ESMED small

A quantitative analysis of risk-sharing agreements with patient compliance programs for improving adherence in chronic diseases

Adherence to medication, especially in chronic diseases, is a big challenge for patients, drugmakers, and payers. To promote adherence, patient compliance programs have been developed by either drugmakers or payers, and most recently by a collaborative effort of both. In this paper, we consider such a compliance program run by the payer under an innovative form of risk-sharing agreement in which a drugmaker provides a discount to the payer if the adherence exceeds a certain threshold. It is the opposite of a traditional performance-based risk-sharing, in which a drugmaker provides a discount if the drug performance is below a certain standard. Both the payer and the drugmaker can benefit from this agreement: the payer can have more patients being cured and the drugmaker can sell more drugs. We develop a multi-stage sequential game to investigate how to promote patient adherence, what type of risk-sharing agreement should be used, and how prices are negotiated and determined under various situations. We also compare different pricing policies and their impacts on patients, payers, drugmakers as well as on the society. It is the first theoretical exploration of patient compliance programs under a risk-sharing agreement. Our analysis not only contributes to the literature but also provides managerial insights into how to improve patients’ health, drugmakers’ profit, payers’ utility, and social welfare, as well as how to balance the conflicted interest of different parties.