As demand for over-the-counter (OTC) medicine continues to grow in developed and developing markets, distribution channels must cater to the increased use of online ordering and direct-to-customer delivery processes. World Pharmaceutical Frontiers examines the growing appetite for consumer healthcare, how it’s affecting supply chains and the broader impact that OTCs are having on the pharmaceutical industry.

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It didn’t come as much of a surprise when it was announced this year that the retail sales of over-the-counter drugs had grown by 6.7% in the UK since 2014. Painkillers made up 21.5% of the market and it’s been estimated that two thirds of the British adult population purchase an OTC analgesic every year.

Other OTCs are popular too, with 17.8% of consumer healthcare sales going to cough and cold treatments, and 9.6% for gastrointestinal remedies. Citing government cuts to the NHS, increasing prescription charges, and a push by the Department of Health to encourage members of the public to take more initiative about their own well-being, the report published by Key Note projected continued growth of 3.0% in 2015/2016 and 3.3% in 2016/2017.

"The OTC pharmaceuticals market has experienced consistent year-on-year increases in sales over the past three years," the report revealed.

"It has benefitted from the restructuring of the NHS and squeezed budgets in recent years."

This isn’t a flash in the pan, and it’s been predicted by visiongain, a business information provider, that by 2017, the global market for OTC drugs will be worth $106.3 billion.

"The next ten years will see the world OTC pharmaceutical market double in size as continued demand for affordable medicines, especially in emerging economies, and the creation of entirely new markets in new therapeutic areas, generates opportunities for growth," Thomas Ling, an analyst at visiongain argued, citing demographic and economic trends, the switching of treatments from prescription-only to OTC sales, and changes in cultural attitudes as playing major roles in this change.

Big pharma increasingly know that customers would rather, when possible, get medication straight from the supermarket shelves, and many of the biggest ones have their origins selling remedies that would, these days, be thought of as OTC.

Some companies are joining forces to maximise their purchasing power. Amid much "frantic deal making", as one journalist described it, last year saw Glaxo-Smith-Kline Consumer Healthcare and Novartis OTC join forces to create an OTC behemoth worth $6.5 billion to take advantage of the new interest – and plenty of other companies are making similar moves.

One of these companies is Bayer, and the firm’s spokesperson Claudia Müller-Spohr believes that the OTC boom can be attributed to an aging population with higher needs and new global self-care trends.

"Consumers not only take OTC medicine to treat acute and symptomatic symptoms. They focus on prevention and staying well," she says. "Consumers take on more self-medication approaches and are encouraged to self-medicate and self-pay. Knowledgeable but time-poor consumers go straight to OTC."

OTCs are also appealing as a way for companies to steel themselves against the impending shift of a number of drugs going off-patent, and will be free for competitors to replicate. Switching from prescription-only treatments to OTC can be seen as a way for pharmaceutical companies to protect revenues from brands that are soon to lose their patent protection, with the profits from selling a widely recognised product OTC, offsetting the losses caused by losing exclusive rights to produce the drug.

This, tied to cultural trends and social attitudes where consumers increasingly take a more active interest in looking after their own health, leaves the market wide open.

"Multinational pharmaceutical firms must transform their supply chain to facilitate revenue and profit growth. This means streamlining the supply chain and making it more flexible, so it can produce and deliver drugs efficiently." 

With the heady optimism surrounding the potentially massive growth of the consumer healthcare segment, much of it justified, come real difficulties. When the pharmaceutical industry cuts out the middle man and sells straight to the customer, the dangers of counterfeiting and the challenges of keeping an eye on a more complicated supply chain arise. With more customers using the internet, and the prevalence of direct-to-customer ordering, it difficult to guarantee that they’re getting the drugs for which they have paid.

Control production

One way for big pharmaceutical companies to keep OTC customers away from counterfeits and protect supply chain integrity is to take control of the supply at every stage of production. In March last year, AstraZeneca announced the launch of a direct-to-patient delivery service for Nexium, its $4 billion-a-year OTC heartburn medication. Pfizer did something similar, approaching customers of its Viagra product with an online marketplace, offering discounts such as three free pills with initial orders. Bayer takes similar precautions on logistics and transportation.

"We apply the highest standards during production and transportation, including transport protection and control, for example, of temperature," says Müller-Spohr. "Contrary to the end user of pharmaceuticals, a consumer rather than a doctor stands at the end of the supply chain, taking the decision to buy and take a product."

While Bayer in general does not operate a direct-to-customer delivery process, instead using wholesalers and pharmacies for the distribution of drugs, it still needs to take serious precautions.

"Our business partners are chosen and audited by us with extreme care," says Müller-Spohr. "The risk to consumers of buying counterfeit products online is an issue, as it may be difficult for them to distinguish between a reliable partner and a non-reliable partner."

"For us, it is therefore very important to use up-to-date anti-counterfeiting techniques, such as on the outer packaging of our products, to be able to clearly identify them as original Bayer products."

Despite the uncertainty about supply chains, OTC products can, in some cases, decrease the chances of counterfeit products compared with a prescription alternative.

Sildenafil (more commonly known as Viagra) and other drugs to treat erectile dysfunction, are ripe for counterfeit, since many patients would prefer to buy it online for reasons of privacy and convenience. They leave themselves extremely vulnerable to the fake medicine market.

In response to this danger, Sanofi announced in June last year that it would be working with Eli Lilly to develop an OTC version of the company’s blockbuster Cialis erectile dysfunction treatment. It makes access to the drug easier and reduces the incentive to buy online from unscrupulous vendors.

Combat illicit trade

"The vast majority of men don’t consult their doctor on erectile dysfunction," Sanofi’s senior vice-president of global consumer healthcare Vincent Warnery says. "Men search online for drugs they can access directly and in doing so, they expose themselves to the huge risks of counterfeit drugs."

"Millions of men worldwide trust Cialis to treat erectile dysfunction," David A Ricks, president of Lilly Bio-Medicines, argues. "We are pleased to work with Sanofi to pursue a path that could allow more men who suffer from ED to obtain convenient access to a safe and reliable product without a prescription."

Sanofi and Eli Lilly are not the first to consider marketing consumer healthcare as a means to combat the illicit trade of counterfeit medication. In 2008, Pfizer attempted to get an OTC erectile dysfunction treatment on the market in Europe, but was forced to withdraw its application after regulators expressed concerns about an OTC Viagra.

There’s little doubt that OTCs are reinventing the ways that pharmaceutical supply chains work. Traditionally, these were developed to maximise productivity – resulting in systems built to avoid running out and to meet tight requirements, a situation that led to substantial losses when factories were overstocked. With the costs involved in manufacturing generic OTCs being generally higher than other products, this isn’t a feasible approach.

Tailored approach

"As they tackle the issues that threaten their future, multinational pharmaceutical firms must strategically transform their supply chain to facilitate revenue and profit growth," an article in strategy+business outlining the key challenges faced by pharmaceutical supply chains read last year. "This means streamlining the supply chain and making it more flexible, so it can produce and deliver drugs efficiently to meet the needs of a variety of product and market segments at competitive cost levels."

There are numerous ways a company can do this. The most obvious is to tailor its approach depending on the roduct being sold – in the case of OTCs, it can be based with an emphasis on cost competitiveness, for the simple reason that if an OTC drug is too expensive, it won’t get bought.

There’s little doubt that OTCs are big business, and that their massive growth in recent years means that pharmaceutical companies will have to re-evaluate how they understand supply chains and their patients’ needs. Most people when faced with chronic headaches or a cold don’t call the doctor to arrange an appointment. They simply visit the local chemist or supermarket and pick up any number of OTC analgesics available to them without the need of a prescription, such as ibuprofen or paracetamol. There’s a huge range of powerful painkillers available to buy for the most common pains without needing to consult a medical professional.

That we are increasingly encouraged and motivated to take the iniative into looking after our own health is certainly an empowering shift.