Counter Balance

Prescription drugs switching to over-the-counter (OTC) status represent a huge opportunity for consumers and retailers. For consumers, the opportunity to bypass a physician’s visit and safely self-medicate with a product once available only by prescription is a big plus in a market where self-care is a growing trend.

For retailers, newly switched products offer an opportunity to capture prescription consumers as well as to attract new users to specific OTC categories. “Rx-to-OTC switches introduce new molecules to existing categories [and] create new categories in the OTC market, so they bring new users into that space,” says David Spangler, SVP of policy at the Washington, D.C.-based Consumer Healthcare Products Association (CHPA). Spangler adds that switches can have a huge impact on the category. “Growth of the OTC category overall is up around 4 percent,” he notes. “The upper-respiratory segment, which has seen a number of switches over the past few years, is up 8 percent.”

“Switches have the potential to drive significant value to the OTC category,” affirms Bob Sanders, EVP and practice leader at Chicago-based IRI. “Blockbuster switches Nexium and Flonase each contributed $300 million in sales to the OTC category. It’s hard to develop that kind of growth though any other mechanism.”

Laura Mahecha, industry manager for health care at Parsippany, N.J.-based Kline & Co., says that while the industry is not seeing as many switches, the products that do make the switch are significant. “There’s a huge investment required for switch approval, so companies are choosy about what they put forward,” she observes. That means that, more often than not, switched products become significant drivers in their categories.

Opportunity for Growth

For retailers, particularly in the food and mass channels, switched products provide an opportunity to gain incremental business. “Since switches give retailers one big chance to grab a disproportionate share of the business in that segment, their goal right out of the gate should be to grab those consumers by creating buzz and awareness in the store even before the product is on the shelf,” says Sanders.

But while some supermarket retailers do a great job giving recent switches a front-and-center position, he asserts, others view the OTC category overall as a convenience rather than a strategic category, and so miss an opportunity to bring new consumers to their HBW aisles.

“With OTC and nutritional products growing at four times the rate of other categories in the supermarket, committing to the OTC business and focusing on switches in a strategic way can allow these retailers to really grow their business,” notes Sanders. “Making sure they get their share of products like Nexium and Flonase, which were billion-dollar businesses as prescriptions, are big opportunities they should not miss.”

While there weren’t any blockbuster switches in 2016, although Bayer Group launched a new OTC product, Clairspray, in 2016 that contains the same ingredient as Flonase and taps into the Claritin brand franchise, the active allergy category saw one new Rx-to-OTC introduction, Johnson & Johnson’s Rhinocort, in February 2016. The launch joins a category that has seen plenty of action with Sanofi’s Nasacort switch in 2014 and GlaxoSmithKline’s going the OTC route with Flonase in 2015.

“The switch of those nasal sprays created a new subclass of products in the allergy category, so they had a big impact on the category,” points out Kyle Lentz, HBC category analyst at Waukesha, Wis.-based Hamacher Resource Group. Rather than cannibalizing sales of existing allergy products, the new products created a lift for the entire category. “When the nasal spray switches entered the market, unit sales did not decline,” says Lenz. “The new products opened up additional sales in the category.”

Building Awareness

Retailers that support these launches quickly win big. “It’s crucial that retailers build awareness and excitement for these products in the critical first six months of distribution, when all the marketing and couponing is taking place,” asserts Lentz. “Retailers need to have the product on shelves from day one to secure that customer.”

Critical point-of-purchase materials usually include “ask your pharmacist” signage — a key element for effective merchandising of these products. “A lion’s share of sales of these products occur in locations with a pharmacist, making effective selling a challenge in locations that don’t have a pharmacy,” says Lentz. Quick-response codes that direct consumers to educational web pages when scanned or on-shelf videos are one solution.

“Quick-response codes, apps and interactive on-shelf materials are all product-plus concepts that are going to be more important going forward,” notes CHPA’s Spangler.

Those in-store educational tools and the availability of a pharmacist to answer consumer questions could be important for several prescription products that are considered candidates for a switch.

According to IRI’s Sanders, switches such as Nexium, the proton pump inhibitor that switched in 2014, and others that launched prior, like Prilosec, proved that the products were safe and effective, and that consumers could self-select when it came to treating chronic conditions. “That was a real departure for the FDA and should pave the way for other drugs,” he says. “The future of switches has got to include new categories.”

What’s Next?

An innovations-in-pharmacy study designed to determine which prescription drugs pharmacists feel have safety profiles that warrant a switch to OTC status revealed that among the pharmacists surveyed, oral contraceptives were the most frequently cited category, followed by the asthma drug albuterol and Mylan’s epinephrine autoinjector epi-pen for the treatment of anaphylaxis.

While the switch of oral contraceptives represents a huge market, it would be fraught with political challenges. The switch of the lifesaving drugs albuterol and epinephrine would be more likely.

Erectile dysfunction (ED) drugs are another category that may be poised for switched status. Eli Lilly’s Cialis loses patent protection in 2017, Bayer Group’s patent on Levitra expires in 2018, and Pfzer’s Viagra loses protection in 2020.

While switched status for ED drugs could be a challenge due to contraindications in men with heart disease and concerns about inappropriate use of the products, the medications represent multimillion-dollar potential if switched. “ED drugs are the biggest potential market for switches,” affirms Sanders.

The bladder control drug oxybutynin, which was partially switched in 2013 as an OTC transdermal patch marketed by Merck as Oxytrol for Women, is another drug that’s being discussed. While the transdermal patch failed to gain traction, a pill delivery system supported with adequate pharmacist and consumer education and a strong marketing and advertising program could succeed where the earlier product failed.

“Bladder control continues to be an unmet need, with many consumers affected and few products to address the problem,” observes Sanders.

Other categories likely to see switched products in the near future are drugs used to treat acne, eczema, migraine and sleep issues, as well as topical analgesics such as Novartis’ Voltaren.

“Since switches give retailers one big chance to grab a disproportionate share of the business in that segment, their goal right out of the gate should be to grab those consumers by creating buzz and awareness in the store even before the product is on the shelf.”
—Bob Sanders, IRI