The Effect on Social Welfare of a Switch of Second-Generation Antihistamines from Prescription to Over-the-Counter Status: A Microeconomic Analysis

Shih YT, Prasad M, Luce BR

In this study, researchers hoped to determine how converting second-generation antihistamines (SGAs) from prescription (Rx) to over-the-counter (OTC) availability would affect social welfare. Economic literature regarding drugs converted from Rx to OTC between 1990 and 2001 was studied to see if there were indications of how such conversions had affected social welfare in the past. This article provides a conceptual microeconomic framework for addressing issues regarding this conversion's effect on social welfare. Social welfare, as defined in microeconomics, is the value consumers receive from a commodity beyond what they have paid for it. In other words, a reduction in SGA prices would increase the product's benefit to the consumer. Those in favor of SGA conversion from Rx to OTC status argue that OTC availability creates price competition among manufacturers, resulting in a lower price—and an increased positive effect on social welfare. This argument was supported by studies such as the Rx-to-OTC conversion of 0.5 percent topical hydrocortisone lotion in the US. The author of that study estimated net benefits for consumers at $212 million in 1980 and $433 million in 1981. Reports on H2-receptor antagonist (such as Tagamet®) conversions have yielded different results. While one author used a managed-care database to conclude that the switch was cost saving for the managed care plan, another author used a decision-analytic model and reported that the difference in cost to the consumer between Rx and OTC H2-receptor antagonists was negligible. In the case of SGA conversion to OTC status, the authors of this article note that a decreased price of SGAs after conversion to OTC availability may not guarantee a benefit to social welfare. It's reported that in some cases, social welfare can be damaged in spite of a decrease in price. These researchers concluded that it is uncertain whether SGA conversion to OTC status would be beneficial to social welfare. Social welfare implications depend heavily on pricing strategies and consumer behavior, so the authors report that further analyses on these two factors are necessary before costs and benefits of such a conversion are fully understood. Clin Ther 2002;24(4):701-716. Return to Top