Climb In Consumer Self-Care, Slide In Rx Margin Boost Front-Of-Store Pharmacy Sales

OTC drug and supplement marketers could benefit from stronger outreach to independent pharmacists, via product education and patient sales collateral, pharmacists say in a Healthcare Distribution Management Association survey.

Consumer health care product firms should plant seeds of support with pharmacists to reap sales growth from a field made more fertile by consumers’ increasing self-care and pharmacies’ shrinking margins from Rx drug sales, according to a survey.

Firms’ support for pharmacists in education about products, particularly dietary supplements, is critical to generating higher sales, the Healthcare Distribution Management Association says in its Feb. 3 report on a survey of independent pharmacists it commissioned.

With Rx sales margins shrinking, pharmacies are looking to increase sales of health care products in front of the pharmacy counter and elsewhere in the front-end.

“As a result of shrinking prescription margins, focusing on the front-end has become a mandate for growth” for many pharmacies, according to a survey the Hamacher Resource Group conducted May 30-Aug. 15, 2014.

“With growing challenges on the prescription side of the business, recommending health, beauty and wellness solutions in the front-end and encouraging a total store shopping experience becomes more paramount to survival” of independent pharmacies, according to the report.

The survey found gross margins at an average of 38.2% for sales of OTC drugs, supplements and personal care products, which together account for about 50% of front-end sales.

The survey notes the average gross margin for Rx sales was 21%, down from 23.3% in 2010 and 22.1% in 2011, according to a 2012 report by pharmaceutical magazine “Drug Channels”

Independents represent 37% of U.S. retail pharmacies and about $88.8 billion in sales. The remainder of pharmacies in the country comprises national and regional chains.

The survey included online responses by 263 independent pharmacists and phone interviews with 76 of them. HDMA’s report also included information from secondary sources.

Pharmacists could have more interaction with consumers about the use of some nonprescription drugs under FDA’s ongoing consideration of approving some Rx-to-OTC switches with requirements for conditions of safe use or for innovative technologies to guide consumers in accurate self-diagnosis. Major pharmacy chains, in 2012 comments to FDA, said pharmacists should play a central role in a new class of nonprescription drugs that would be available only with a pharmacist’s assistance (Also see "Pharmacy Interests Back BTC Models For Third Class" - Pink Sheet, 18 Jun, 2012.).

However, FDA officials on multiple occasions have said the agency is not proposing creating an additional class of drugs as it considers changes to facilitate making more drugs available nonprescription.

‘Differentiate The Experience’

The survey findings “point to an opportunity for independent pharmacies, wholesalers and manufacturers to work more closely together to differentiate the experience for consumers and place more emphasis on core nonprescription product groupings,” says the report.

Key to the communication is marketers giving pharmacists access to resources such as educational material for their own references and sales and promotions collateral, such as on-shelf communication, coupons, leaflets and shelf-talkers for their customers. Importantly, pharmacists surveyed expressed interest in receiving the material.

“Among OTCs and supplements, vitamins were referenced as the most popular category where pharmacists wanted more information,” the report stated.

“Given the high degree of growth and interest in vitamins and mineral supplements, an opportunity may exist to strengthen the knowledge and resources available to independent pharmacists to aid in their patient conversations.”

Pharmacists also said they wanted information on other product categories. Weight management/nutritional food was listed second behind vitamins and minerals, followed by digestive health, cold and allergy, homeopathy, first aid; probiotics; and pain relief.

In personal care, pharmacists identified medicated skin as the area they want more support in, including product knowledge and training. Oral care was next, followed by feminine care, family planning, and ethnic products.

“Medicated skin care, in particular, has historically been a strong focus and area of competitive advantage for independent pharmacy,” said the report.

Put Insights Into ‘Action’

Adding to the importance of consumer communication, the survey highlighted that consumers increasingly are turning to OTC treatments as a “first line of defense” in treating conditions before going to a doctor. “Self-care is an important component of consumer health and wellbeing,” the report notes.

However, “despite patients’ expanding interest in the self-management of their health, it is apparent that the guidance of an experienced health care professional can be invaluable.”

Pharmacists Want Product Info

A company’s efforts to provide pharmacists with information on its products as well as collateral sales pieces for shoppers could sway their recommendations, and the research found pharmacists are open to the data. Pharmacists in the survey identified these tools as the most beneficial in selling nonprescription products to patients:

• patient leaflets/pamphlets
• continuing education and training
• shelf-talkers
• nutrient depletion printout
• samples, for patients and staff.

Nearly 25% of respondents identified at-shelf information like leaflets and shelf-talkers as useful tools to help them sell non-pharmaceutical products. They most infrequently identified emails, newsletters and one-on-one meetings with supply chain partners as tools that help.

The report also made these recommendations for marketers:

• develop both consumer- and pharmacist-focused leaflets that include product details to assist pharmacists in recommending appropriate products.
• collaborate with wholesale partners and/or reliable third parties to distribute timely information to pharmacists.
• offer educational materials (continuing education and webinar-based) describing the need for a particular non-prescription product to enhance patient outcomes to compliance.
• provide at-shelf support (signage, selection guides and product information) that will help customers make well-informed decisions.

According to an HDMA-sponsored study conducted in 2012, the majority of consumers rely on advice from their pharmacist in the selection of OTC products. “Pharmacists are certainly the logical go-to resource given their availability at the point of purchase and their knowledge of non-prescription treatment,” notes the latest report.

Independent pharmacists are engaging customers, versus customers engaging them, at more than double the industry average. However, with consumer health care products discussed 14% of the time, and non-health care the remainder of the time, it is “an area of improvement,” the report states.

The survey also found that 71% of the pharmacists are recommending a companion OTC to a prescription product less than three out of 10 times. The industry average is two out of 10.

The categories most frequently recommended to patients are cough/cold – 33%; pain relief – 27%; digestive health – 18%; vitamins/supplements – 14%; and first aid/wound care – 8%.

The research underscored the need for marketers to provide more information on their products to pharmacists. For example, pharmacists most often recommend store brand/private label products over brand names, with 56% saying they “always” do because of the lower price, profitability to the pharmacy and “store brands are just as effective as name brand medications.”

In the OTC switch realm, firms have found that product launch programs that engage health care professionals including pharmacists generate two to three times the consumer awareness as those that do not (Also see "Switch Sponsors Find Key Partners In Payers, Providers and Managed Care" - Pink Sheet, 29 Sep, 2008.)