Rx-to-OTC Switches

OTC Innovations Key to Ascending Above Price Comparisons and Private-Label Competition

Sales for the Mucinex line of OTC cold medications were $137 mn in 2007 and grew 35.0% to reach $185 mn in 2008.  Miralax is a novel Rx-to-OTC switch brand in the laxatives category and it grew from $40 mn in 2007, up 187.5% to $115 mn in 2008.  Both brands are supported with strong advertising budgets and offer truly unique treatment of colds and constipation than private-label products in their respective categories. 

As we emerge from the global recession of 2008 and 2009, marketers of major OTC brands must be careful to continue to invest in innovations to bring new and improved OTCs to market.  Several categories were hard hit by private-label competition as consumers were willing to trade down to less costly store brands during tough economic times.  The antacids, general pain relief, and allergy relief categories have been eroded significantly by private-label competition in 2008.  Some brands have positioned themselves head on by stressing “value” messages in advertisements or citing quality and testing as reasons why consumers should spend more on OTC brands.

However, market share and sales for branded OTCs can be insulated from private-label competition by offering innovations such as fast-acting, fewer doses, improved drug delivery forms, faster healing times, or medicines targeted at specific groups of consumers such as age, gender, or those who have certain health conditions.  2008 in general was a slow year for new OTC branded products and this could have inadvertently helped private-label products’ performance. During the recession many OTC companies sought to reduce expenditures and there was a decline in new products launched as well as ad spending for the overall industry.  In order to gain some market share back from private-label products, marketers of branded OTCs should be diligent, now more than ever, to develop new line extensions and products that can help them differentiate from and command higher price points compared to private-label OTCs.

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