Fda's otc drugs initiative 10-20-03.pdf

ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
ChangeWave Research Report:
FDA Over-the-Counter Drug Initiative
Agency Ready to Force Certain Proprietaries to OTC


Abstract

Speculation on whether the FDA will force certain drugs to be sold over-the -counter
(OTC) has steadily increased in recent months. FDA Commissioner Mark McClellan
has stated, quite forcefully, that the FDA has the legal right to do so, with the goal of
making certain drugs cheaper and more available to consumers.
A Driving Force for Change. In our July 2003 report, “FDA Leadership Change
Shakes-Up BioPharma Industry," we stated, “An impressive three-quarters (75%) of our
healthcare respondents see the new FDA Commissioner…as having a positive impact
on both the FDA and the U.S. Healthcare industry.” But how is the healthcare
community reacting to the prospects of an FDA over-the-counter drug initiative? And
who stands to win because of it and who stands to lose?
During August 5-11, 2003 we surveyed Alliance healthcare members to take a closer
look at the pros and cons of this emerging FDA effort. A total of 126 members
participated. Some key results:
• A Majority Supports a Proactive FDA. Nearly two-thirds (65%) of our
healthcare respondents believe the FDA should force certain safe and effective drugs over-the -counter, while only 26% believe they should not. • Proprietary Antihistamines – Top OTC Candidate. According to better than
nine-in-ten (92%) of our respondents, Proprietary Antihistamines are most likely to be sold over-the-counter in the next 12-18 months. Another 71% believe Gastrointestinal Therapies will soon be sold over-the-counter. • Advantages: Expected benefits of the FDA initiative to expand availability of
over-the-counter drugs include lower prices, easier access for patients, and a decrease in unnecessary doctor visits. • But There are Disadvantages. Respondents identified four key drawbacks: (a)
the costs aren’t covered by insurance; (b) the potential improper use of drugs; (c) the discouragement of R & D; and (d) the lowering of profits for drug companies. • A Big Potential Loser: Proton Pump Inhibitors. 35% said the expensive, big-
name PPI’s Nexium and Prilosec will be hardest hit by going OTC.
Bottom Line: The FDA isn’t hesitating to lower drug costs and make treatment options
more available for the consumer. Its swift approval of Prilosec OTC (subsequent to this
survey) is clear evidence of the agency's willingness to drive change.
Helping You Profit From A Rapidly Changing World ™ ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
Table of Contents

Summary of Key Findings . 3
The Findings. 5
FDA’s OTC Initiative . 5
Top OTC Candidates . 5
Insurance Reimbursement . 5
Weighing Pros and Cons . 7
Most Vulnerable Proprietaries . 9
Patient Administration . 10
Summary and Analysis . 11
ChangeWave Research Methodology . 12
About ChangeWave Research. 13
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
I. Summary of Key Findings
Majority Supports
Most Likely OTC
FDA: Driving Force
FDA's OTC Initiative
Candidate
for Change
Proton Pump
Initiative's Pros
Inhibitors would
take hardest hit as
…and Cons

Overview

Speculation on whether the FDA will force certain drugs to be sold over-the -counter
(OTC) has steadily increased in recent months. FDA Commissioner Mark McClellan
has stated, quite forcefully, that the FDA has the legal right to do so, with the goal of
making certain drugs cheaper and more available to consumers.
In our July 2003 report, “FDA Leadership Change Shakes-Up BioPharma Industry," we
stated, “An impressive three-quarters (75%) of our healthcare respondents see the new
FDA Commissioner…as having a positive impact on both the FDA and the U.S.
Healthcare industry.” But how is the healthcare community reacting to the prospects of
an FDA over-the-counter drug initiative? And who will stand to win because of it and
who will stand to lose?
During August 5-11, 2003 we surve yed Alliance healthcare members to take a closer
look at the pros and cons of this emerging FDA effort. A total of 126 members
participated, and the focus was on:
• The FDA's OTC Initiative
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?

Key Findings

• Majority supports proactive FDA. Nearly two-thirds (65%) of respondents
believe the FDA should force certain safe and effective drugs over-the-counter, while only 26% believe they should not. • Proprietary Antihistamines – Top OTC Candidate. According to the
overwhelming majority (92%) of respondents, Proprietary Antihistamines will most likely be sold over-the-counter in the next 12 – 18 months. Another 71% believe Gastrointesti nal Therapies will soon be over-the -counter.
• How will initiative affect patients and healthcare costs? Better than 2-in-5
respondents (44%) believe drugs going over-the-counter won't negatively impact patients, but will lower healthcare costs.
• Foresee less abuse of prescription drugs. More than half (52%) of Alliance
healthcare members believe the unnecessary consumption of prescription drugs would decline if certain drugs were forced OTC, but 39% disagree, saying abuse would not decline at all. In addition, the potential improper use of drugs was one of the four key OTC drawbacks cited by respondents (Point 6 below). • Expected benefits of the FDA initiative to expand availability of over-the-
counter drugs include lower prices, easier access for patients, and a decrease in unnecessary doctor visits. • But disadvantages must be considered too. Respondents identified four key
drawbacks: (a) the costs aren’t covered by insurance; (b) the potential improper use of drugs; (c) the discouragement of R & D; and (d) the lowering of profits for drug companies.
• A Big Potential Loser: Proton Pump Inhibitors. 35% said the expensive, big-
name PPI’s Nexium and Prilosec will be hardest hit by going OTC. • Patients gaining control of their own care. Three in five (60%) respondents
see the FDA’s OTC initiative as a move by the government and insurance companies to enable patients to administer more of their own tests and medications. Alternatively, 21% believe it is a one-time ploy by the FDA to reduce costs. • Best for patient administration. The most popular therapies, treatments and/or
diagnostic tests that members believe are most appropriate for patient self- administration were Cholesterol Tests/Drugs (i.e., Statins) (12%) and Diabetes/A1C (11%). ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
II. The Findings

A. FDA's OTC Initiative

(1) Question Asked: Do you believe that the FDA should force certain drugs that
are proven safe and effective to be sold over-the-counter?

Yes

Majority Supports Proactive FDA. Nearly two-thirds (65%) of respondents believe the
FDA should force certain safe and effective drugs over-the-counter, while only 26%
believe they should not. Such an effort would undoubtedly cause a significant shake-up
in the pharmaceutical industry.

B. Top OTC Candidates

(1) Question Asked: Whether or not you believe the FDA should force certain
drugs over-the-counter, which of the following drugs do you believe are prime
candidates to go over-the-counter in the next 12-18 months? (Check All That
Apply)
Proprietary Antihistamines - Allegra, Zyrtec, Clarinex, etc.
Gastrointestinal Therapies - Prilosec, Nexium, Prevacid, etc. COX -2 Inhibitors - Vioxx, Celebrex, Bextra, etc. Osteoporosis Drugs - Fosamax, Evista, etc.
Proprietary Antihistamines – Top OTC Candidate. According to an overwhelming
majority (92%) of respondents, Proprietary Antihistamines are the prime candidates to
be sold over-the-counter in the next 12–18 months, followed by Gastrointestinal
Therapies which garnered a healthy 71%.
C. Insurance Reimbursement

(1) Question Asked: What percentage of patients do you think would forego
purchasing the above types of treatments altogether if they went over-the-counter
and were no longer reimbursable through their health insurance?

5%
More than 20% 29%
Don't Know/NA 27%
Sensitive to reimbursement issues. Half (51%) of all respondents believe at least
20% of patients would stop buying popular prescription drugs if they were no longer
reimbursable by their health insurance and they were available over-the -counter.
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?

(2) Question Asked: Once a drug goes over-the-counter, insurance companies
typically refuse to pay any reimbursement costs. This may or may not have an
impact on patients and on health care costs. Which of the following statements
best reflects your own beliefs on the subject?

More drugs going over-the-counter won't have an adverse
impact on patients - but will reduce health care costs
More drugs going over-the-counter won't have an adverse
impact on patients - and won't reduce health care costs
More drugs going over-the-counter will have an adverse
impact on patients - but won't reduce health care costs
More drugs going over-the-counter will have an adverse
impact on patients - and will reduce health care costs
Don't Know/NA


How will initiative affect patients and healthcare costs? Better than 2-in-5
respondents (44%) believe that drugs going over-the-counter won't have an adverse
impact on patients, but will reduce healthcare costs. Overall, 54% believe more drugs
going OTC won’t negatively affect patients, and 61% believe it will lower healthcare
costs.
(3) Question Asked: It is sometimes said that too many people take too many
drugs, in part because their insurance coverage completely or partially
reimburses them for the expense. Do you believe that if the FDA were to force
certain drugs over-the-counter, it would reduce the unnecessary consumption of
these prescription drugs?

Yes, abuse and over consumption of these drugs would decline dramatically 13%
Yes, abuse and over consumption of these drugs would decline marginally
No, abuse and over consumption of these drugs would not decline
There is no abuse or over consumption of drugs at this time
Foresee less abuse of prescription drugs. More than half (52%) of Alliance
healthcare members believe the unnecessary consumption of prescription drugs would
decline if certain drugs were forced OTC, but 39% disagree, saying abuse would not
decline at all. In addition, the potential improper use of drugs was one of the four key
OTC drawbacks cited by respondents
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
D. Weighing Pros and Cons

(1) Question Asked: What is the most important benefit and/or drawback of the
FDA forcing certain drugs over-the-counter?
Respondents most commonly identified three main benefits of the FDA forcing
certain drugs over-the-counter, including:

a. Lower prices, b. Easier access to patients, and c. Less unnecessary doctor visits.
Members also cited several drawbacks, primarily:

a. The costs are not covered by insurance, b. The potential for Improper use of drugs, c. Discouraging R & D, and d. Lower profits for drug companies.
Interestingly, those respondents who do not believe the FDA should force certain drugs
over-the-counter identified similar benefits and drawbacks to those who do believe the
FDA should force certain drugs OTC.
Sample of Alliance Member Responses:

• WIL6687 writes, "Benefit: Lower cost to consumers; less time and money wasted
on physician's 'approvals' (for drugs they may not know much about). Drawback:
The argument will be 'dangers of self-medication; only physician's know anything.'
This is specious and self-serving. Consumers should have the final say in their
medical care, consulting doctors when they believe it is necessary.”

• WSH1329 writes, "Benefit: Having them widely available without having to go to the
doctor and driving down prices (Claritin). Drawback: Having suddenly to pay full
price for a medication previously covered by your insurance because now it is over-
the-counter and insurance doesn't have to cover it. (Claritin)”

• WAS9107 writes, "Benefit: Costs will be lowered dramatically. Drawback: Drug
companies will need to charge higher prices initially to ensure their margins and cover development costs. This policy may limit future drug development on drugs that will fall into this category insurance companies would not reimburse patient costs.”
• ERI5582 writes, "Benefit: Decrease dependence on unnecessary $75 visits to
MDs, (not to mention the lost time traveling and waiting) to obtain safe and effective
medications; allowing non-insured equal access to these drugs. If anyone believes
that the uninsured are going to pay the additional cost of a doctor's visit to get these
drugs they're dreaming. Drawback: There are only two drawbacks: 1) The
medications won't be covered by insurance, and 2) doctors offices will be a little less
crowded.”
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?

• RGR2675 writes, "Benefit: Easy access, but if OTC the insurance companies
automatically will not pay for the medication. Often these drugs are the most
common and useful. Drawback: This makes people pay more for their medication.
In addition, if there is an OTC version of a medication, the insurance companies will
not cover similar drugs that are still prescription. It is really a game, which I am afraid
the people are losing and the drug and insurance industry is winning.”

• SR10005 writes, "Benefit: Increased accessibility to the general public is a large
benefit; Drawback: Would be that patients may not seek medical professional help
in a timely manner for some serious conditions which are only treated
symptomatically with OTC (i.e. peptic ulcer disease).”

• DHK5101 writes, "Benefit: People will have access to lower dosed products,
although at premium OTC prices, to medications known to help certain problems. I
don't think the FDA will be irresponsible and allow OTC sale of medications not
already thoroughly researched and used. Drawback: The drawback is that patients
conceivably may mix OTC products with prescribed medications, from their doctors,
and have problems. Is the pharmacist then responsible to monitor any customer's
complete list of prescribed medications?”

• JES5551 writes, "Benefit: Reduced overall cost of medical expenses especially
medical bills and the obvious accessibility costs and convenience with the
associated drawback that they may be misused or misapplied but doctors often
don't know the proper dose depending on the person be prescribed. Ultimately, the
individual is responsible for their own wellbeing, e.g. healthcare, so if you allow him
to do so at least some will benefit with less congestion to the overall system.”

• BAK6101 writes, "Benefit: The public will have access to medications that would
have otherwise been restricted to prescription only and allow them to obtain without
an office visit to their doctor. Drawback: It hurts some people with drug benefits
that use to have the medication paid for, but it also will keep the government from
paying for those drugs for Medicare drug benefit if they are OTC.”

• 2057047 writes, "Benefit: Unnecessary trips to the doctor for stable, well-informed
patients on chronic meds. There is no reason patients cannot assume more
responsibility for managing their own health. Drawback: Package inserts would
need to be modified to alert patients for red flags.”

• DRM7263 writes, "Benefit: Will lower the cost overall, Drawback: But not to people
who have a prescription drug plan. Though it will never go away, health insurance is a FRAUD. Believe it or not, this statement comes from a physician. We need to regroup!” ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
E. Most Vulnerable Proprietaries

(1) Question Asked: Can you name one drug whose sales would be most hurt by
going over-the-counter? Why?
Nexium
*Note that this survey was conducted before Prilosec OTC
8% was approved and made available in stores.

Proton Pump Inhibitors would take hardest hit. Proton pump inhibitors (PPI’s) were
most commonly identified as drugs that would be hurt by going OTC. According to 35%
of respondents, expensive big-name PPIs, Nexium and Prilosec, would suffer the most.
Many members said these drugs are too expensive without insurance coverage.
As Alliance member LEO7024 puts it, “Gastrointestinal therapies, i.e. Nexium, et al.,
because they are too expensive, patients want insurance to cover them, and cheaper
alternatives are already over-the-counter.”
Sample of Alliance Member Responses:

a. Nexium (19%)
• LEO7024 writes, "Gastrointestinal therapies, i.e. Nexium, et al., because they are
too expensive, patients want insurance to cover them, and cheaper alternatives are already over-the-counter.” • WPW6938 writes, "Nexium and its relatives. If patients could no longer get coverage for these meds from insurance companies, I would expect many people to return to TUMS and other antacids instead of paying for the H2 therapies.” • ERI5582 writes, "Nexium. Expensive. Multiple substitutes on the market. If it weren't covered by insurance patients would move over to the less expensive subs.” • SR10005 writes, "Nexium; people love having the prescription because of the effectiveness of these type drugs, however, I believe the expense as OTC medications would hinder a great many people from considering them; they will go back to Tums or Mylanta.”
b. Prilosec (16%)
• WIL1338 writes, "Prilosec, big products, rather safe, well known. If going to OTC
status, most companies will try to switch patients to newer drugs. The sales will also be hurt because many patients can not afford payments on own their own.” • ETA8200 writes, "Prilosec, patients would self-treat with a cheaper OTC.” • PEG8651 writes, "Prilosec. Very expensive medication. Patients rather pay co-pay and have an expensive med. Patients will also be more selective of insurance.” ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?

c. Celebrex (8%)
• SFO7709 writes, "Celebrex would probably be hurt since people are less likely to
pay $2-3 per pill for that type of pain relief. They are most likely to use cheaper treatments even if they are less effective.” • TOM0053 writes, "Celebrex - these are very expensive anti-inflammatory/analgesics that have no demonstrable increased efficacy over NSAIDs (ASA, feldene, naprosyn, ibuprofen, etc.) They are in high demand when covered because they are expensive which some patients equate with being more effective. I don't believe most patients would find them effective enough to pay and exorbitant premium for.”
F. Patient Administration

(1) Question Asked: Some analysts see an FDA over-the-counter initiative as the
inevitable consequence of creating highly effective and safe therapies and - in the
future - more and more drugs and devices will be scrutinized to see if they can be
"patient administered." Which of the following statements best reflects your
thinking about this issue?

The FDA over-the -counter initiative is part of an ongoing series of actions by
government and insurance companies that will enable patients to make more of their own choices and administer more of their own tests and medications The FDA over-the -counter initiative is a one-time ploy by the FDA to reduce costs
Patients gaining control of their own care. Three in five (60%) respondents see the
FDA’s OTC initiative as a move by the government and insurance companies to enable
patients to self-administer more of their own tests and medications. Alternatively, 21%
believe it is a one-time ploy by the FDA to reduce costs.
(2) Question Asked: What other therapies, treatments and/or diagnostic tests can
you think of that are best suited for patient administration?

Cholesterol Tests/Drugs (Statins) 12%
Diabetes Testing/A1C

Best for patient administration. The most popular therapies, treatments and/or
diagnostic tests members believe are most appropriate for patient administration were
Cholesterol Tests/Drugs (i.e., Statins) (12%) and Diabetes/A1C (11%).
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
Summary and Analysis

FDA Forges Ahead on OTC Initiative. Subsequent to this survey, the FDA approved
Prilosec OTC for the market. The dramatically cheaper product is now available in
stores everywhere.
FDA Commissioner Mark McClellan recently said "…approval of over-the-counter
Prilosec is yet another example of the important role FDA serves in improving access to
safe and effective treatments for conditions that people can treat themselves. As has
been the case for many other over-the-counter switches, the availability of Prilosec OTC
will help reduce costs and expand the availability of treatment options for millions of
Americans.”
More OTC Switches on Horizon. Based on the findings in this survey, we expect to
see the FDA forcing additional proprietary drugs to OTC over the coming year.
• Majority Supports Proactive FDA. Nearly two-thirds (65%) of respondents
believe the FDA should force certain safe and effective drugs over-the-counter, while only 26% believe they should not. • Proprietary Antihistamines – Top OTC Candidate. According to the
overwhelming majority (92%) of respondents, Proprietary Anti histamines are prime candidates to be sold over-the-counter in the next 12-18 months. Another 71% believe Gastrointestinal Therapies will soon be sold over-the-counter. • How Will the OTC Initiative Affect Patients and Healthcare Costs? Better
than 2-in-5 respondents (44%) believe drugs going over-the-counter won't
negatively impact patients, but will lower healthcare costs.
• Expected Benefits of the FDA Initiative to expand availability of over-the-
counter drugs include lower prices, easier access for patients, and a decrease in unnecessary doctor visits.
• But Disadvantages Must be Considered Too. Respondents identified four key
drawbacks: (a) the costs are not covered by insurance; (b) the potential for improper use of drugs; (c) discouragement of R & D; and (d) lower profits for drug companies. • Proton Pump Inhibitors would be hardest hit. According to 35% of
respondents the expensive, big-name PPI’s Nexium and Prilosec will suffer the most by going over-the-counter.
Bottom Line: The FDA will not hesitate to act on lowering drug costs and making
treatment options more available for the consumer. Its swift approval of Prilosec OTC
(subsequent to this survey) is undeniable evidence of the agency's willingness to drive
change.
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
III. ChangeWave Research Methodology

This report presents the findings of a ChangeWave Alliance survey on the issue of the
FDA forcing drugs over-the -counter, conducted the week of August 5-11, 2003. The
survey was exclusively for Alliance members who work in the healthcare ind ustry. A
total of 126 Alliance members participated.
The Alliance’s proprietary research and business intelligence gathering system is based
upon the systematic gathering of valuable business and investment information directly
over the Internet from accredited members.
ChangeWave surveys its Alliance members on a range of business and investment
research and intelligence topics, collects feedback from them electronically, interprets
and reconciles the information in a cohesive manner and converts the information into
valuable quantitative and qualitative reports.
The Alliance has assembled its membership team from senior technology and business
executives in leading companies of select industries. Nearly 3 out of every 5 members
(58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-
year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time
view of companies, technologies and business trends in key market sectors, along with
an in-depth perspective of the macro economy – well in advance of other available
sources.
ChangeWave Research: Should the FDA Force Drugs Over-the-Counter?
IV. About ChangeWave Research
ChangeWave Research, of Phillips Investment Resources, Inc. is a market research
intelligence network powered by thousands of accredited and organized front-line
professionals – the ChangeWave Alliance.
ChangeWave is the alternative to traditional “sell-side” investment research. The
company publishes ChangeWave Investing, the investment advisory service for
individual investors dedicated to researching and discovering growth stocks that profit
from radical change, and Weekly WaveWire, a free e-mail newsletter distributed to
nearly 200,000 investors.
ChangeWave has a very unique asset in its 4,000-member Alliance. We have
assembled our membership team from a broad cross section of more than 20 vertical
markets such as Internet e-commerce, semiconductors, data storage, and
biotechnology, along with a wide range of professional disciplines including CIOs, IT
managers, executive management, scientists, engineers and sales personnel.
The ChangeWave Alliance is composed of senior technology and business executives
in leading companies – credentialed professionals who spend their everyday lives
working on the frontline of technological change.

ChangeWave Research Reports provide a real-time view of companies, technologies
and business trends in key market sectors along with an in-depth perspective of the
macro economy – well in advance of other available sources. ChangeWave surveys its
4,000 Alliance members on a wide range of investment research topics and converts
the findings into valuable investment and business intelligence reports. ChangeWave
delivers its products and services on the Web at www.ChangeWaveResearch.com
ChangeWave Research does not make any warranties, express or implied, as to
results to be obtained from using the information in this report. Investors should
obtain individual financial advice based on their own particular circumstances
before making any investment decisions based upon information in this report.
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