External factors drive Rx-to-OTC switches

About 30% of top-performing OTC drugs today were once prescription-only medications, Dave Wendland, VP Hamacher Resource Group, noted during a videocast hosted by GMDC, titled “Rx-to-OTC: Getting it Right at Retail.”

“From a numbers standpoint, Rx-to-OTC switches contribute 13% of total OTC sales,” he said. “More importantly, it represents about 25% of OTC growth over the past five years. That’s why it’s a big deal. The growth within OTC between 2008 and 2009 was slightly more than 2%, whereas growth attributed to Rx-to-OTC switches was nearly 13%.”

Looking forward, there is a potential $36 billion book of business to be had out of future switches. 

There are a number of external factors that are helping to drive switch considerations, Wendland noted, including a growing and aging population, and an increased focus on consumer empowerment and education. “We are an aging population,” Wendland noted. “That means that more and more of us will be stricken with chronic conditions. More and more of us will require ongoing health care to treat the conditions and to keep us healthy in terms of our long-term care.”

The Affordable Care Act may be another driver behind switch, Wendland said. “The Affordable Care Act has provisions for preventive care, has more responsibility placed on the consumer and is interested in reducing overall healthcare costs,” he said. “All of that bodes well for the availability of additional OTC medicines.”

One factor manufacturers may want to consider in the Rx-to-OTC switch process is emerging consumer populations, including Hispanics and millennials. “If a manufacturer is considering an Rx-to-OTC switch, part of that consideration has to be how to ensure — regardless of native language [and] regardless of culture — how can [they get their] information reliably … into the hands of all populations,” he said. “The other emerging consumer is the millennial, the future of our country. This population is very technology savvy, very empowered with their health care, very interested in preventive care.”

“If consumers are able to self-diagnose, self-treat and self-manage, then the Food and Drug Administration looks favorably upon that switch,” Wendland said. “The FDA has recognized that consumers are committed to treating themselves and taking more responsibility for their own health care.” According to a study conducted by the Consumer Healthcare Products Association, 73% of Americans would rather treat themselves at home than see a doctor. 

Wendland noted that the FDA is open to more complex switch paradigms, provided the risk-benefit ratio continues to skew toward less risk and greater benefit. “There is increased demand by the FDA for safety and efficacy studies. Make no mistake, the FDA is committed to ensuring the safety and efficacious of drugs, and their availability in the stream,” Wendland said. 

A few years ago the FDA formed the NSURE panel — Non-prescription Safe Use Regulatory Expansion — to explore the benefit of using pharmacists as a resource in the switch of a medicine, to potentially implement such technology as healthcare kiosks in the switch of a medicine, and to realize the benefits of switching more medicines for chronic conditions. “There are retail trends occurring that the FDA is watching closely,” Wendland said. 

Perhaps the most important player in that mix is the pharmacist. “The pharmacist becomes a critical conduit to that patient. For the previous prescription-only patient, they will likely go to their pharmacist immediately and [ask], ‘Is this the same product? Does it have the same efficacy? Can I expect the same performance?’” Wendland said. “The pharmacist is their trusted adviser, [and] the pharmacist needs to maintain that continuity,” he said. Similarly, consumers who may for the first time be trying an over-the-counter product will engage the pharmacist. “The pharmacists are critical to this dynamic,” he said.

There are a number of examples of the benefits switched products have brought to the overall healthcare paradigm. Take nicotine replacement therapies, for example. There was a 150% to 200% increase in their purchase and use in the first year after the switch, Wendland said. “The indication is that there were consumers who were interested in quitting smoking, but had not [gotten] a prescription for that nicotine replacement therapy,” he said. “That has resulted in a $2 billion social benefit every year. That’s a big reason why OTCs are successful; it’s because of this movement from Rx-to-OTC that opens up the opportunity to consumers who heretofore had not been using the Rx-only product.” 

Another example is heartburn medicine; consumers save on average $174 per year in saved prescription costs and doctor visits, Wendland said citing CHPA statistics. “[That] has driven more than $750 million in savings in the healthcare system,” he said. 

A third example is vaginal yeast treatments. “When they were made over-the-counter, studies found that women were as accurate as their doctors in recognizing the recurrence of vaginal yeast infections,” Wendland said. “This goes to show that consumers indeed want to be empowered to make some good decisions, and they want access to products such as this.”

For retailers, there are three primary benefits of an Rx-to-OTC switch. First, the switch peaks consumer interest and brings them into the store. Second, there are collaborative advertising opportunities with manufacturers on promoting the switched products. And third, that increased foot traffic equates into potential add-on sales. As much as 50% of first-year volume of most switch products is sourced from the parent prescription product, Wendland noted. That means the other 50% are potential new patients to the category. “Those are three good reasons that retailers should pay attention to OTC conversion,” he said. 

“Execution, however, is [key],” Wendland said. There are the “four P’s” that every switch manufacturer should consider: Make sure they have the product available, priced right, placed on shelf properly and with a solid promotion campaign to support the switch. “Those ‘four P’s’ of retail cannot be overlooked. … It would be painfully apparent if they were overlooked in an OTC conversion,” he said. “The most successful OTC switches achieve 60% or higher distribution within eight weeks of product launch,” Wendland added.