Written by on May 30, 2014 in Insight - No comments


Over-the-counter (OTC) drugs can be an important aspect of self-empowered decision-making by patients. Hence, patients are taking increased control of health care decisions, especially for non-life threatening chronic conditions. It also reduces costs for government and private insurers by limiting physician services for routine care and patients pay directly for consumer medicines. The Food and Drug Administration (FDA) defines OTC drugs as safe and effective for use by the general public without a doctor’s prescription. [1] OTC drugs are mostly used for “mild” diseases and patients can make a reasonable decision themselves on which OTC medication to use. A prescription (Rx) drug requires a doctor’s authorization to purchase as these drugs are used for more “severe” diseases. [1] Switching patients from Rx-to-OTC is an interesting playing field for the pertinent stakeholders: patients, pharmaceutical companies and payers. Is Rx- to- OTC switch the next big thing?

PharmacistWEBThe advantage of OTC drugs is that when a patient makes the right self-diagnosis the OTC drug will likely provide a benefit if used according to instructions with a low risk of adverse events. However, problems arise in case of an incorrect self-diagnosis, which is delaying accurate diagnosis and treatment of serious illnesses by a healthcare professional, or when OTC drugs are used incorrectly or in combination with other drugs thereby increasing the risk of adverse events. [2, 3] In addition, the easy access gives potential for misuse and abuse. [3] It can also increase or decrease costs of treatment depending on the health insurance and the country.

OTC drug retail is a growing market, with sales of $33.1 billion in 2013, compared to only $14.1 billion in 2004. [4] Currently, 35% of adult American citizens are using OTC medications on a regular basis and there is a trend towards increased use as more drugs move from prescription to OTC status. [5] In 2008, for the first time ever, growth in the sales of OTCs surged significantly ahead of growth in the sales of Rx medicines. Now worth $98.5 billion globally, the OTC market continues to outgrow the pharmaceutical sector by a clear and consistent margin (Figure 1).

We have recently seen an example of pharmaceutical companies trying to increase their revenues on OTC drugs. Novartis and GlaxoSmithKline, two of the world’s top drug makers, have struck a multi-billion-dollar deal to join forces and reshape their businesses. The deal involves swapping assets and combining their consumer health units which also include OTC drugs. Novartis will acquire GSK’s cancer drugs business and sell its vaccines division, excluding the flu unit, to GSK. [6,7] GSK and Novartis will create a new world-leading Consumer Healthcare business with 2013 pro forma revenues of $11 billion. GSK will have majority control with an equity interest of 63.5%. [6] The goal of switching is the diversification of portfolios by expanding into consumer and OTC products, while addressing prescription market needs and simultaneously building stable and predictable revenue streams and managing the product lifecycle.

Figure 1. Year on year growth and OTC share of total pharma (Figure adapted from [8])


Rx vs. OTC drug

There are over 80 therapeutic categories of OTC drugs which can be grouped in 12 broad therapeutic classes (Table 1). [9, 10]

Table 1. Twelve broad therapeutic classes of OTC medications


The recent strategic joint venture between GSK and Novartis points out those pharmaceutical companies are actively pursuing consumer health as an area of diversification and growth. In 2012, $33 billion of sales was reported to have been lost as a result of expired patents. [11] It has been suggested that for the period between 2012 and 2018, more than $290 billion of sales will be at risk from patent expirations, with 2015 being the most crucial year for pharmaceutical companies. [11] There are several ways to maximize an Rx product future potential as it approaches its patent expiration. Pursuing a generic strategy, monetizing the assets of a mature established product and of course performing a switch from Rx to OTC are all valid strategies which involve strategic analyses and thinking.

Regulatory bodies are nowadays also more favorable towards switching than they have been in the past. For example there are now more than 700 OTC drugs in the USA that would have required a prescription only 20 years ago, according to the Consumer Healthcare Products Association (CHPA). [12] The FDA believes that there is an important trend towards consumer participation in their health care. [12] Improvements in the regulation process by European Medicines Agency (EMA) and the adoption of the centralized regulations of Rx-to-OTC switching in Europe have fuelled further growth in Europe as well. [13]

Rx-to OTC switching has a huge impact on the health care economy too. The greater availability of medicines over the counter saves payers approximately $20 billion each year, according to a 1997 study by the CHPA. [12] The $20 billion takes into account prescription drug costs, doctor visits, lost time from work, insurance costs, and travel. [12] In accordance, numerous economic studies investigating the effect of Rx-to-OTC switches have reported cost savings to society or payers. [14-29] For example, two studies suggested that the Rx-to-OTC switch of loratadine was cost effective for consumers, payers, and society as a whole. [27, 28] The study by Sullivan et al 2005 demonstrates that the Rx-to-OTC switch of loratadine resulted in cost savings for payers (in terms of prescription utilization and cost only); consumers facing no change in their prescription benefits significantly decreased utilization of prescription drug after the OTC availability of loratadine. [29] In contrast, one study reporting consumer cost data and medical service utilization argues that Rx-to-OTC switches of cromolyn, tioconazole, ketoconazole and terbinafine did not benefit patients financially or medically. [26]


Given the challenges that the pharmaceutical industry is facing in sustaining revenue streams, the consumer health care business is becoming a viable option for prolonging prescription product lifecycles by switching to OTC. Competition is growing and the markets are definitely on the move.

OTC medications represent a diverse group of widely available drugs which are considered safe and effective when used appropriately. OTC use is expected to continuously increase in the coming years. Whether switching from Rx to OTC is the new big thing is hard to predict, but for sure it is already ongoing and major players are getting involved in the OTC market which will eventually diversify and expand the portfolio of OTC drugs. This could eventually improve the quality and maybe even reduce the prices of existing OTC products.

By Goran Medic, Eline Huisman, Carla Vossen
Mapi – HEOR & Strategic Market Access, The Netherlands
Corresponding author: Goran Medic: gmedic@mapigroup.com


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