Could Over-the-Counter Birth Control Boost Drug Makers?

Beneath the fanfare of primary season, the political sands are quietly shifting when it comes to an issue near and dear to many hearts … and other organs. Oral contraception, “the pill,” in common parlance, may soon be sold over the counter (OTC).

For investors in the healthcare sector, such a change could potentially have outsized effects, but nailing down just what those might be gets a bit tricky. This post will focus on the implications OTC birth control could have for drug manufacturers, but hospitals, insurers and even the public sector would almost certainly experience profound changes as well.

The Market

According to the Guttmacher Institute, a left-leaning NGO focusing on reproductive health, “the average American woman spends about five years pregnant, postpartum or trying to become pregnant, and three decades—more than three-quarters of her reproductive life—trying to avoid an unintended pregnancy.”

Of the estimated 43 million women at risk for unintended pregnancies in 2008, only 68% used birth control consistently, with 18% reporting inconsistent use and 14% reporting non-use or long gaps in use.

Admittedly, these data are not current: the estimated time spent trying to avoid pregnancy comes from 2000, the use patterns for birth control from 2008. Still, they give us an order of magnitude: millions of women who could potentially increase their birth control use, and perhaps do so for decades.

The question is, why do these women use birth control infrequently or not at all, and what would cause them to join the ranks of consistent users? The answer appears to be money. A 2009 study, again by the Guttmacher Institute, found that of surveyed women (947 sexually active pill users with household incomes of less than $75,000 a year, aged between 18 and 34), 25% had used their prescription inconsistently in order to save money. Many had delayed visiting the doctor for the same reason.

Of course, that study was conducted during the depths of the recession, so we shouldn’t assume its findings remain completely valid today. There is also the question of how large the rather specific cohort the sample aimed to represent was, and how large it is today.

Caveats aside, a theme emerges: if birth control is cheap, more women will use it more often. Making the pill available without a prescription would make visiting a doctor unnecessary, reducing both cost and inconvenience.

A Note on Politics

The main driver of cost would be the extent of insurance coverage, and there is some political wrangling over whether that would decrease for OTC birth control. Democratic and Republican senators have introduced separate bills on the issue, and each side accuses the other of trying to pull a fast one, hiding their partisan agendas behind a nominally (and newly) bipartisan facade. But that’s a conversation best left to the Huffington Post and Breitbart.

Drug Manufacturers

Let’s assume, for the sake of argument, that the law changes in such a way that the pill becomes available OTC at a relatively unchanged out-of-pocket cost to the consumer. How would that impact the companies who make these drugs?

First of all, it’s important to note that the FDA would have to approve each drug individually. No one is proposing a law that would simultaneously make all oral contraception brands nonprescription. Nor would all brands necessarily meet the FDA’s criteria for nonprescription status, since a few brands have been associated with severe, if rare, side effects such as deep vein thrombosis.

For the most part, however, as Marilyn Eshikena writes for the Columbia University-affiliated blog Voices in Bioethics, the pill is a good candidate for OTC availability: it’s non-habit forming, relatively low-risk and used to treat a self-diagnosed condition, of sorts.

The Zyrtec Scenario

There are two cases we could look at to assess the potential profitability of OTC birth control. Eshikena cites the example of Johnson & Johnson (JNJ) subsidiary McNeill’s allergy drug Zyrtec. A Nielsen-Wolters Kluwer whitepaper on the drug’s 2008 Rx-to-OTC switch finds that consumers who switched from other OTC products accounted for 84% of OTC Zyrtec sales, while only 27% of Rx Zyrtec users switched to the OTC version.

There is no OTC birth control pill on the market currently, but there are other methods available without a prescription, such as condoms. Perhaps a number of consumers who currently use other methods would switch to—or add—OTC oral contraception. Barriers such as doctor’s appointments—with the associated costs, inconvenience and awkwardness—would be eliminated, making the pill more attractive for a number of consumers.

Another interesting find of the Zyrtec study has to do with cost. The average consumer who switched allergy medications between January and June of 2008 paid an extra dollar, which is almost negligible. Of those who switched to OTC Zyrtec, however, 68% paid more than they had previously, and the average out-of-pocket increase was $11.68.

Clearly many consumers—a large majority in this case—are willing to pay a premium for convenient access to a recognized brand. That has to be a tempting prospect for Allergan PLC (AGN), Johnson & Johnson, Merck & Co. (MRK), Bayer AG (BAYRY), Pfizer (PFE) and other companies that market oral contraceptives in the U.S. Not to mention their shareholders.

The Plan B Scenario

On the other hand, pregnancy and allergies are not one and the same. To assume that demand for Zyrtec and a birth control pill would follow the same patterns in an Rx-to-OTC transition is a stretch. A better comparison might be Plan B, the “morning after pill” or emergency contraceptive that the FDA made available for without a prescription for women of all ages in 2013.

That development had basically no effect on the bottom line of Teva Pharmaceutical Industries Ltd. (TEVA), Plan B’s manufacturer, despite the fact that 11% of sexually experienced women had used emergency contraception between 2006 and 2011, according to the CDC. Between 2012 and 2013, Teva reported a 3% increase in women’s health medicines revenues, from $448 million to $463 million: along with the launch of Plan B, the modest increase was attributable to higher revenues in Europe and Latin America, as well as the launch of Quartette.

Yet there are a couple of reasons we shouldn’t compare Plan B to daily birth control pills. First of all, Plan B isn’t daily: women take it when they’ve had unprotected sex or when some other birth control, such as a condom, has failed. It’s an ex post facto fix for unusual circumstances, not a regular preventative measure. Second, it is a generic drug; the manufacturer enjoys no exclusive rights to the formula and therefore makes lower total profits.


The more optimistic comparison to Zyrtec is probably a better basis for predicting what OTC birth control could mean for drug makers. Even if legislation allowing for OTC birth control leads to an increase in average out-of-pocket expenses, Zyrtec’s example suggests that the average consumer would pay it, including a fair number who hadn’t used the drug before.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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