OTC growth shows drug’s role in health care
While drug stores across North America have diversified their mix over the past few years, over-the-counter medications remain at the heart of most every pharmacy retailer’s efforts, helping to maintain the drug channel’s inherent value as a front-line healthcare provider and the outlet of choice for consumers suffering from a wide range of minor illnesses.
(For the full report, including charts and sales data, click here.)
According to the Consumer Healthcare Products Association, OTC medication sales are more than double what they were just six years ago. The association noted that without access to these products, more than 60 million people in the United States would not seek treatment for their illnesses.
Access to appropriate medicines without a prescription empowers consumers to take greater control over their self-care selections and provides tremendous public health benefits, the association said.
CHPA also noted, at a time when so much emphasis is being placed on controlling healthcare spending, OTCs have a significant impact on reducing the nation’s
healthcare costs.
Data from IRI showed that consumers across the country spent more than $40 billion on over-the-counter medications in the 52 weeks ended June 15. While some segments perform better in some years than in others — a mild winter can often mean a slowdown in the sale of cough-cold remedies — sales in most product areas continue to advance from year to year, showing that people put their trust in OTCs. In fact, CHPA said that its research showed that 89% of consumers say OTC medicines are an important part of their overall family health care.
Healthcare professionals are equally enthusiastic about nonprescription remedies, with 92% of physicians telling CHPA that they feel OTC medicines are effective, and 91% saying they are safe.
That trust is supported by the most recent sales data from IRI, where dollar volume in two-thirds of the 30 largest product areas increased over the 12 months ended June 15. The spikes in two of those categories — lip balm and nutritional/intrinsic health value bars — exceeded 11%.
In those categories where sales declined, the fall off in all but three instances was less than 2%.
Research shows that OTC drugs are playing a significant role in efforts to rein in spiraling healthcare costs. CHPA reported that nonprescription remedies save the nation’s healthcare system more than $102 billion a year, while using OTCs instead of a prescription product for the same illness provides $25 billion in savings.
Those who closely monitor the OTC market point out that as the nation’s primary care physician shortage continues and more patients seek ways to avoid seeing a doctor, OTCs comprise a larger portion of pharmaceutical companies’ sales.
According to Pfizer Consumer Health, OTCs now make up 8% of domestic pharma sales. IRI reported that the OTC market is growing between 4% and 5% each year, while sales of prescription drugs have been virtually flat for the past few years.
One of the main factors helping to drive the steady increase in OTC sales in recent years has been prescription-to-OTC switches. Over the past 40 years, more than 100 over-the-counter ingredients, strengths or indications have had their status switched from prescription to OTC. These switches have led to a wider range of options in antihistamines, pain relievers, heartburn reducers, nicotine-replacement therapies and vaginal yeast infection treatments.
In some instances, an Rx-to-OTC switch has caused sales in the related product area to skyrocket. For example, when the first nicotine replacement therapies went OTC in the late 1990s and early 2000s, there was a 150% to 200% increase in their purchase and use in the first year after the switches.
Since that time, sales of anti-smoking products have leveled off. While the most recent IRI data showed sales in the overall category as flat over the past year, the development of new delivery systems over the years has caused some category segments to flourish while others have taken a hit. The category’s two largest segments — antismoking gum and antismoking tablets — saw gains of 0.3% and 4.6%, respectively; while the once-popular anti-smoking patches fell by 6.8%.
Like many OTC categories, smoking cessation is now dominated by private-label products. Store brands are the top sellers in 4-of-the-6 anti-smoking segments and control at least 50% of the market.
Analysts say that the reasons behind private label’s rise is two-fold: the lingering effects of the economic downturn continue to force many shoppers to seek out lower-priced products, and the growing evidence that store-brand formulas are just as safe and effective as national brands has led more shoppers to opt for these lower-priced alternatives.
Private label accounts for more than 40% of all antacid tablet sales and more than half of all sales of antacid liquids and powders. In the tablets market, however, Rx-to-OTC switches continue to have a dramatic effect on sales. Since they began to attain over-the-counter status more than a dozen years ago, former prescription products like Zantac, Prilosec, Prevacid, Pepcid, Tagamet and Nexium have perennially dominated the category. IRI data showed that over the last 12 months, these brands accounted for more than a third of antacid tablet sales. In addition, many of the private-label products in the segment are generic versions of these formulas.
Researchers say that the proliferation of heartburn medicines that were once restricted to prescription-only has helped consumers save an average of $174 per year in avoided prescription costs and physician visits.
Similarly, store brands and a series of high-profile Rx-to-OTC switches over the past few years have altered the cold-allergy-sinus tablets market. The impact of these factors, however, may be waning. IRI data showed that private label’s share of dollar sales is the same as it was a year ago, and that its unit share has fallen by nearly 6%. Meanwhile, the former prescription-only brands that have shaken up the market in recent years — McNeil-PPC’s Zyrtec, Chattem’s Allegra and MSD Consumer Care’s Claritin — seem to have leveled off. Still, these brands have a combined market share close to 25%, about the same as a year ago.
While sales of antacid and heartburn relief formulas and cold-allergy-sinus products are measured in the billions of dollars every year, some of the greatest gains and declines in OTC sales are being seen in smaller product areas.
In the $93 million-a-year ear care category, for instance, sales increased by more than 20% over the 52 weeks ended June 15, according to IRI. Seven-of-the-20 best-selling brands, including private label, showed double-digit sales gains.
Similarly, sales of sleeping-aid liquids shot up by almost 24% for the 52 weeks with the introduction of several novel products and a meteoric rise in the sale of private-
label formulas fueling the growth of the $110 million category.
While the pace of Rx-to-OTC switches has slowed in recent years, a product that was once available only by prescription has the ability to create an entire new over-the-counter category, driving more patients into a store’s medication aisles.
The most recent case of this phenomenon was the FDA’s decision early last year to make Merck’s Oxytrol for Women available over the counter. The move created a new OTC category — urinary bladder control — in which Oxytrol, which generated more than $18.5 million in sales l