Pharmacies Poised to Capture At-Home Diagnostics Category

At-home diagnostic testing has grown from a nascent pre-pandemic trend to an emerging, high-growth health product category in the pandemic’s wake. The accelerated adoption of OTC COVID-19 rapid antigen tests used for at-home self-testing was the tipping point.

Even as the COVID-19 infections that sparked the rise turn rife, the numbers are still huge. At a recent diagnostics summit hosted by Arizona State University, Nephron Research’s health care equity analyst, Jack Meehan, said, “The endemic COVID-19 at-home testing market is estimated to be 2-3 times larger than the size of flu testing market pre-pandemic (~$1.5bn).”

The numbers reinforce the idea that at-home diagnostics represent a lucrative opportunity for pharmacy growth. The OTC at-home diagnostics market is growing by all counts. Recent analysis predicts that the At-Home Testing Kits Market will grow at a compound annual growth rate of 6.1% from 2022 to 2029. Other estimates are as high as 11.3%.

By leveraging this do-it-yourself testing momentum, community-based and retail pharmacies can solidify their position as health care hubs with a category management approach that enhances the consumer experience and boosts store relevance and revenue.

The New COVID-led, Demographics-driven Health Care Consumerism

The past two years dramatically shifted how consumers think about at-home diagnostics and the importance of rapid testing.

“The most important attitude and culture change has been with the public,” said Dr. Wilbur Lam, professor of Biomedical Engineering at Emory and Georgia Tech.

Lam’s team has been instrumental in testing the quality of COVID-19 diagnostics on behalf of the NIH. He also is a diagnostics company entrepreneur.

“Before COVID, you really could only do about 2 tests at home. You could do blood sugar testing or pregnancy testing. But the pandemic forced us to realize that we could diagnose infections at home,” Lam added.

The pandemic raised consumer awareness of the role that testing plays. Meanwhile, pandemic lockdowns and movement restrictions also underscored the importance of telemedicine and alternative care sites (i.e., the home).

“Around the end of 2021, Omicron took over, and there was just an explosion in infection ­— and a desire to try to get a handle on it with testing,” said Michael Abrams, managing partner at the health care consultancy, Numerof & Associates. “And that, in effect, is really what broke down the resistance to at-home testing, which previously had been regarded as a curiosity and interesting bit of technology. The FDA gave an EUA to an at-home test, and the dam broke. By the end of the first quarter of 2022, there were 16 at-home products on the market.”

In addition to increasing demand for in-home testing, the pandemic encouraged a new generation of conscious consumers to take health care into their own hands. The Kaufman Hall State of the Healthcare Consumer Report 2022—featuring survey findings from more than 3500 Americans and interviews with health care leaders—explored the evolving ways consumers receive health services.

Analysts found that those under 45 years of age are spending more on health care and are more engaged with their health in terms of seeking out mental health services, utilizing fitness trackers, and participating in alternative therapies such as cryotherapy and acupuncture.

“Younger consumers, in particular, are more engaged in their own health, more interested in staying healthy and more disposed to use at-home testing to generate concrete evidence of their health for themselves,” Abrams said.

Digitally savvy health care consumers are more comfortable searching for information, communicating with doctors, and monitoring their health online. Their adoption of telehealth demonstrates this segment’s openness to trying new health care approaches that provide greater convenience and control.

Consumers are taking advantage of rapidly developing technologies to track, diagnose, and manage their health. As a result, do-it-yourself at-home testing has emerged as a key consumer health movement. According to a recent survey by Deloitte, 30%­–50% of consumers are comfortable using at-home diagnostics. 

Meanwhile, the role of pharmacies is evolving beyond filling prescriptions.

“Customers are beginning to embrace their retail pharmacy as a hub for a broad range of routine health and wellness services,” said Christopher Lis, managing director of Global Healthcare Intelligence in J.D. Power’s 2022 U.S. Pharmacy Study. “This is an opportunity for more retail pharmacies to innovate.”

This surge in health care consumerism, the decentralization of health care, the democratization of diagnostics, and the growing acceptance of pharmacies as health hubs have set the stage for pharmacies to grow as primary retail centers for the at-home health diagnostics category.

Gaps in Retail Management of At-home Testing

Although favorable to the market for self-test products, rapid growth has revealed gaps in how at-home diagnostics are managed at retail. Insight into buyer behavior is lacking.

Sales of COVID-19 test kits during the pandemic weren’t dependent on understanding consumer segmentation and behaviors. It was an undifferentiated, one-size-fits-all matter of taking orders—not marketing.

Yet, as the pandemic moves to endemic, the industry must explore key questions. What will motivate different buyer types to use these products? And how, when, and where will consumers search for at-home diagnostic tools in the future?

Another concern for the industry is confusion surrounding the use of at-home diagnostic products and the management of results.

“Doctors think, I don’t know if I can trust the data coming from a patient,” Lam said. “We know that the tests are not perfect. Can consumers occasionally screw it up? Well, yes, they can screw it up. But I think we’ve all come to the realization that the pros far outweigh the cons.”

The fact is that pharmacies, providers, and consumers need education on how to provide or use self-testing appropriately, what results mean, and how to determine the next steps. For pharmacies, this is an opportunity to increase their roles as health care educators.

In addition, the self-testing consumer experience is incomplete. First, finding tests in pharmacies is a hit-or-miss experience. No longer is the problem that only certain pharmacies stock COVID-19 tests. Rather, every pharmacy seems to stock these tests in different places – one store has them behind a locked case, another behind the pharmacy counter, another with respiratory products, etc.

Next, once found, the test alone is only one part of the solution. A healthcare diagnostic product on its own is not enough to meet the consumer's needs and address their health concerns. To maximize the value of self-testing, retail pharmacies should consider integrated, end-to-end services that provide a one-stop experience with diagnosis, advice, direction, and feedback. Retailers also have room to bundle tests with related products and services.

A pharmacy offering test-to-treat options is a good example of a more complete customer solution. With this approach, someone self-testing positive for COVID-19 may be a candidate for Paxlovid to relieve symptoms and shorten duration. Forward-thinking pharmacies and diagnostics providers are integrating the test-to-treat experience through digital platforms to capture, track, and distribute information to primary care providers, health departments, and others.

“A test, just to say it’s positive or negative, that’s not a new thing,” said Paul Schrimpf, Partner and Strategic advisor at Prophet Healthcare–a leading marketing consultancy. “But if you’re able to upload results, or link them into your medical records, I think that’s gonna be new, innovative, and interesting.”

Opportunities for Retail Pharmacies

Self-testing market growth has armed consumers with greater diagnostic literacy. Consequently, retail pharmacies are uniquely positioned to capture the market share if they prepare for the future by considering the buyer. Here are several ways to make the most of the growing at-home diagnostics trend.

1. Pursue a category management approach

In the same way that the oral care category evolved from a limited number of toothbrushes and toothpastes into a vast array of products, COVID-19 at-home diagnostic tests are likely to be the seeds of an expanded retail pharmacy category. COVID-19 created enormous demand for at-home testing over the past 2 years, and even as it moves into the endemic phase, the disease will sustain significant diagnostics demand.

As the starting point for a pharmacy’s diagnostics category growth, more thoughtfully, proactively merchandising COVID-19 at-home test kits is an important next step. If consumers can’t easily find COVID-19 test kits, how confident will they be in returning to find self-diagnostics for other conditions?

In early 2023, there will likely be a proliferation of at-home combined tests for COVID, Flu, and RSV. Where will these reside on the pharmacy shelves? Multi-indicator tests for various disease types, such as respiratory or STDs, are likely to be an essential part of the emerging category.

“There’s going be a lot more bundling. The trigger for any test is ‘there’s something wrong with me, and I want to know what, but it could be ten different things. I don’t want to do ten different tests. I would prefer a single test that can give me a range of answers,” Schrimpf said. “Regarding shelf space for at-home tests, if I were running category management for a pharmacy, I’d pilot a few different approaches. I might have a whole at-home testing section in one store and in another, I might place specific tests in condition-specific sections.”

2. Increase counseling and education

Hospitals have built successful health education programs to support their communities and build local relationships. Similarly, pharmacists are well-positioned to give consumers valuable insights related to diagnostic testing through “know your health” education programs.

Empowering pharmacists to be information resources and trusted confidantes is in the best interest of health care consumerism and may be an important part of effective at-home diagnostics usage. Through written material, one-to-one conversations, and even large forums, pharmacies can build their diagnostics category business through counseling and education. They can help eliminate confusion and guide customers to understand the tests, their results, and the right next steps.

3. Provide complete solutions

When a person goes to a pharmacy and purchases a diagnostic solution, what is the real problem they’re trying to solve? Considering the at-home test on its own, the answer is “To find out whether or not I have a specific illness or disease.” But looking at the big picture, the larger problem they are trying to solve is, “I feel sick, and I need to get and stay better.”

The most desirable option would be a complete solution to the problem, including all elements—from diagnosis to treatment—to solve the bigger consumer concern. COVID-19 test-to-treat solutions that link diagnostics with a telemedicine physician consultation and prescriptions plus pharmacy-provided medication is an example of a complete solution.

“Link testing and telehealth and make it easy to get the counseling there that you need. And that can be an enormous social good in terms of helping people deal with the results of the tests that they administer to themselves and make informed and appropriate decisions,” Abrams said.

Rather than just selling standalone products, the more that pharmacies can link at-home diagnostics to complete solutions—even if it requires partnerships with complementary product and service providers—the more successful they’ll be in building their diagnostics revenue.

4. Anticipate rapid change

Pharmacies are uniquely positioned to capitalize on the growing at-home diagnostics category. In fact, analysts suggest that retail and online pharmacies will collectively capture nearly 60% revenue share of the at-home diagnostics market. Community-based and retail pharmacies leading the way in the at-home testing category can expand self-testing kits into additional offerings lines and further establish their expanding role in the healthcare landscape.

However, in addition to a stream of new, disruptive diagnostics, significant competitive threats are on the horizon. Amazon’s aggressive foray into health care—including primary care (Amazon Clinic) and digital pharmacy initiatives—is already actively promoting at-home testing solutions. Can pharmacies be agile enough to embrace or outmaneuver these shifts?

“Who wins in the at-home diagnostics space? I think the key is adaptation: the ability for pharmacies and diagnostics makers to adjust quickly to a market facing incredible change,” said Dr. Wilbur Lam.

About the Author

Doug Field is chief revenue officer of PHASE Scientific Americas, a fast-growth health diagnostics provider.Field was previously founder and CEO of The Institute for HealthCare Consumerism and one of the co-founders of Employee Benefits News.

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