Riding the Wave: Understanding the Growth of the Global OTC Market and the factors driving it
OTC or over-the-counter drugs are medicines that can be sold without a doctor's prescription straight to the consumer in accordance with each country's individual rules and are thought to be safe. These medicines can be purchased lawfully without a prescription in hospital pharmacies, medical stores, e-commerce portals, online pharmacies, and occasionally even grocery stores. Common medical symptoms including the common cold, headache, bodily discomfort, allergy and flu, heartburn, acne, and other elementary health issues are treated with OTC medications.
According to the Insights10 market research report, “The global OTC Drugs market is projected to grow from $157.0 billion in 2021 to $233.6 billion in 2028 at a CAGR of 5.8% in the forecast period, 2021-2028 owing to pharmaceutical companies switching from Rx to OTC drugs, especially in the U.S. and growing trend of self-medication in developing economies.”
The global OTC drugs market is segmented into various product categories, including analgesics, cough and cold remedies, vitamins and dietary supplements, and dermatologists. The market is further segmented by distribution channels, such as retail pharmacies, drug stores, and e-commerce.
The over-the-counter (OTC) drugs market has seen significant growth in recent years due to a variety of factors. Some of the most significant factors include:
Increase in e-commerce sales: With the growth of online retail and the increasing adaptation of telehealth and telemedicine, more consumers are purchasing OTC products online. This has led to an increase in e-commerce sales for OTC products, and many companies are now focusing on building their online presence to meet this demand. These platforms offer a wide range of benefits such as product variety, enhanced accessibility, and product discounts. According to IRI, while online sales of OTCs are only about 2% of total CPG (Consumer Packaged Goods) industry sales, they are growing from small bases at double-digit rates, as high as 20-25% year over year.
Expansion of retail pharmacy chains: With the increasing number of retail pharmacy chains, OTC drugs have become more easily accessible to consumers. These chains typically offer a wide range of OTC drugs and personal care products, and many of them have their own private-label OTC products. This makes it convenient for consumers to purchase OTC drugs without having to go to a doctor for a prescription. In addition, retail pharmacy chains often have a strong online presence and offer home delivery services, which has further increased the accessibility of OTC drugs to consumers. The expansion of retail pharmacy chains has also led to increased competition in the OTC drugs market, which has resulted in lower prices and better deals for consumers.
According to the Consumer Healthcare Products Association (CHPA), there are approximately 54,000 pharmacies in the U.S. and more than 750000 retail outlets selling over-the-counter products. The market is expanding due to the accessibility and affordability of OTC products. For instance, it was estimated in the National Centre for Biotechnology Information (NCBI) publication that each year, over-the-counter medications save the US economy about $100 billion.
Shift towards self-medication: As an aftermath of the COVID-19 pandemic, there has been a shift towards self-care and self-medication. Consumers are looking for OTC products that they can use to treat minor illnesses and injuries at home, rather than visiting a doctor or hospital. A study on Google Trends conducted by David Onchonga showed increased worldwide hits for the search queries, “self-care”, and/or “self-medication”. Drugs & therapeutics used for self-medication offer a wide range of benefits such as easy accessibility, affordability, and the ability to reduce healthcare burden.
According to an article published in ScienceDirect, “The trend of self-medication is significantly observed in both developed and developing countries. Prevalence of self-medication peaks at almost 80% worldwide and around 78.6% in India”.
Focus on preventive health: As more people become aware of the importance of maintaining good health, they are taking a more proactive approach to their health and are turning to OTC drugs to prevent illnesses and maintain their well-being. Consumer interest in OTC drugs such as vitamins, minerals, and dietary supplements has increased due to an increase in the prevalence of chronic diseases and the introduction of new infectious diseases. Consumers are looking for products that can help them maintain their health and prevent the onset of diseases. This has led to an increased demand for products that promote heart health, joint health, and cognitive health. For example, many people take vitamin supplements to prevent deficiencies or take fish oil supplements to support heart health.
Greater emphasis on natural and organic products: In recent years, the over-the-counter (OTC) and nutraceuticals industry has seen a trend towards natural and holistic products that are organic and sustainable. This includes increased demand for herbal supplements, probiotics, and vitamins. Consumers are becoming more health-conscious and are looking for natural alternatives that are free from synthetic ingredients and are produced in an environmentally-friendly way as against traditional medications.
Increasing use of CBD-based products: CBD, short for cannabidiol, is a compound found in the cannabis plant that is non-psychoactive and has been reported to have a wide range of therapeutic benefits, including relief of pain, anxiety, and insomnia. As a result of the increasing interest in CBD-based products, many companies have started to offer CBD-based OTC products such as tinctures, capsules, and topical creams. These products are typically marketed as dietary supplements or natural health products and are available over the counter without a prescription. The use of CBD-based products is still a relatively new trend and is not yet fully regulated. However, it has been reported that in many places, the market for CBD-based products is growing rapidly, and this trend is likely to continue in the future. It is worth noting that the legal status of CBD-based products varies by country and region, and it is important to check the laws in your area before purchasing or using these products.
Rise of private label: Private label brands, which are sold under the brand name of a retailer rather than a specific manufacturer, are becoming increasingly popular in the OTC market. This is due to the cost-effectiveness and quality of these products, as well as the increased demand for private-label products from retailers. The share of private-label OTC product sales in the US increased from 26% in 2009 to 31% in 2018.
Growth in emerging markets: The OTC market is growing rapidly in emerging economies, such as Asia and Latin America, due to increasing urbanization, rising disposable incomes, and an aging population. This has led to an increase in investment in these markets by multinational companies.
Use of technology: Another trend in the OTC and nutraceuticals industry is the use of technology to enhance the consumer experience. This includes the use of mobile apps to track and manage health, as well as the use of virtual reality and augmented reality to enhance the consumer's understanding of the products.
In conclusion, the global OTC drugs market has experienced significant growth in recent years and is expected to continue growing in the future. The increasing consumer preference for self-medication, the expansion of retail pharmacy chains, the growth of e-commerce, an aging population, a rise in chronic diseases, and the increasing affordability of OTC drugs are the main factors driving the market. However, governmental bodies across the globe are tightening regulations for the OTC market, to ensure the safety and efficacy of the products, and to control the advertising and promotion of OTC products. Hence, regulatory challenges and increased competition from generic drugs are factors that may hinder the growth of the OTC drugs market. Moreover, wrong medications due to incorrect self-diagnoses and side effects of OTC drugs may hinder growth. Despite these challenges, the OTC drugs market is expected to continue growing in the coming years, providing opportunities for companies in the industry.
Author: Mukesh Nayak