Transforming Pharmacy Profits Through Medicare Advantage OTC Programs

Medicare Advantage OTC benefits represent a growing opportunity for independent pharmacies to expand their services and revenue streams. As health care costs rise and pharmacy reimbursement becomes increasingly challenging, understanding and implementing Medicare Advantage OTC benefit programs can provide a strategic advantage for pharmacies. At the Total Pharmacy Solutions Summit Fall 2025, Saeed Aboelzahab, director of consumer health of account management and retail operations at Cardinal Health, explored the current landscape, potential benefits, and practical steps for pharmacies to integrate these programs effectively.

Medicare Advantage OTC benefits represent a significant opportunity for independent pharmacies to diversify revenue, enhance patient services, and compete with larger retail chains. Success requires a strategic, patient-focused approach that emphasizes education, careful implementation, and continuous adaptation to changing health care landscapes. By understanding the nuances of Medicare Advantage OTC benefits and implementing a thoughtful strategy, pharmacies can unlock new potential for growth and patient care.

“As we all know, the pharmacy landscape continues to change. The environment is very dynamic, and reimbursement pressures continue to get tougher and tougher,” Aboelzahab said. “Pharmacies have to really look at different ways in which they look at profits within their pharmacy. We know health care costs continue to rise. Government has an impact on how drug spending and pricing occur, which then impacts pricing for pharmacies and reimbursements.”

Read on for Key Takeaways From Aboelzahab’s Presentation:

• The current Medicare ecosystem is experiencing significant transformation, with 54% of Medicare recipients already enrolled in Medicare Advantage plans. Projections suggest this enrollment could surge to 78% by 2027, indicating a massive potential market. These plans typically provide beneficiaries with approximately $400 annually in OTC benefits, though some plans offer up to $3000 per year. Most strikingly, approximately $5 billion of the $7 billion allocated for Medicare OTC benefits remains unused annually, representing a substantial untapped opportunity for pharmacies willing to educate and engage their patients.
• Patients can redeem their OTC benefits through multiple channels, including in-store purchases, catalog orders, and online or phone options. The transaction process mirrors a credit card payment, offering immediate completion without complex billing procedures. This streamlined approach provides pharmacies with instant cash flow and eliminates the typical reimbursement challenges associated with traditional prescription billing, making it an attractive option for independent pharmacies seeking to optimize their financial operations.
• Contrary to traditional perceptions, OTC benefits extend far beyond basic medications. Eligible categories now include dental products, diabetes testing supplies, pain medicines, sunscreen, and a wide array of health-related items. This expanded range allows pharmacies to diversify their product offerings, potentially increasing sales opportunities and providing more comprehensive health care solutions to their patients.
• Successfully integrating Medicare Advantage OTC benefits requires pharmacies to collaborate with specific technology partners. Approximately 6 technology companies currently facilitate these transactions, with most offering free terminals to encourage adoption. The implementation process demands a methodical approach, such as identifying primary insurance plans serving their patient population, selecting compatible technology processing partners, developing in-store merchandising strategies, and training team members on program intricacies.
• The success of Medicare Advantage OTC benefits programs hinges critically on patient education. Pharmacists must become proactive educators, explaining available benefits, helping patients understand their specific plan details, and guiding them through redemption processes. By building trust and providing clear, comprehensive information, pharmacies can significantly increase program utilization and demonstrate their value as health care partners.
• Large retailers are already strategically capitalizing on Medicare Advantage OTC benefits. Independent pharmacies face a narrow window to establish their market presence. Immediate action is crucial to prevent larger chains from monopolizing these benefit programs and to capture a share of the currently unused billions of dollars in OTC benefits.
• The Medicare Advantage OTC benefits market shows promising growth, with projections indicating an approximate 7% annual expansion. The program's scope is expected to extend beyond Medicare Advantage, potentially incorporating Medicaid, commercial plans, and retiree programs. The "food as medicine" concept may further broaden eligible product categories, creating even more opportunities for innovative pharmacies.
• Pharmacies should approach Medicare Advantage OTC benefits with a comprehensive, patient-centric strategy. This involves systematically identifying primary insurance plans, selecting appropriate technology partners, developing robust merchandising and marketing strategies, thoroughly training staff, and creating ongoing patient education initiatives. The key is to start small, learn continuously, and gradually scale the program while maintaining a focus on patient needs and health care outcomes.

“I think it's important we take the time to learn about [Medicare Advantage OTC benefits], understand it, and then be able to transfer that knowledge and awareness to our patients each and every day,” Aboelzahab said. “When we think about it from a patient perspective, it's saving them money. It's putting money back in their pocket that they can spend on other items, as I mentioned, like OTC or other grocery items.”