Self-care and the resulting increased use of over-the-counter (OTC) medications is a growing global trend. The United States is one of the few western countries where OTC medications are available through online markets such as Amazon and retail giants CVS, Walmart, Walgreens and Target. The widespread availability of OTC medication on the shelf of retail stores and pharmacies, along with the convenience of online shopping in e-commerce marketplaces such as Instacart and Amazon, has made the U.S. the largest OTC drug market in the world.1 The FDA regulates over 300,000 marketed OTC drug products in over 80 therapeutic categories ranging from acne to cold and cough and allergy medications. In the past 30 years, the FDA has converted more than 700 prescription (Rx) products to OTC status, and this number will only increase over time. OTC popularity is growing for many reasons, in part due to rising prescription drug costs and increasing patient-access challenges presented by payers. Additionally, there is the real, albeit unfortunate, rise in certain disorders, such as those related to stress, pain, anxiety, sleep problems and skin conditions.
The popularity of OTCs and the highly competitive landscape of the OTC drug market led to the creation of private-label OTCs, which refers to a product sold under the name of the retailer rather than that of the manufacturer. Stores, online or otherwise, often sell private-label OTC products at lower prices than the pharmaceutical company's manufactured product, hence their growing popularity with today's budget-conscious society.
The private-label OTC landscape
Today's consumers want 24/7 access to healthcare options, and OTC medicines provide this. Eight in 10 consumers use OTC medicines to relieve their symptoms from a wide range of illnesses without having to see a healthcare professional, and over 90% of physicians believe OTCs to be both safe and effective.2 With the advent of private-label OTCs, the choices for consumers are immense, and the availability is virtually instantaneous with e-commerce retail platforms. A recent study reported that 81% of North American consumers prefer private-label products due to the reduced price tags they carry. In the U.S., 25% of OTC sales currently occur online, and this is expected to increase as consumers' desire for convenience, multiple product options and the ability to price compare will fuel its growth. Major product categories can cover almost all therapeutic categories, including smoking cessation, pain, cough and cold, and gastrointestinal remedies. Private-label products are gaining popularity; in fact, data shows that in 2018, approximately two-thirds of smoking cessation-patch sales and 30% of sleep-aid sales were from private-label OTCs.3
According to a 2019 report by Gartner, private-label OTC-product unit sales across retailers increased year over year by an astounding 93%, whereas pharmaceutical-brand unit sales paled in comparison, with an increase of less than 60%.4 Additionally, retailers showed favoritism toward private-label brands in Google Shopping ads and search results on their respective platforms, and healthcare reference sites such as WebMD continued to enhance their services by assisting consumers in locating private-label OTCs. In 2019, more than half (65%) of consumers worldwide believed that purchasing a store brand was a smart decision and a good alternative to name brands, and that belief still holds true today. The adage "you get what you pay for" is no longer relevant, because more consumers find store-brand products to be a higher quality than expected.
Claiming your stake in the private-label OTC arena can be challenging
Firstly, there are a limited number of FDA-approved manufacturers, and sourcing a trusted contract development and manufacturing organization (CDMO) partner that can deliver high-quality products while keeping the costs low and being capable of offering small- to medium-sized product batches can be very challenging. It is also difficult for marketers to stand out in a competitive market with the need to increase brand awareness and optimize digital marketing to drive demand for their products. Dealing with excess OTC inventory means that communication and processes need to be in place for both the retailer and the manufacturer, with the help of a highly functioning digital supply chain.
CDMO partners that can offer dependability, flexibility, fast turnaround and delivery are in high demand. There are certain critical characteristics that CDMOs need to prioritize if they want to achieve success in this competitive industry. A good CDMO partner should be able to offer enough SKUs (stock-keeping units) to make it worthwhile for the retailers; have a history of successfully supplying products to private labelers and retailers; have a proven track record of dependably passing high testing equivalency to the originator product; and operate consistently and reliably.
A fortuitous future for private-label OTCs awaits
The need for innovations that add value to consumers cannot be overstated in this industry. Manufacturers of private-label brands pay special attention to making their products more desirable and consumer friendly (e.g., improving on colors, flavors and dosage formats) in order to have their products stand out from the crowd and gain market share.5 Trends such as increased Rx-to-OTC switches, the explosive growth of e-commerce and increased targeting of niche markets will lead to further market expansion. With nationwide pharmacy chains such as Walgreens and CVS having thousands of locations and becoming popular go-to healthcare destinations, the demand for OTCs will continue to grow.
Private labels continue to outpace the branded products, and there is a significant need for continuously lower and supple prices, successful continuous manufacturing of products, longer shelf life, preservative-free products and lower MOQs (minimum order quantities).
Intelligent partnering with Aytu BioPharma's DivisionM contract manufacturing offers the quality standards, global regulatory knowledge and technical expertise needed to effectively launch their partners' drug strategies. Providing access to one of the industry's most advanced manufacturing networks, they offer clients:
- FDA drug and device establishments
- NSF auditing
- Regulatory and quality certifications
- Unique capabilities in several therapeutic areas
- Oral food and dietary supplement manufacturing and development
- Topical manufacturing and development
- Specialty natural product ingredients (NPIs) manufacturing
- Sterile eye/ear/nose product development and manufacturing
- Flexible MOQs
- Efficient supply chain
Aytu BioPharma's DivisionM combines its scientific knowledge with open dialogue to solve challenges and help customers bring their innovations to market at a cheaper price. For our customers, our collaborative approach means more efficient and cheaper options to market and high-quality NPIs and drug products.
SOURCES:
- Over the Counter Drugs Market - Growth, Trends, Covid-19 impact, and Forecasts (2022 - 2027). https://www.mordorintelligence.com/industry-reports/global-over-the-counter-otc-drugs-market-industry
- OTC Use Statistics. https://www.chpa.org/about-consumer-healthcare/research-data/otc-use-statistics
- How Trends in Over-The-Counter (OTC) Products are Shaping the Market. https://www.lubrizol.com/Health/Blog/2020/04/How-Trends-in-Over-The-Counter-Products-are-Shaping-the-Market
- Pharmaceutical Brands Face Disruptions From Private Label Brands With Over-the-Counter Products Including Amazon's Basic Care Products. https://www.businesswire.com/news/home/20190926005097/en/Gartner-Reveals-That-66-of-U.S.-Over-the-Counter-Pharmaceutical-Brands-Rank-Average-or-Below-in-Digital-Performance
- Oral Dosage Form Innovation in OTC Pharmaceuticals. https://www.pharmtech.com/view/oral-dosage-form-innovation-otc-pharmaceuticals