According to a well-known World Health Organization report, only 50 percent of patients suffering from chronic diseases take their medications as prescribed, and, given a general lack of resources in low- and middle-income countries, drug adherence rates in much of the world are assumed to be much worse.
Stanford Graduate School of Business Assistant Professor of Economics Claudie Allende Santa Cruz, a King Center on Global Development faculty affiliate, hopes to change that with forthcoming research on pharmaceutical drug purchases in her native Chile. The stakes could not be higher.
“This is a life-or-death issue in many cases,” Allende explains. “If you need to take anti-depressants or hypertension drugs, you can die if you don’t.”
One major barrier to drug adherence is price. When people feel medicine is too expensive, they just don’t buy it. In this area in particular, Allende’s work shows promise, as it will analyze the effectiveness of an online platform that lets consumers compare prices for the drugs they need. In August, she and her co-authors, Stanford Assistant Professor of Economics José Ignacio Cuesta and University of Pennsylvania economics professor Juan Pablo Atal, signed data sharing agreements with the platform, called Yapp, and health insurance companies in Chile. Pairing insurance claims information with drug purchases will allow her team to track health outcomes of individuals.
“We’re very excited,” Allende says. “These companies were really willing to collaborate; they’re interested in learning more about how to improve people’s lives. The stars aligned, in some sense.”
Allende is a microeconomist who studies markets in which public and private providers compete in environments with substantial subsidies and regulation. In addition to health care, her work has examined the education and transportation sectors. Her ongoing research on pharmaceutical drugs in Chile is a perfect fit for that focus. She and her co-authors, who met as undergraduates in Chile, decided to collaborate after their country passed a new law allowing pharmacies to take advantage of the government’s buying powers to purchase certain drugs at lower prices, which they can then pass on to consumers.
“We thought, ‘Wow, this can really change people’s lives,” Allende says.
But Allende and her team wanted to test whether the law would have an impact. She knew from her previous experience in the Chilean government that even well-intentioned polices don’t always work as anticipated. After graduating from Pontificia Universidad Católica de Chile with bachelor’s and master’s degrees in economics in 2010 and 2012, she served as an economist for Chile’s antitrust court and as an advisor to the education department where she worked on a project to provide students with more information about universities and their degree programs.
“That training was very important to me,” she says. “Markets have frictions. Sometimes policies don’t work as they should.”
In her new research, Allende wants to understand why people don’t buy drugs at lower prices if they have the option of doing so.
“Like many Chilean economists of our generation, Claudia and I grew up at a time in which market failures and the design of public policies to address them were critical challenges in our country,” Cuesta says. “A lot of our work is broadly motivated by such challenges and consists of trying to improve our understanding of the implications of market failures and building empirical evidence for them, in cases in which credible and generalizable evidence is lacking.”
Several factors are at play when it comes to the problem of pharmaceutical adherence, Allende explains. First, people might not know about the option of cheaper drugs—in other words, there is a lack of information. Second, people may be biased against generic drugs, in cases when they are the more affordable option, even though the benefits of such drugs are the same. Third, people may not understand how to take their medicines.
After they analyze the data from insurers and Yapp, Allende and her team, including two researchers she was able to hire in Chile with funding from the King Center, hope to design interventions to combat each of these problems. Possibilities include providing more information about drugs and their effectiveness and sending reminders to people to prompt them to renew their prescriptions.
“We’re trying to understand, from an economics perspective, what is preventing people from taking their drugs, so we can design policies that break through that problem,” she says.
Allende, who earned her PhD in economics and education from Columbia University in 2020 and joined GSB in 2021, says she knew about the King Center before she arrived at Stanford and was eager to tap into the community there.
“People who work in development know about the King Center,” she says. “It was very natural to connect.”
Allende says she was drawn to business and economics generally because of their power to analyze public policy in “a scientific and quantitative way.”
“I like not only having ideas but testing those ideas in the real world to see what works in practice,” she says. “That combination fascinates me.”
She is particularly interested in areas in which the private and public sector can collaborate, as pharmacies and the government are doing in Chile to help lower drug prices.
“This is a very interesting idea to explore for development,” she says.
It’s also one she tries to impart to her students.
“I tell my students, ‘Do you really want to find a way to deliver foods to rich people slightly faster?’” she says. “Or maybe you want to improve health care in developing countries or make education more efficient? I see a lot of potential for the private sector to provide innovation in these areas.”