Questions over move from RX to OTC

With the growing cost of developing novel drugs combined with the fact that from year-to-year fewer such drugs are gaining regulatory approval, the use by pharmaceutical companies of lifecycle management (LCM) techniques is playing an ever-more important role in the increasingly cost-conscious pharma industry. During 2002-06, three times as many reformulated products were approved by the US FDA than novel entities*.

The advantages of LCM strategies are manifold, but are ultimately employed to either increase or prolong the revenues of a given brand. With reformulated products taking less time and therefore less money to develop (with clinical trials typically beginning in Phase III), LCM strategies have become an important tool used by Pharma, says Datamonitor pharmaceutical strategy senior analyst Alistair Sinclair. “Prescription to over-the-counter (Rx-to-OTC) switching is one such strategy employed to either enhance existing franchise revenues or protect branded revenues from generic competition. An Rx-to-OTC switch involves the reclassification of a prescription product as an OTC product by the relevant national regulatory authorizations,” he says.

Volume of OTC market declining in majority of seven major markets

Several key factors need to be considered before the implementation of an Rx-to-OTC strategy, Sinclair says. “Manufacturers need to carefully identify what products are suitable for an Rx-to-OTC switch, when in the lifecycle of the Rx product the switch should be initiated, and how to differentiate, price and position the OTC product.”

The present declining of sales volume in the OTC market is attributed to the rising prices of OTC medicines, having increased on average by 9.7% year-on-year between 2003 and 2007 (US and 5EU markets). If the trend continues not only will it impact the profits of OTC manufacturers, but also national cost-containment measures to reduce ever-mounting healthcare costs, Sinclair says. “It is only in the UK that the volume of OTC products sold has increased year-on-year between 2003 and 2007.

“This is likely driven by the fact that on average, the mean prices of commonly used OTC medicines are cheaper than the co-pay (prescription charge) for similar prescription medicines. However, in the remaining markets it appears that strategies employed to improve the awareness of, confidence in, and uptake of OTC products, at least before the end of 2007, have been largely unsuccessful,” he says.

While Rx-to-OTC switching is a useful tool for pharmaceutical manufacturers to squeeze revenue out of a declining drug or franchise, switching patients from Rx-to-OTC products is a practical cost-containment tool used by governments and payers to transfer the cost of a therapy to the patient. However, if governments and payers are to reduce their growing national healthcare costs through the implementation of Rx-to-OTC as a cost-containment measure, more investment is needed in the promotion of OTC medicines to healthcare professionals and the public alike.

“Unless the benefits of OTC medicines can be justified to these audiences”, Sinclair says, “the rising prices of OTC medicines as compared to Rx products could conceivably become the single most important factor limiting the growth potential of the OTC market, and will counteract awareness campaigns to promote OTC usage as a cost-saving initiative.”

Behind the counter - a future switching option in the US?

Officially two main classifications of medicine exist in the US; prescription medicines (Rx) and over-the-counter medicines (OTC). However, the FDA is giving consideration to the implementation of a third class - behind-the-counter (BTC) medicines, equivalent to the pharmacy-only status in the UK. As such, BTC drugs would be available without prescription, but only upon the authorization of the serving pharmacist.

While there are many pros and cons to the introduction of a BTC product status in the US, the question remains as to whether the FDA will actually introduce a BTC classification. To date, the agency has been cagey over its future intentions, Sinclair says.

“This is already the fourth time the agency has broached this subject in more than 30 years, after first addressing it in 1974.

“In a November 2007 press conference, FDA deputy commissioner for policy Randall Lutter inferred that there was no immediate plan to introduce a BTC classification.”

One potential opportunity to test the water in the US would be to implement a BTC pilot scheme, giving patients and pharmacists a trial run in participating in the new medicine classification scheme. This would enable the collection of a considerable volume of data and information on the effectiveness and suitability of the scheme, before the option of committing to a nationwide roll-out. However, the FDA is at present unable to comment on the implementation of such a suggestion, as no prior consideration to this proposal has been made.**

Consequently, whether the FDA will launch a BTC classification in the near future is uncertain. Nevertheless, looking longer-term, Datamonitor believes that it is inevitable that a BTC classification will be introduced into the US market, with the benefits outweighing the resistors.

Schering-Plough leads the market in terms of switched products

For a product to be considered for an Rx-to-OTC switch, it must possess a number of specific qualities that allow it to be obtained without prescription, and without pharmacist supervision. Several additional factors regarding the indication or symptoms at which a potential OTC drug is targeted must also be carefully considered by the manufacturer and the regulatory agencies. Consequently, the most frequently switched products from Rx-to-OTC in the US and UK markets between 2001 and 2007 include topical antifungals, antihistamines, anti-ulcerants and certain pain medications.

The leading initiators of these Rx-to-OTC switches have been Schering-Plough (seven OTC products), GlaxoSmithKline (six) and Johnson and Johnson (four), collectively responsible for half of the total number of Rx-to-OTC products launched between 2001 and 2007. The defining characteristics of these companies, Sinclair says, is that they are global market leaders, have broad drug portfolios consisting of numerous products targeted at the primary care market, have the capacity to assign sizable budgets to the marketing and promotional activities required to drive Rx-to-OTC switching, and have a strong history of brand lifecycle management.

“Going forward, Datamonitor estimates that if a BTC classification is introduced in the US, that $1 billion in sales of branded Rx drugs falling into the aforementioned product categories could be switched to OTC/BTC products in the next five years, confirming the commercial potential of Rx-to-OTC switching,” he says.

Notes

*315 reformulations versus 111 New Chemical Entities; NCEs. More bites at the apple, 2007; adapted from FDA CDER, 2007; http://www.fda.gov

**Transcript of FDA Press Conference on Behind the Counter Availability of Certain Drugs, 2007; http://www.fda.gov/bbs/transcripts/transcript111407_2.pdf

Related Research

Rx-to-OTC Strategies: Maximizing the Commercial Potential of an Rx-to-OTC Switch

Datamonitor's report Rx-to-OTC Strategies: Maximizing the Commercial Potential of an Rx-to-OTC Switch is a case study-based analysis of Rx-to-OTC strategies within the pharmaceutical industry, examining the varying success of such lifecycle management strategies recently employed in the US and EU markets, providing best practice recommendations.