Please login to the form below

Not currently logged in
Email:
Password:

Smart Thinking blog

Insights and expert advice on the key issues facing today’s pharma marketer

Externalities

Improving my health through your own behaviour is not easy

RK

Rohit Khanna

In today’s behavioural sciences-driven world, the prevailing thought is that by ‘nudging’ people to change their behaviour, we can get them to improve their own health. 

Eat better. Exercise more. Drink less alcohol. You get the picture. But what might be infinitely more important and insightful is that by getting people to change their behaviour, we can get them to improve your health. The economic principle that underpins this conceptual idea is referred to as an ‘externality’.

From a strict economic sense, we define externalities as scenarios in which the effect of producing or consuming goods or services imposes costs or benefits on others which are not reflected in the prices charged for those goods and services being provided.

In the world of public health and health policy, the practical implication of this definition is that sometimes the things people do have an effect on other people’s health. If those effects are positive effects, we deem the situation to have created a positive externality and, similarly, if the effect is negative, then we acknowledge a negative externality.

Let’s briefly look at two such examples. Suppose, for a moment, that I get an annual influenza vaccine or flu shot. While the vaccine largely protects me from getting the flu, it also protects you, to some degree, from contracting the flu virus from me. Hence, the act of my getting a flu vaccine grants you and others in my circle a level of herd immunity.

You accrue some level of protection against a virus because I have vaccinated myself. This is an example of a positive externality – a benefit that is extended to you by virtue of my behaviour. Conversely, let’s assume that I smoke cigarettes. And let’s assume that we live under the same roof.

The second- hand smoke from my smoking habit may deliver outcomes to you such as respiratory infections, or an increased risk of cardiovascular disease. In this situation, my behaviour inflicts a negative externality upon you and those around me.

Vaccine

That externalities are an everyday part of healthcare is not a new revelation. It is (always) the ‘how’ that matters the most. In other words, how do we get more people to engage in positive externality behaviours and less often in negative externality behaviours.

In most situations, the individual and societal benefits of increasing positive externalities or decreasing negative externalities are immense (imagine if everyone got vaccinated or quit smoking). The school of thought on how best to motivate such obvious positive externalities has always centred on subsidies/cost-sharing and free distribution.

Let’s give away insecticide-treated nets (ITNs) to prevent malaria or make vaccines free at the point of care. Uptake and usage are guaranteed to be massive – no? Sadly, this is not the case. The stark reality is that giving away things for free or imposing nominal user fees are not the sole determinant of whether people engage in a specific health-related behaviour. Individuals must value the good or service at a level that is tied to the externality.

And in the case of cost-sharing or subsidies, we must be careful that the amount we charge does not selectively screen out those individuals who place a high value on the goods or services but who can afford it the least. Public education is also needed in order to truly motivate some of these behavioural tendencies – often a challenge in jurisdictions with low literacy levels.

And we must consider access to healthcare as a critical component in the overall context of improving externality-related behaviours. Perhaps patients want to get a vaccine but doesn’t have reliable transport to get to their healthcare provider.

Additionally, nudging people’s behaviours to increase positive externalities through a financial mechanism that involves no ‘skin in the game’ for the patient may lead to a low willingness- to-pay in the future. After all, price does signal quality, which also impacts perceived value.

And certainly, we must consider that free-at-the- point-of-care models or high subsidy levels do have implications for other programmes within the health budget and diminish some level of reimbursement or cost recovery that may have potentially been (re)allocated elsewhere.

Externalities are critically important components of our health system. We don’t always refer to them by their ‘technical’ name, but we pay attention to them because of their potential massive impact on public health.


As we turn to behavioural approaches to help solve some of our most vexing healthcare problems, let’s keep in mind that improving my health outcomes by relying on your behaviour change is a tricky business.


The author wishes to acknowledge the work of Dr Meredith Rosenthal, Harvard T.H. Chan School of Public Health, who contributed to the writing of this column.

Rohit Khanna is the Managing Director of Catalytic Health, a healthcare communication, advertising & strategy agency. He can be reached at: rohit@catalytichealth.com

28th October 2019

From: Healthcare

Share

Featured jobs

Subscribe to our email news alerts

PMHub

Add my company
Create Health

A healthcare marketing agency that shares your passion for making things better. Our clients with solve real health problems every...

Latest intelligence

R&D protocol amendments
Rethinking trials: the pros and cons of protocol amendments
Protocol amendments occur often and can be beneficial, but the steps involved can be complex...
Using human insights to push healthcare communications forward
This blog highlights the value of human perspectives, showing how insights can propel healthcare communications forward to ultimately improve lives...
RWE Blog 4: The place of real-world evidence in the market access strategy
The fourth and final blog in our latest series focuses on market access strategy. This follows our evaluation of the role of real-world data (RWD) and real-world evidence (RWE) in...

Infographics