How Consumer Health and OTC Companies Work

Introduction

Pharmaceutical companies have spent the past few years letting go of the medicines people buy without a prescription. Sanofi closed the sale of a 50.0% controlling stake in Opella, its consumer healthcare business, to the private equity firm Clayton, Dubilier & Rice (CD&R) on April 30, 2025, receiving around 10 billion euros of net cash proceeds and keeping 48.2%. Sanofi described Opella, owner of Allegra, Doliprane and Dulcolax, as already the third-largest business worldwide in over-the-counter medicines and vitamins, minerals and supplements. It followed GSK's separation of Haleon in 2022 and Johnson & Johnson's of Kenvue in 2023.

Those separations reflect how different consumer health is from prescription pharma. Consumer health companies sell trusted brands of over-the-counter (OTC) medicines and vitamins, minerals and supplements (VMS) directly to shoppers through pharmacies, supermarkets and mass merchants. Their economics look more like branded consumer goods than drug development: steady demand, strong brands, high margins, modest research spending and heavy advertising. But they operate under drug regulation that shapes what they can sell and claim. This article covers what these companies sell, how OTC regulation and prescription-to-OTC switches work, the VMS model, the separations from pharma and the brand portfolio deals that follow.

Consumer health spans products for everyday self-care, from headache tablets to multivitamins, and it overlaps with household and personal care in oral care and therapeutic skincare.

The main categories

The leading companies include Kenvue, Haleon, Opella, Bayer's consumer health division and Reckitt's health brands, along with Perrigo, a leading maker of store-brand OTC medicines, and household groups such as Procter & Gamble and Church & Dwight with health portfolios.

Why the business is attractive

Consumer health brands combine several advantages. Shoppers rely on trust when choosing a medicine, so established brands hold share for decades. Pharmacists and doctors often recommend specific brands, which reinforces loyalty. Demand is steady and partly seasonal, with cold, flu and allergy seasons adding variability but not long downturns. And regulation limits how quickly newcomers can enter with new ingredients or claims. The result is gross margins comparable to the best household and personal care companies and steady cash flow, which is why these businesses attract both strategic acquirers and private equity.

Pharmacy, mass and online channels

Consumer health sells through more channels than most staples. Pharmacies and drugstores remain central, both for sales and for the advice that drives brand choice; supermarkets and mass merchants carry the broadest ranges; warehouse clubs sell large packs; and online sales, especially of vitamins and repeat-purchase medicines, have grown quickly. In many European countries, some OTC medicines may be sold only in pharmacies, which keeps pharmacists' recommendations at the heart of the business. The economics of these channels, and of the retailers that dominate them, are explained in the article on retailer power and customer concentration.

Where the risks sit

The risks are specific. Store brands compete strongly on price, because an OTC store brand must contain the same active ingredient at the same strength as the national brand, and pharmacists and retailers promote them. Regulatory changes can remove an ingredient or a claim. And consumer health companies face product liability litigation more often than most consumer businesses, because their products are ingested and their safety is scrutinized closely. The store-brand side of the market is covered in the article on private label versus national brands.

In the US, nonprescription drugs reach the market through two main routes, the monograph route and the application route, and the choice shapes how easily a product can be copied.

The monograph system

Most OTC medicines are sold under monographs, which set the conditions under which a category of drugs can be marketed without individual approval.

OTC Monograph

A set of standards, established by the US Food and Drug Administration (FDA), that specifies the active ingredients, doses, labeling and other conditions under which a category of over-the-counter drugs is considered generally recognized as safe and effective. A product that complies with the relevant monograph can be marketed without an individual FDA approval, which is why many brands and store brands sell identical active ingredients.

The system was modernized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020, which replaced a slow rulemaking process with administrative orders, let companies request changes through monograph order requests and introduced user fees to fund the FDA's work. Monograph status can also be taken away. In November 2024 the FDA proposed removing oral phenylephrine as an OTC nasal decongestant ingredient, a decision based on effectiveness rather than safety concerns, while allowing products to remain on sale until any final order. Phenylephrine is used in many leading cold and flu products, so the proposal showed how a single regulatory decision can force reformulation across a category.

Rx-to-OTC switches

The second route is an application to the FDA, used most visibly for switches: moving a drug that was prescription-only to over-the-counter sale.

Rx-to-OTC Switch

The process by which a drug previously available only with a prescription is approved for sale over the counter, after the manufacturer shows that consumers can use it safely and effectively by relying only on the nonprescription label, without help from a health care professional. Successful switches open large new consumer markets for established drugs.

Switches have created some of the largest consumer health brands, including allergy treatments such as Allegra and Flonase and heartburn drugs such as Nexium. The FDA approved Opill in July 2023 as the first daily oral contraceptive available in the US without a prescription. A switch based on new clinical studies can come with a period of marketing exclusivity, typically three years, before store brands can follow, which is why switch candidates are valuable assets in consumer health deals.

Switches are slow and uncertain. The sponsor must run label comprehension studies, showing that consumers understand the label, and often actual use studies, showing that they choose and use the product correctly without a doctor. Many switch attempts fail or are withdrawn, and successful ones can take years of work with the FDA. That is why switches are usually pursued jointly by the drug's owner and a consumer health company with the marketing scale to launch the OTC version.

Outside the US

Other markets classify nonprescription medicines differently. In the European Union, each member state decides which medicines may be sold without a prescription and where, so the same molecule can be pharmacy-only in one country and sold in supermarkets in another. The United Kingdom distinguishes general sale medicines, available in shops, from pharmacy medicines, sold only under a pharmacist's supervision. These differences mean an OTC brand's economics vary by country, and a portfolio strong in one market cannot simply be rolled out across others.

Vitamins, minerals and supplements follow different rules from OTC drugs. In the US they are regulated under the Dietary Supplement Health and Education Act of 1994 as a category of food, so they do not need FDA approval before sale, and they may make structure and function claims, such as supporting immune health, but not claims to treat or cure diseases.

A fragmented, trend-driven market

The VMS market is far more fragmented than OTC medicines. Large brands such as Centrum, Nature Made and Emergen-C compete with thousands of smaller brands, store brands and online sellers. Growth has come from formats such as gummies, from trends in sleep, immunity, gut health and protein, and from aging consumers, while sales swing with health trends: demand surged during the pandemic and then normalized, leaving some companies with excess inventory and capacity.

Channels and quality

VMS sells heavily online, through Amazon, brand websites and subscription models, as well as in pharmacies, mass merchants and clubs. Because supplements do not need pre-approval, quality control is a key differentiator and a key risk: contamination, mislabeling or unsupported claims can lead to recalls, enforcement action and reputational damage. Large brands invest in third-party testing and manufacturing standards to stand apart from low-cost online sellers, and retailers increasingly demand them.

Claims and enforcement

Although supplements need no pre-approval, their marketing is policed. The FDA can act against products that are unsafe, adulterated or marketed with disease claims, and the Federal Trade Commission (FTC) enforces truth-in-advertising rules, requiring companies to have competent and reliable scientific evidence for health claims. Competitors also challenge each other's claims through industry self-regulation. For buyers, a supplement brand's claims substantiation file is as important as its sales data, because a claim that cannot be supported can force relabeling, refunds or the loss of a retailer.

Why VMS deals are harder

VMS businesses can look attractive, with recurring purchases and wellness tailwinds, but they are harder to value than OTC brands. Barriers to entry are low, brand loyalty is weaker, online competition is intense and trends can fade. Buyers therefore study repeat purchase, channel mix and the share of sales coming from a few trend products before paying a premium. The strongest VMS businesses tend to be those with brands recommended by pharmacists or doctors, manufacturing they control and a customer base that buys on subscription or routine, rather than those riding a single ingredient trend on social media.

The largest consumer health businesses grew up inside pharmaceutical companies, and most have now been separated from them through demergers, listings or sales.

Why pharma lets go

Pharma companies separate consumer health for several reasons. The two businesses have different growth profiles and investor bases: prescription drugs offer high growth and patent-driven returns, while consumer health offers steady, lower growth. They need different capital allocation, with pharma investing in research and consumer health in marketing. And separation lets each business be valued on its own terms, often unlocking value that a combined company hides. The pharma side of these decisions is covered in the Healthcare guide's article on pharma M&A case studies, and the general mechanics in the blog's guide to spin-offs and carve-outs.

Three models of separation

The recent separations used different structures:

Each structure trades off speed, value and control. A sale to a sponsor brings cash immediately but at a price set by financing markets; a spin-off avoids tax on the separation in many cases but leaves the parent's shareholders to decide what to do with the shares.

Once separated, the new companies tend to be valued like other branded consumer staples, on steady organic growth, margins and cash conversion, rather than on drug pipelines. The comparison with household and personal care peers, rather than with pharma, is often where the value case for a separation rests.

What happened next

Separation was not the end of the story. Once independent, consumer health companies became targets or acquirers themselves. Kimberly-Clark agreed in November 2025 to acquire Kenvue for 0.14625 of its shares plus $3.50 in cash for each Kenvue share and completed the deal on 2 November 2026, combining Tylenol, Neutrogena and Listerine with Huggies and Kleenex in a deal that turned a recently separated consumer health company into part of a larger household and personal care group. The strategic logic was scale with shared retailers and shoppers, a theme that runs through the sector's largest combinations.

Consumer health companies manage portfolios of many brands across categories and countries, and they reshape them constantly.

Buying and selling brands

The most common deals are bolt-ons: a pharma company or larger consumer health group sells a regional brand or a mature product, and a buyer with distribution in that category or country adds it to its portfolio. Many specialist consumer health companies have grown almost entirely by buying such brands and improving their marketing and distribution. Sponsors are active buyers too, because established OTC brands have steady cash flows that support leverage, as described in the article on consumer LBOs.

Managing the portfolio

Portfolio management in consumer health focuses on a few power brands that receive most of the investment, supported by switch pipelines, line extensions and geographic expansion, with smaller brands managed for cash or sold. Brands that work in one country do not always travel, because medicine habits, regulations and pharmacy practices differ widely, so international expansion is slower than in other consumer categories.

Emerging markets are nonetheless an important source of growth. Rising incomes, growing pharmacy networks and greater use of self-medication have lifted demand for OTC medicines and vitamins in Asia, Latin America and the Middle East, and several global consumer health groups earn a meaningful share of their growth there. Local brands are often strong, however, and regulators may require local registration and testing, so many groups expand through acquisitions of local brands rather than by exporting their own.

Consumer health mandates combine consumer and regulatory analysis, and they draw strategic acquirers and sponsors alike. Bankers look at the regulatory status of each product (monograph or approved application), exposure to ingredients under review, the strength and timing of any switch pipeline, store-brand penetration in each category, the weight of seasonal cold and flu sales, and any litigation history. For VMS businesses, they add repeat purchase, online channel dependence and quality controls.

For a carve-out from a pharma group, the work typically follows a sequence:

The regulatory step is often the longest. Transferring marketing authorizations country by country can take a year or more, during which the parent may have to keep selling products on the buyer's behalf. Bankers build that timeline into the closing structure and the transition agreements, because delays in regulatory transfers delay the moment the buyer controls its own revenue.

Consumer health sits at a meeting point of pharma and consumer goods, and its deals draw buyers from both. The businesses that command the highest values combine trusted brands, protected products and steady demand, and they are increasingly owned by companies and sponsors that specialize in running brands rather than discovering drugs.