different from that in which non-reimbursable items and services are treated. The treatment for pharma could be similar – rewarding behaviors that encourage health and adherence but are not tied to the purchase of the drug. For example, pharma could reward for participation in health management programs, using drug related resources (e.g., portals, education, call center coaches), adherence tools (e.g., schedulers, signing up for automatic refills)  and providing data (e.g., tracking activity, responding to surveys). They would not, however, be able to reward for purchase of the drug.
  • Dollar Values: both the Medicare Regulations and the Retailer Regulations did not set a maximum dollar value of rewards per year. They both leverage the concept that the value must be reasonable relative to the behavior to which the reward is tied. The Medicare Regultations require a value that “could reasonably be expected to affect enrollee behavior while not exceeding the value of the health-related service or activity itself.” The same standard could be applied to the behaviors related to medication adherence noted above.
  • Reward Types: while the Medicare Regulations prohibit cash rewards, the Retailer Regulations permit discounts, coupons, buy one get one free, rebate of a portion of a purchase price and “other rewards” such as free items or services, such as store merchandise, gasoline, frequent flyer miles. We would propose that the Medicare standard apply to pharma and that cash rewards be prohibited so as not to create any association with thee cost of the drug. The Medicare Regulations lay out adequate rewards such as gift cards and other loyalty rewards that would be sufficient for pharma to impact behavior.

In addition, some of the other concepts used in both the Medicare Regulations and the Retailer Regulations would apply. Most importantly, rewards would need to be offered to all similarly situated individuals and could not discriminate against any individual based on any health factor or demographic characteristic.

If we really want to solve the medication adherence problem, we need to provide pharmaceutucal companies and retailers with the flexibility to provide real financial rewards. While this has been taboo for some time in the pharmaceutical community, recent regulatory developments in other related and highly regulated areas of healthcare show the understanding of the need for this tool in addressing healthcare costs. Even in the highly regulated world of Medicare in which CMS has had a long standing anti-reward view due to marketing concerns, regulations were passed to provide for expanded use of rewards. Certainly there are more details to be worked out, such as the type of state prohibitions that exist in states such as Massachusetts, Rhode Island and Michigan. Nonetheless, we believe it is time to take the handcuffs off pharmaceutical companies and allow them to spend their dollar to improve medication adherence and drive the associated cost savings and health systems benefits. And if they happen to reap some of the $300 billion in lost revenue from non-adherence along the way, let’s just chalk it up the reality that with health reward programs, everyone wins.

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