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%).