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Going OTC in the USA

Posted on: 18 Oct 04


The OTC market has become highly competitive for pharmaceutical manufacturers, particularly in the US, which is the largest consumer society in the world. There have been a number of consolidations and acquisitions in the pharmaceutical sector to help companies boost their presence in the OTC field.


The FDA defines over-the-counter (OTC) products as drugs that are available to the consumer without a prescription. In the US there are currently 80 classes (therapeutic categories) of OTC drugs covering a wide range of health conditions (1). In total, there are 100,000 OTC drug products marketed in the US and as an OTC effectively shifts the control of healthcare to consumers, FDA has had to develop regulations to ensure that OTC products are properly labeled and that their benefits outweigh their risks (1). The FDA's Center for Drug Evaluation and Research (CDER) Division of Over-the-Counter Drug Products is the main point for the review of such products.


Rx-to-OTC switching

The movement of pharmaceuticals from prescription-only to OTC status, known as switching, is a key stage in the product lifecycle of a number of major pharmaceuticals. Switching a pharmaceutical product can extend its lifecycle, and must be accompanied by fresh pricing decisions relating to the new environment that the product is entering (2). Unlike prescription pharmaceuticals, OTC products are not overtly price regulated, and their price is fully visible to, and completely paid by, the consumer.


Since the early 1980s, this practice has developed into a major issue for ethical pharmaceutical companies, as a succession of high-profile prescription products have been switched to OTC status. Throughout this time, the definition of what makes a drug an appropriate candidate for switching has been extended considerably (2).


Growth of the US OTC sector

The OTC market has become highly competitive for pharmaceutical manufacturers, particularly in the US, which is the largest consumer society in the world (2). There have been a number of consolidations and acquisitions in the pharmaceutical sector to help companies boost their presence in the OTC field. As OTCs are more readily visible to the consumer there is a need to have a strong brand image and thus larger companies are in a more powerful position to market such products. Larger companies have the financial capability to launch nation-wide advertising campaigns, which smaller players will find difficult to emulate in the image-conscious US market.


After a period of unsteady performance, the OTC market has shown strong growth in the US during the last two years. A study by Euromonitor International found that in 2003 OTC sales in the US increased by 3.2% compared to the previous year and that the growth of the sector was bolstered by improvements in the US economy (3). Kline and Company carry out annual analyses of the US OTC sector and its figures suggested that between 2002 and 2003, the market grew by 5.2% (4). They estimated OTC sales at the manufacturer level to have been US$16.7 billion in 2002 and US$17.5 billion in 2003 (4). They concluded that the growth of the US OTC market between 2002 and 2003 was more than double the growth rate experienced by the sector during the 2001 to 2002 period (4).


The success of Schering-Plough's Claritin (loratadine) product family highlights the growing importance of the OTC sector to pharmaceutical companies. In 2002, the FDA approved Claritin as an OTC product. It had previously only been available on a prescription basis for seasonal allergic rhinitis, a condition that was estimated to affect between 10% and 30% of adults in the US (5). The decision was an important one as the FDA indicated that the drug had met criteria which deemed that the drug was sufficiently safe for use by consumers without direct prescriber supervision and that its labelling contained clear and understandable instructions. As a result of the switch, in 2003, the Claritin family brand had retails sales of over US$460 million and this helped propel a 90% growth in Schering-Plough's OTC sales during 2003 (4, 5). Procter & Gamble Co.'s heartburn medication, Prilosec (omeprazole), has been a similar OTC switch success story (6). The company markets the product under an agreement with AstraZeneca. In its first year on the US market, sales exceeded the company's own projections of US$200 million to US$400 million (6).


The US market has also evolved because of changing consumer attitudes. For example, one survey commissioned by the Consumer Healthcare Products Association (CHPA) in 2002 suggested that 75% of Americans would prefer self-diagnosis and treatment rather than seeing a physician for an appointment (7). Nevertheless, many consumers are influenced by their doctors on their choice of OTC product. According to a survey by Ipsos, nearly half of consumers who purchased Claritin OTC in its first six months on the market did so because of a doctor's recommendation (8).


Although the popularity of OTCs has grown, there has been renewed focus on ensuring that patients have the right information available to make better decisions about their health. Regulators in a number of countries have launched a series of education campaigns to provide consumers with better advice regarding OTCs. For example, in January 2004, the FDA launched a national education campaign focusing on OTC pain and fever remedies (9). The agency highlighted the importance of reading labels and consumers were warned against taking multiple medications containing the same ingredient at the same time as this could lead to the risk of an accidental overdose (9).



As the importance of the OTC market has grown, the question of the pricing of OTC drugs has become a key issue for many major pharmaceutical products. When pricing OTC drugs, although the pharmaceutical company has far more regulatory freedom than for prescription products, it must consider a number of other factors - not least among them the exposure of the consumer to the full price of the product (2). This is particularly crucial in the US market as companies are having to work harder than ever before to justify their prices to consumers. Although the OTC sector will grow in the US, its performance may be affected by consumer concerns over the pharmaceutical industry's role in healthcare. Pharmaceutical companies that can justify the commercialisation of their OTC products in line with social health objectives will be those that succeed most in the market.



1.    Anon (2003). Over-the-Counter Drug Products. FDA/Center for Drug Evaluation and Research. Division of Over-the-Counter Drug Products.


2.      Kermani F. (2000). Global Pharmaceutical Pricing: Strategic Issues and Practical Guidelines. Urch Publishing


3.    Anon (2004). US OTC market continues to show signs of rekindled growth. Euromonitor International.


4.    Anon (2004). U.S. OTC Market Showed Healthy Rebound in 2003, Reports Kline & Company. PR Newswire. 7 April 2004.


5.    Anon (2003). FDA Approves OTC Claritin. November 27, 2002. FDA Office of Public Affairs.


6.    Anon (2004). Prilosec OTC Exceeds P&G's First Year Sales Expectations. CNN/Money. 12 October 2004.


7.      Johnsen M. (2003). Optimizing OTC market potential - View from the Top'03: CHPA - Consumer Healthcare Products Association's priorities for 2003. Drug Store News,  20 January 2003.


8.    Anon (2003). Doctors Play Key Role in Sales of Non-Prescription Drugs. 17 September 2003. Ipsos-Insight. http://


9.    Anon (2004). FDA launches consumer campaign on safe use of OTC pain products. 22 January 2004.





Dr Faiz Kermani

Last updated on: 27/08/2010 11:40:18

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