Emphasizing the value of OTC medicines
Is this the year that restrictions on the use of over-the-counter medicines in conjunction with a flexible savings account are lifted? If you consider the value proposition — the $102 billion saved each year by the use of OTC medicines — and that health care is moving toward a more value-based, outcomes-driven system, it would certainly seem so.
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“The FSA issue continues to be one of our top priorities if not our top priority from a legislative perspective,” Scott Melville, president and CEO for the Consumer Healthcare Products Association, told Drug Store News. “Ever since that law was enacted in 2011, [and] the ability for consumers to use their FSAs or HSAs to purchase OTC medicines was taken away, we pursued a strategy up on Capitol Hill to change that and to correct that wrong. Each year since then, we’ve had bipartisan and bicameral legislation introduced to reverse that provision,” he said. “When I speak to legislators on the Hill, uniformly they say, ‘That makes no sense.’ … We’re hopeful that with two years left in the president’s administration and a Congress that is likely to start moving legislation and sending it to him, that this will be at the top of the list for the kind of common sense reforms that President Obama has said that he’d be willing to consider.”
And “this makes absolutely no sense” is exactly what Sen. Erik Paulsen, R-Minn., said to fellow senators in introducing The Family Health Care Flexibility Act in March. “Instead of a top-down, one-size-fits-all healthcare system, we need solutions that provide patients with greater value, more choices and lower cost.”
“Families [today] have to waste more time and money jumping through Washington-mandated hoops just to access these accounts,” added Sen. John Barrasso, R-Minn. “We should be making it easier for families to pay for routine medical expenses, not harder.”
Emphasizing the value of OTC medicines is important because it represents the first line of healthcare defense for so many Americans. According to a Pfizer white paper released last year, as many as 81% of adults use OTC medicines as a first response to minor ailments. And one U.S. study analyzing the seven most common acute and chronic self-treatable conditions found that 92% of those who use OTC medicines in a given year would seek treatment elsewhere if OTCs were not available, which would result in a surge of office visits that would require 56,000 additional full-time healthcare practitioners to handle.
To that end, physicians recognize the value of OTC medicines, too. In a 2013 survey of U.S. primary care physicians, 75% would recommend an OTC product prior to prescribing a medicine to relieve their patients’ symptoms for ailments, such as allergies, pain, cough and cold, and acid reflux/upset stomach.
“[OTCs are] poised to play an even greater role in our nation’s evolving healthcare system as it continues to move toward a more value-based system, where incentives are changing with consumers being required to absorb more cost of their health care,” Melville said. “For every dollar a consumer spends on an OTC medicine, it saves the healthcare system $6 to $7 for a total of about $102 billion each year by avoiding unnecessary doctor appointments or by using less-expensive OTC medicines when it’s appropriate.”
Innovative switch products lift OTC sales
Five macro trends impacted sales of OTC medicines in 2014, Bob Sanders, EVP at IRI, shared with attendees of the Consumer Healthcare Products Association Annual Executive Conference in March. On the plus side, switch continues to drive considerable growth across OTC aisles — Rx-to-OTC accounted for 19% of OTC sales and 27% of growth in the past five years, and that trend is likely to continue, Sanders said. Also, self-care as a preventive measure toward better health is taking hold in the consumer psyche.
“Innovation in general is very, very key,” Sanders told Drug Store News in an interview following the conference. “If you look at past performances, innovation drove or was a major contributor to the nutritional growth we had realized over the past three years,” Sanders said, pointing to the recent surge in gummy vitamin sales from companies like Church & Dwight, for example. Another great example of innovation is Procter & Gamble’s ZzzQuil launch, Sanders said.
And while innovative switch products like Nasacort Allergy 24HR, Nexium 24 HR and most recently Flonase also help significantly boost OTC sales, there has been a lack of monograph-based innovation, Sanders said, which limits further growth potential. “In the monograph cookbook, what creative marketing [introductions] did companies come up with last year? The answer is not much,” Sanders said.
Another drag on OTC growth is a lack of trust in OTC safety and effectiveness due to the major recalls over the past several years, and more recently the attack on the herbal industry by New York Attorney General Eric Schneiderman. “Negative press on any front, [either OTC or VMS], or unavailability of the product that they use and trust … really impacts even greater uptick in the self-care trend,” Sanders said. “It is absolutely a barrier to greater acceptance and use of over-the-counter products and nutritionals as first-line therapy.”
Finally, there is the potential impact of the Affordable Care Act. An early read suggests growth of OTC use among participants of the ACA Health Exchanges is not as high as consumers not using the exchanges, Sanders noted. “They have options now. These are folks who were uninsured and their only option was over-the-counter,” he said. While that has changed with the implementation of ACA, it’s still too early to draw concrete conclusions, Sanders said. IRI will be tracking that trend longitudinally, he added.
According to IRI, sales of OTC medicines and natural supplements reached approximately $40 billion in 2014, representing 6.4% of total store sales. And OTC sales outpaced total store growth with a 2.8% lift vs. 2.2% growth overall. The top five categories — nutritionals ($9.7 billion), respiratory ($7.5 billion), analgesics ($4.4 billion), gastrointestinal ($4.3 billion) and first aid ($3 billion) — represented 75% of total OTC category sales. The key growth leaders in OTC are respiratory (4.7%), sleep (4.4%), gastrointestinal (4.2%) and first aid (3.3%).