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Volume 39, Issue 5
Op-Ed: The best way to capitalize on the potential revenue influx from enterprise-level drug adherence programs is to create room at the executive table for a Chief Adherence Officer.
The pharma revenue engine is stalling. A full 78% of Americans, according to the Kaiser Health Tracking Poll, say drug companies making too much money is a “major reason” why their healthcare costs have been rising, up from 62% who felt that way in 2014. The political winds have shifted and the risk of backlash is real.
Winning in a post-price-hike world
Price increases contributed a staggering $14 billion of the $23 billion in sales growth for the 45 top-selling medicines from 2014-2017, according to an analysis by research firm Leerink. Take away price hikes and you take away 61% of the growth in US sales for those 45 medicines over that three-year period.
It may be nearing last call for the price hike party and time for pharmaceutical leaders to mine new, more sustainable sources of revenue growth. Medication adherence has emerged as a viable and largely untapped source of revenue and earnings per share (EPS) growth for pharma.
Medication adherence is pharma’s new golden goose
Drug manufacturers lose an estimated $637 billion globally and $250 billion in the US each year from patients not taking their medications as prescribed. Recent analysis from Credit Suisse of the 21 largest pharma companies found that improved medication adherence has the potential to be one of the industry’s most important growth drivers over the next seven years.
According to that analysis, enterprise-level adherence programs could, for example, increase Sanofi’s revenue by up to 12% and EPS by 20% between 2020 and 2026. Adherence could drive revenue up 29% for Novo Nordisk between 2020 and 2026.
So how do we take these growth numbers off the pages of the Credit Suisse analysis and onto the balance sheets of pharma?
Introducing the chief adherence officer
The best way to capitalize on the medication adherence revenue opportunity is to designate a chief adherence officer (CAO) to lead the charge in a post-price-hike, outcomes-based world.
The chief adherence officer would report to the CEO and be connected to the board of directors. The CAO would be empowered with a material budget and P&L responsibilities, and would own enterprise-level adherence initiatives and not just brand-level, tactical projects.
CAOs would connect initiatives to revenue and outcome metrics and lead strategic, corporate-wide patient engagement initiatives to improve adherence. Their mandate would be to deliver scalable revenue growth and improve patient outcomes across brands and portfolios.
In addition, the CAO would have one of the most influential seats at the executive table because of their impact not just on company finances, but on other parts of the business, such as digital transformation.
Chief adherence officers play well with others
Organizational tension between departments tends to manifest itself acutely in the C-suite, yet a chief adherence officer, due to the additive nature of adherence programs, would bring a new dynamic to executive relationships.
Chief medical officers (CMOs) would love partnering with the adherence lead because of the widespread improvement to patient outcomes from increased adherence. Chief financial officers (CFOs) would cherish the ROI of adherence programs because the growth comes at a relatively low cost compared to the billions spent on new drugs or marketing to HCPs to get prescriptions written.
CEOs would be thrilled to kick-off an earnings call by announcing that their company was the first to deliver the “Pharmaceutical Triple Aim” of increased revenue, improved patient outcomes, and lower overall healthcare costs through a robust, enterprise-wide adherence program.
The benefits of an executive-level adherence leader
A C-level adherence executive could wring revenue from across the entire enterprise. They would weave together various brand-level projects into a company-wide program that scales adherence benefits across the firm. Even a small lift in adherence rates scaled across the enterprise has a powerful impact on total revenue and EPS.
If drug companies are allowed to raise prices every year, they will. This fact is not lost on regulators and consumers, nor is it lost on the pharma C-suite. Yet for those leaders that seek the Pharmaceutical Triple Aim, imagine the positive impact even a portion of the $637 billion of revenue lost annually to non-adherence would have, solely by having patients take their medication as prescribed.
Change starts at the top, and for pharma that means creating room at the table for a chief adherence officer.
Tom Kottler is Co-Founder and CEO of HealthPrize Technologies