ACNU: Preparing for disruption
How the new FDA rule will affect the healthcare ecosystem
By: Dan Frey and Todd Greenwood
Introduction
In our previous blog, ACNU: Changing everything about non-prescription medication, we began by describing the soon-to-be-published United States Food and Drug Administration (FDA) rule entitled additional condition for nonprescription use (ACNU). The ACNU offers a new non-prescription pathway for consumers to get access to certain medications, especially chronic care ones, without needing to first obtain a prescription (Rx) from a physician. The ACNU approach relies on a digitally enabled system to help consumers ascertain that a medication is appropriate for their use and to distribute medications to the intended recipient.
The FDA has been working on the ACNU rule for more than a decade and it’s intended to expand the public’s access to important medications that are not available over the counter while establishing appropriate safeguards for consumer safety. The need is clear: More than a quarter of Americans don’t have a regular physician, and even more just avoid going to a doctor. The gap is growing between those who need medications for a chronic condition and financial and access limitations.
The ACNU rule may dramatically change how Americans obtain medications and hopefully establish market conditions that will reduce both the associated cost and burden. Indeed, the introduction of ACNU will mean a change for consumers, pharmacists, physicians, payers, pharmacy benefit managers (PBMs) and of course pharmaceutical manufacturers. For some, especially those who are not prepared, ACNU will be deemed disruptive. Although the final rule has not been published and there are some uncertainties, the bones are clear, and it’s not too early to speculate on both the pains and gains that entities around the healthcare ecosystem will likely experience as a result.
The consumer experience
There are many obvious questions about how consumers will receive an ACNU medication. From the consumer’s point of view, the experience will involve two key components: The completion of a standardized questionnaire, and payment and medication delivery.
The questionnaire, which will be tailored to each ACNU drug and approved by the FDA, will require consumers to answer questions about their current and prior health, relevant to the risks of taking that drug. However, it likely will also involve a seamless and nearly instantaneous back-end review of pharmacy fulfillment records to objectively verify that a person who is seeking a certain medication has not been dispensed another medication which would be contraindicated. This digital questionnaire will have standard questions and predefined branching logic. Depending on the situation, a consumer may first learn about an ACNU drug through digital, traditional or in-store advertising. The questionnaire then would be delivered on a smartphone, a webpage or through a kiosk or terminal at a retail pharmacy.
After access to the ACNU medication has been granted, payment and delivery may occur through an online e-commerce transaction and then direct-to-home delivery. Alternatively, in a retail context, it may be paid for and then dispensed at the “front of the store” or through an electronic kiosk in the store.
There are several time and financial benefits for consumers with an ACNU. For many, there will be no need to wait for a doctor’s appointment, saving time and money. The average wait time to see a familiar primary care physician is 24 days, according to a 2022 report by Merritt Hawkins and the estimated average charge for an uninsured primary care visit nationwide was $161, some four to five times more than for someone with insurance, per a 2019 study by the Altarum Institute. If a generic version of a drug is available, the ACNU will need to be priced strategically to address a competitive market. The net impact on the cost for consumers may depend on their insurance coverage, on availability of rebates and coupons from manufacturers and on the actions of payers and PBMs who may determine that it’s in their interest to leverage towards an ACNU and away from an Rx.
Pharmaceutical companies and consumer health companies
For any pharma company that is considering an ACNU, it requires far more than a simple search and replace edit to the Rx-to-over-the-counter (OTC) switch playbook. Heading down an ACNU path will involve some changes to regulatory, pricing, payer and distribution strategies, all of which impact the ACNU business case. With ACNU there are also new implications for the valuation of assets, organization design, readiness and launch coordination.
Regulatory: With ACNU the FDA is expecting that sponsors submit a new drug application (NDA) or abbreviated new drug application (ANDA) supported with a label comprehension study, a self-selection study and an actual use study, similar to an Rx-to-OTC switch. However, the process for an ACNU differs from a switch in a few significant ways. First, the self-selection study will be performed using an additional conditions algorithm. The sponsor will propose the specific rules of this algorithm to the FDA in the pre-investigational new drug (IND) application, and for the self-selection test, it will be used in a real-world digitally enabled environment to establish that self-selection can be performed. Once the self-selection test is complete and the ACNU is approved, the algorithm will essentially be locked. As the ACNU legislation is intended to support the continued use of chronic care medications, digital labeling that reinforces the importance of adherence and persistence to medication may also need to be tested. Another regulatory difference is that a sponsor must perform post-marketing surveillance to be reported to the FDA.
Pricing and payers: The pricing strategy with an ACNU requires a new set of forecasting and planning tools. The provision for simultaneous marketing means that different price points are possible between the Rx and ACNU versions of a drug. Identifying optimal, non-cannibalizing pricing to grow the brand is critical. Companies need to consider the potential actions that payers and competitors will take, which may change the business case entirely. While the role and position that payers and PBMs will take is not yet known, it’s likely that if an ACNU is mostly cash-pay, they may start with a passive, low-key approach. However, if payers see that an ACNU reduces pharmacy spending for their commercial plan members, they may use tools to leverage members towards an ACNU and away from tiered Rx products.
Marketing and distribution: Another element of the ACNU business case is the efficiencies that can be gained from direct-to-consumer marketing and distribution, as ACNU brands can use digital tools to target customers more surgically. If the product is to be distributed through e-commerce and centralized fulfillment, there are opportunities to recover some portion of the wholesaler, distributor, group purchasing organizations (GPOs) and broker costs currently consumed through the consumer-channel distribution model. Along the OTC drug supply chain, the intermediary can account for upwards of 40% of the cost of a drug.
Organizational design and readiness: Simultaneous marketing of the same product — with the same indications, strengths and form of delivery — through two pathways presents challenges within the structures of pharma companies. Currently, consumer health and branded prescription businesses operate separately with different and distinct organizational structures — with many large pharmaceutical companies spinning out their own consumer health divisions. The world of branded Rx in terms of value and access, sales, marketing and regulatory affairs is dramatically different than that of consumer health brands which are focused on building their brand and growing it through brand extensions. With ACNU, brands may find advantages and new synergies with both an Rx and a non-prescription version of their product in the market. They will need to consider the structures and connectivity across their Rx and consumer health organizations and coordinate strategy and operations accordingly.
Valuation of assets: For companies that are considering the value of their assets, ACNU could materially impact the portfolio of brands to be sold, transferred or insourced. There are nuances to the competitive landscape that need to be unpacked to ensure that, for example, a pharmaceutical company that is looking to unload a brand to a private equity (PE) firm is not undervaluing its asset. For instance, while the FDA will grant a minimum three-year marketing exclusivity for an ACNU to lock out competition from a store brand — similar to an OTC switch — the requirement that a generic manufacturer repeat the self-selection and other tests may be an even greater barrier to generic competition, as algorithms developed for the additional conditions will remain the property of the original sponsor. Another valuation factor to unpack is the effect of simultaneous marketing and the halo effect on the Rx product that occurs because of consumer promotion of the ACNU version.
While ACNU may be a relevant strategy for Rx brands with years still left in their marketing life, it’s also viable for consumer health companies with assets that have already faced the patent cliff but retain brand equity. These brands could be taken off the shelf and revived through ACNU. Of course, this requires institutional investment and organizational commitment, beginning with a calculation of the long-term value that is locked in these assets which could be released through ACNU.
Providers and provider organizations
For physicians and healthcare organizations delivering primary care, ACNU could help shift the nature of chronic care visits. An ACNU could ease the staffing burden as patients opt for this solution to avoid the cost and hassle of a “refill-only visit” with their doctor. This could free up clinic schedules so that there is more time available for patients with complex needs.
However, while ACNU may result in fewer refill visits, it will add an educational burden for physicians to educate their patients on new options. In addition, when a patient does return to their doctor, it will be incumbent upon the provider to question the patient about all their medications, not just the prescribed ones. Only 37% of physician-patient encounters involved the physician actively asking about OTC medications, according to a 2018 study published in the Annals of Family Medicine. Physicians will need to incorporate non-prescription medications into regular medication reviews.
In brief, it will be incumbent on the existing provider organizations to monitor the impact of ACNU on patient care, including revisiting metrics that will incentivize throughout to improve care quality, impact and hopefully make a consequential change in clinician satisfaction.
Pharmacists and pharmacies
In discussions about ACNU, the FDA has emphasized that there are, and will continue to be, only two classes of drugs in the U.S., Rx and non-prescription. Just like OTC drugs, ACNUs are non-prescription, and they are intended to be dispensed without the need or requirement for interaction from a medical professional. For that reason, they’re not intended to be stored and dispensed from behind a pharmacy counter.
While pharmacists and their advocacy organizations have cited to the FDA, in response to the preliminary version of the rule, the important role that pharmacists play in helping the public make safe and effective medication choices, the ACNU rule intends to bring access to consumers without needing to engage or consult an intermediary.
That being said, drug stores will be an important point of distribution for ACNU drugs. Within those stores, pharmacists will be a natural resource for consumers to turn to as they navigate between OTC, ACNU and Rx choices. Indeed, consumers seek the advice of pharmacists in making choices not only about Rx but also about OTC medications. The Journal of Pharmacy Practice in 2016 found that 40% of consumers consulted a pharmacist for help choosing an OTC medication.
While the first ACNU may be a few years out, it will soon be mandatory for pharmacy chains to design for ACNU. This not only includes the considerations for planograms in stores to ensure that all-important foot traffic is maintained but also planning for new sources of ACNU-generated data. They will need to align on the design of processes that will put a box of medication in the hands of the person who has met the additional conditions and not someone else. The FDA is waiting on the industry to suggest how this will be accomplished. This could be through an in-store kiosk, or by employing a quick-response (QR) code, sent to the consumer’s phone, which would then be scanned at the front of the store where the ACNUs would be held and dispensed alongside the high-theft items.
ACNUs may be a source of customer erosion for chains if transactions move online and manufacturers take a direct-to-consumer route. As such, chains should begin to prepare against a potential drift from the mail-order business and existing owned online properties. There are numerous outstanding questions regarding the digital experience for consumers in an ACNU world and who has the ability and rights to mediate that experience. The challenges of strategizing to support an optimal mix between the front of the store, pharmacy business and mail-order operations with ACNUs will soon be a strategic imperative for chain store executives.
Coming up
In the next blog, we will focus on the business case for an ACNU. The article will look at the leverage points, uncertainties and opportunities as portfolio managers and strategic planning teams begin to weigh an initial business case for proceeding down the non-prescription pathway. Given that the time required to switch and launch a brand is significant, and ACNU is untested waters, there may be brand assets that still have five to ten years of marketing protection which could be considered for an ACNU switch. The article will offer specificity on how to select and prioritize a short list.
