Future Growth of OTC Market

Future Growth of OTC Market Linked Closely to Rx-to-OTC Switch Activity

The years 2008 and 2009 have posed considerable challenges for branded OTC marketers caused by global recession, price-conscious consumers, and strong competition from private labels. However, Rx-to-OTC switch remains a strong prospect for future growth of the industry.

Over the next two years a number of switch opportunities will be emerging in existing OTC categories such as allergy, digestives, pain relief, and sleeping aids. Some switches may possibly expand the OTC market by creating entirely new categories such as urinary incontinence, erectile dysfunction, and benign prostatic hyperplasia (BPH).

In the allergy category, potential switches over the next few years include Allegra (Sanofi-Aventis), Clarinex (Merck/Schering-Plough), or Flonase (GlaxoSmithKline). If any of these medicines make the Rx-to-OTC switch they will serve to add new users to the OTC market by converting ex-prescription users to self-care.

In the digestives category, two new proton pump inhibitors (PPIs) Prevacid 24HR (Novartis/Takeda) and Zegerid (Merck/Schering-Plough) are expected to enter the market in late 2009 and early 2010, respectively. The opportunity for Prevacid 24HR remains so large in simply converting a portion of ex-Rx users to the OTC market that Novartis executives, who are expected to launch the OTC product upon Rx patent expiration in November 2009, have publicly stated that their strategy is not to pursue any of Prilosec OTC’s (Procter & Gamble) OTC consumers, but solely build the brand by converting some of the Rx users to the OTC product. Other potential longer term switch candidates in this class include Protonix (Pfizer/Wyeth), Aciphex (Eisai/Johnson & Johnson), and Nexium (AstraZeneca). The digestives category offers unique opportunities for marketers to switch lower dose, less serious indications to the OTC market while leaving higher dose, more serious indications simultaneously on the Rx market. For example, Prilosec is still sold as a prescription drug for ulcers while Prilosec OTC treats frequent heartburn.

Two other existing OTC categories with potential for switches include internal analgesics with GlaxoSmithKline’s migraine treatment Imitrex and sleeping aids Ambien (Sanofi-Aventis), Lunesta (Sepracor), and Rozerem (Takeda). While Rx-to-OTC switch brands in each of these drug classes would enter existing OTC categories, they would presumably offer new indications and claims compared with existing brands on the market. Given the safety and efficacy issues with these drug classes, these switches present regulatory challenges for marketers; however, they also offer lucrative opportunities for expanding these OTC categories and lifecycle management of these drugs.

Speculation on the possibility of new OTC categories being created through Rx-to-OTC switches in BPH, urinary incontinence, and erectile dysfunction remain mixed; however, these conditions could all in theory be self-treated as they are all symptomatic. The issues with ED OTC medications are concerns about side effects, as well as potentially dangerous drug interactions with prescription medications, and for some patient populations such as those with heart disease. With BPH and urinary incontinence, a physician’s diagnosis may be suggested on OTC product labels before consumers would self-treat as a way to both confirm the condition exists and to rule out more seriously related illnesses such as prostate cancer or bladder cancer. For instance, back in the early 1990s, product labels and advertising for Rx-to-OTC switch feminine yeast infection creams Monistat (Johnson & Johnson) and Gyne-Lotrimin (Schering-Plough) were required to state that women should see their doctor to confirm they were suffering from a yeast infection and then could self-treat once the initial diagnosis had been confirmed.

Rx-to-OTC switches continue to be an engine of growth for the OTC industry, adding new users to the OTC market from the prescription market. In fact, the top ten Rx-to-OTC switch brands during 2008 have grown by 5.8% compared with a growth rate of 2.4% for the overall OTC industry over the same time frame, as shown in Kline’s Nonprescription Drugs USA report. With all the competition from private labels and pressure from retailers for brands to offer more value, switches will remain a way for branded marketers to expand the price points, margins, and profitability of their OTC portfolios. Continued growth of the OTC market will be largely dependent on future Rx-to-OTC switches.

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