A Model and Empirical Analysis of Patient Compliance and Persistence in Pharmaceuticals

We develop and estimate a stochastic model of patient compliance and persistence regarding pharmaceutical drugs. Persistence refers to whether a patient continues with therapy, i.e., whether the patient continues to obtain refills of the drug. Compliance refers to whether the customer obtains a refill on time, given he or she does in fact obtain a refill. We develop a simple stochastic model of these behaviors, drawing on models of customer value developed by Schmittlein, Morrison, and Colombo (1987) and Fader, Hardie, and Lee (2005). We estimate the model using patient-level data for 253 drugs and illustrate two applications: (1) We show how changes in drug characteristics would influence the number of days of therapy lost either through lack of persistence or lack of compliance, and (2) Show how the model could be used to identify patients who are at higher than average risk for losing therapy days due either to noncompliance or nonpersistence. We discuss implications of the work for researchers and practitioners. A Model and Empirical Analysis of Patient Compliance and Persistence in Pharmaceuticals Introduction The tendency of patients not to take their prescribed medications on a consistent and continuing basis has emerged as an issue of significant concern. This behavior has been reported to contribute to 125,000 premature deaths each year in the United States and an additional $100 billion in costs to the economy in terms of increased health care costs and lost productivity (Loden and Schooler 2000; Johnson and Bootman 1995). The result has been an active effort on the part of the health care industry to remedy the situation. These efforts include mechanical devices to monitor individual patients (Pharmaceutical Executive 2006) as well as better packaging to encourage adherence to the drug regimen. In a highly publicized move, CVS Pharmacy intends to use its data and marketing muscle to “get patients to take their pills” (Boyle 2009). The financial implication for pharmaceutical drug manufacturers is clear – to the extent that patients take their medications more consistently and continually, these companies stand to earn millions of dollars more in revenues. From a customer relationship management standpoint, increased patient diligence in taking their drugs increases customer retention and thus the lifetime value of the customer (CLV). Thus, from either a patient health standpoint or a company prosperity perspective there is a huge impetus to improve customer’s adherence to the instructions of their drug regimens. A first step in examining the issue is to note that “patient diligence in taking their drugs” consists of two distinct behaviors – “compliance” and “persistence”. Persistence means that the patient continues to refill the prescription, while nonpersistence means