An important trend contributing to the consumerization of healthcare is the transformation of select prescription categories to over-the-counter (OTC). The OTC medicines and natural supplements market in the United States is worth $46 billion, with the cough, cold, allergy, and sinus medication category posting $9 billion alone.
In 2017, Congress stipulated that hearing aids would join the ranks of pharmaceuticals, eyeglasses, and diagnostic tests with an OTC category. The OTC Hearing Aid Act of 2017 instructs the FDA to create a class of OTC hearing aids for adults with mild to moderate hearing loss.
For companies evaluating the OTC hearing aid category–as well as companies in other industries sizing up their OTC markets — what insights may be gleaned from categories who already have made that transformation? OTC categories create significant value in the U.S. healthcare system and also provide lower prices, improved access, and more choices for consumers. The main brake on OTC markets is inertia in physician and consumer behavior.
Healthcare system value and lower consumer prices
The availability of OTC medicines provides over $100 billion in value to the US Healthcare System annually, according to a report jointly authored by Booz & Co. and the Consumer Healthcare Products Association. Sixty-five percent of the value stems from consumers making fewer clinical visits. Consumers with gastrointestinal distress, for example, may purchase an OTC remedy at a drugstore, rather than seeing their primary care physician for a prescription.
Whether that new value translates into lower prices for the consumer hinges in part on whether insurers covered the treatment pre-OTC. Consumers sometimes may experience an increase in expenditure when they migrate from Rx copays to purchasing medicines off the shelf.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
For treatments not covered before OTC deregulation, however, consumers could pay significantly less. Take the example of couples experiencing difficulty conceiving. Traditional diagnostic procedures, “which focus on the woman and are cash-pay, can cost tens of thousands of dollars,” explains Karen Drexler, CEO of Sandstone Diagnostics. The company’s Trak Fertility solution allows men to test and monitor their sperm count at home. Sandstone recommends that couples use the product before seeking medical care. The system, which includes the testing engine and four tests, retails for $199.99.
Consumers enrolled in traditional Medicare plans and many commercial insurance plans must pay cash for hearing aids. A pair of premium hearing aids with iPhone connectivity retail on average for $5,800 a pair at independent audiologists. In contrast, high-quality Personal Sound Amplification Products (PSAPs) generally retail from around $300 to $500 a pair. These high-quality PSAPs indicate how low prices for OTC hearing aids may go.
Improved access and more choices
In addition to value creation and potentially lower prices, in a prescription category transforming to OTC, “access dramatically increases to consumers,” according to Alex Kandybin, a consumer healthcare consultant. New availability of hearing aids as OTC products in drugstores, mass merchandisers, grocery stores, as well as online, allow consumers to seek treatment more quickly and conveniently.
OTC deregulation may also open up access to a new form of support for consumers in the form of health coaches. At Sandstone, Drexler notes that the company is testing a premium version of the app which provides access to a live person who can coach around lifestyle. Although not all consumers need to purchase hearing aids from an audiologist, they nonetheless would benefit from coaching on handling stigma, maintaining the devices, and seeking accommodations in the workplace.
OTC healthcare categories also frequently multiply the range of product choices available to consumers. The diversity of reading glasses on the market, in a panoply of styles and corresponding price points, provide one example. So do the different variations of cold medicine.
Kandybin described the traditional hearing aid market this way: “I would imagine right now, you can buy only Cadillacs. Not everyone needs a Cadillac. Some need a device good enough to get by.”
Creating awareness and changing behavior
In order to convert benefits like value creation, an explosion in access, and multiplied consumer choices into increased adoption, the new OTC category needs to create awareness within physician and consumer communities.
Sougat Chatterjee, President of The Shikhar Group, a consumer goods company, wrote a LinkedIn post that listed several crucial questions for business leaders of markets migrating from Rx to OTC to consider, such as:
- How aware are consumers of their condition’s risks and how willing are they to seek a solution?
- Whom do physicians see as the target group for the OTC category and what motivates them to recommend it?
Companies competing in the new OTC category benefit from embracing classic marketing techniques of developing branding, launching direct marketing campaigns, and designing compelling packaging. Generating awareness with the consumer and physician communities not only requires new skills but also can be expensive. For the top ten OTC brands, TV ad spending alone tops $500 million a year.
At Sandstone, “the biggest challenge that we have is that most men and women still think fertility is a female issue,” says Drexler. “Somewhere around 40 percent of infertility cases have a factor from the male, but if you poll consumers, especially if they are early on in the fertility journey, they assume the woman” is the one who is infertile. Similarly, OB-GYN physicians may neglect to recommend that men be tested.
New entrants to the hearing healthcare OTC market will need to grapple with similar challenges. Physician screening rates for hearing loss are lackluster. Less than a quarter of adults aged 20 to 69 had a hearing examination in the last five years.
Additionally, societal stigma against hearing loss may deter consumers from seeking treatment. Stereotypes of people who wear hearing aids as being “not whole,” “disabled,” or even “cognitively impaired” impact consumers’ acceptance of their hearing loss and their willingness to wear hearing aids.
Despite measurable benefits from a category transforming from Rx to OTC, including an explosion in access, richer choices, and sometimes lower prices, new OTC categories often need sustained investment to create awareness and change behavior. Will the largest hearing aid companies invest in new market development?
Photo: Getty Images
