Managed Care Influences OTC Switch With Zyrtec As Model – Nielsen

Data not only show some consumers are choosing OTC Zyrtec over other nonprescription allergy drugs they previously used, but also that managed-care plans have growing influence on OTC choices, according to Nielsen market research firm executive Matt Dumas.

Managed-care plans are affecting decisions by drug firms, too, says Dumas, senior VP and managing director of the NielsenHealth unit.

"All the players involved in OTC are focusing on and realizing that managed care has a complete role - not just an adjacent role - but a very important role to play in managing the success of not just one [product] but the total category," Dumas explained.

Insurers' reimbursement strategies related to OTC categories are not likely to directly influence drug sponsor's initial decisions on whether to apply for switches, he said. However, drug firms are in close contact with providers about their pharmacy coverage plans.

Decisions on filing switch applications are directly influenced by patent expiry and by competition in a category as well as by pipeline developments.

"But there is no doubt that the dialogue from managed care plans is completing the thinking process in manufacturing when it comes to timing as well as their pricing of the OTC products," Dumas said.

Manufacturers planning Rx-to-OTC switch opportunities are "spending a significant amount of their time in advance of launches working with the managed care companies," he said.

Zyrtec OTC Coverage

The latest development in this trend is insurers' coverage of OTC Zyrtec (certizine 5mg), which is available at a lower price than some competing nonprescription allergy brands.

Since the OTC launch of Zyrtec, an increasing number of managed-care plans have elected to cover the product, Dumas said. Johnson & Johnson launched Zyrtec OTC in January 2008 (¹ (Also see "Zyrtec Launch Brings Big Boost To Johnson & Johnson, But Competition Grows" - Pink Sheet, 21 Apr, 2008.), p. 15).

"Our expectation is that it is going to continue with some momentum as the year unfolds," said Dumas, who spoke with "The Tan Sheet" about NielsenHealth's publication of its first data on nonprescription Zyrtec sales.

The data show 62 percent of Zyrtec OTC buyers took an Rx allergy drug in the previous 12 months, and more than 53 percent of those buyers had been "very satisfied" with the prescription medication.

Those figures indicate consumers buying Zyrtec OTC "really are chronic sufferers" and are "typically going to prescription products," Dumas said. "That shows that clearly Zyrtec is appealing to a segment that's really requiring strong efficacy."

Efficacy Plus Savings

Some Zyrtec consumers are also saving money. According to data from Nielsen and a collaboration with market research firm Wolters Kluwer, from Feb. 1 through March 15 consumers switching from Rx to OTC Zyrtec saved an average of $7 on each purchase, based on insurance co-pay levels and retail OTC purchase prices.

"They're getting the same product in terms of efficacy, but they're getting it $7 cheaper," Dumas said. "That is the most obvious and the most significant driver behind what's happening in the market."

Trading Up

But efficacy can be a more significant factor than savings for some consumers, Dumas pointed out. While 49 percent of Zyrtec OTC purchasers previously bought Rx Zyrtec, 27 percent are switching from other, less expensive OTC allergy products, Nielsen found.

"What's interesting is those folks are paying a premium versus what they originally were paying," he said. "They're actually paying on average $13.91 more by switching from their current OTC product to the Zyrtec OTC product."

"People are willing to pay up for a higher efficacy product."

And this consumer trait is good for more than Zyrtec.

"It's also driving up the value of the OTC market. If you think about total market size, everyone thinks, 'OK, we're going to increase the OTC market by switching people from Rx,'" Dumas said.

"Well, that no doubt is one important point, but in terms of lessons learned, this is showing that if you have a superior product in the marketplace for OTC users, people are going to trade up and pay more, which is another contributor to growth in the OTC market."

Dumas added the OTC Zyrtec launch has become a bellwether for the industry. All firms with products in the category are paying more attention to insurers' coverage policies.

Zyrtec has also become the model for predicting switch-related impact for Nielsen clients, replacing Procter & Gamble's launch of the proton pump inhibitor Prilosec OTC (omeprazole), he said.

"Now everyone is saying let's learn from the Zyrtec launch because let's face it, managed care is in an even tougher position than they were five years ago, managing costs."

"They're being more aggressive in changing the formularies to migrate their patients from an Rx to an OTC in order to save money."

The increasing opportunities for managed care and OTC sponsors working together picks up on a trend that has grown since Schering-Plough's antihistamine Claritin and Prilosec OTC entered the market.

Blue Cross Blue Shield of Rhode Island in March ended a one-year pilot program - conducted by pharmacy benefits manager WellPoint NextRx - that covered the full cost of generic OTC allergy medications as an alternative to prescription drugs (² (Also see "WellPoint NextRx/BCBS Pilot Program Encourages Members To Buy OTC" - Pink Sheet, 14 Apr, 2008.), p. 3).

Humana, which also is considering different co-pay type plans to cover OTC drugs, offers members OTC discounts and coverage of OTC products through its health savings accounts, flexible savings accounts and high deductible health plans.

WellPoint Health Networks, Aetna and Cigna also offer or have offered their members coupons for OTC products.

- Malcolm Spicer ([email protected])