Steady Performances for Cost-Saving OTCs

OTC Guide, June 2010, Volume 14, Issue 1

It was basically a decent year for OTC drugs this past year, and in this economy, no one is complaining. “Growth was not tremendous in the OTC category,” said Laura Mahecha, industry manager for health care at Kline Group. “Switches provided some blips, but overall growth averaged around 2.2% in 2009.”

Although a lack of blockbuster OTCs left 2009 a lackluster year, the category had a steady performance—a trend that is good for the health care system in general.

“According to CHPA [Consumer Healthcare Products Association]/Nielsen research from 2009, OTC therapy saves patients an average total of $174 each in office visits and medication costs annually,” said Elizabeth Funderburk, a spokesperson for CHPA. “In addition, an estimated $757 million in annual savings to the US health care system can be attributed to fewer office visits.”

Digestives/Proton Pump Inhibitors Growing

Gastrointestinal OTC drugs have had the highest rate of growth due to key switches, and that trend is expected to continue as more products are due for a switch.

“The market for gastro[intestinal] OTCs has exploded since 2004, with one switch after another,” said Melissa Elder, market analyst for Kalorama Information. “This category has seen 4.5% to 5% growth, while other segments in OTC are at 3% growth or below,” she said.

Novartis Consumer Health launched Prevacid 24HR(lansoprazole 15 mg), which was the biggest Rx-to-OTC switch last year. The product launched in November 2009 with a $200-million marketing campaign.

“We will see a big increase in Prevacid sales this year, as previously switched brands, such as Pepsid and Zantac, try to hold onto their share of the market,” said Mahecha. She expects “a lot of noise and a lot of promotion” from manufacturers as managed care companies attempt to shift prescription users to the OTC market.

Schering-Plough Healthcare Products’ (a subsidiary of Merck & Co Inc) Zegerid(20 mg omeprazole/sodium bicarbonate) crossed over to OTC from prescription status in the first half of 2010 and is likely to shake up the category. Pfizer Inc’s Protonix (pantoprazole) could be the next big category switch.

“The prescription market is very large for these drugs and in terms of switches. Their great performance and great track record has made them very easy candidates for switches,” said Mahecha.

Allergy Category Still Active

The allergy segment also had an active year, as the last major category switch, Johnson & Johnson’s Zyrtec (cetirizine), and Schering-Plough HealthCare Products’ Claritin (loratadine) duked it out for market dominance.

Sanofi-aventis US’s Allegra (fexofenadine) is likely to receive crossover status by the end of 2010 or early 2011. Sanofi has been positioning for the switch, having purchasedChattem Inc to be its platform for US OTC sales of the product.

Once Allegra hits the market, the competitive category will get even more crowded. “There could be even more switches in the next 5 years as Merck Sharp & Dohme Corp’sSingulair(montelukast) and GlaxoSmithKline’s Flonase (fluticasone propionate) are considered,” explained Samantha Chemlik, consumer health industry manager for Euromonitor. “The FDA could ask for reduced dosage strengths. It is certainly in the interest of insurers to have these products switched. Like the digestive category, it is an expensive chronic disease category that is attractive to insurers who want to control costs.”

Consumers’ desire to save money also propelled the private-label segment of the allergy category. “None of these low-sedating antihistamines received Hatch-Waxman exclusivity, so private-label copies were on the market within months,” said Mahecha. Euromonitor estimates that private-label products accounted for 23% of allergy category sales in 2009. “That is a pretty good chunk,” said Chemlik. “Private label accounted for 29% of proton pump inhibitor sales in the gastro[intestinal] category.”

“Private label is keeping up with branded products,” said Elder. “People are looking to low-cost generics and private-label products as an effective way to keep their health care costs down.”

Analgesics: Private Labels Gain

Private-label products also made gains in the analgesic category. As a mature category, branded analgesics are extremely vulnerable to private-label competition. In 2009 and early 2010, the category was also plagued with issues of contaminated product, recall issues, and ongoing debates about the safety of high doses of acetaminophen.

In early 2010, McNeil Consumer Healthcare issued a voluntary recall of certain OTC Children’s and Infants’ liquid products manufactured in the United States, including Tylenol, Motrin, Zyrtec, and Benadryl products. The recall was not a result of adverse medical events; however, it was believed that some of the products may not have met required quality standards. The company reported that some of the products in the recall may have contained a higher concentration of active ingredient than specified; others may have contained inactive ingredients that may not have met internal testing requirements; and others may have contained tiny particles. The risk for serious medical events was low, but, as a precautionary measure, parents and caregivers were advised to discontinue use of these products.

In addition, McNeil Consumer Healthcare voluntarily recalled some lots of Tylenol in early 2010 after consumers complained of the product’s moldy odor and associated nonserious gastrointestinal events. Trace amounts of a chemical called 2,4,6-tribromoanisole were found in the product and were believed to be the result of the breakdown of a chemical sometimes applied to wood used in pallets to store materials. McNeil also recalled all lots of Tylenol Arthritis Pain 100-count with Ez-Open Cap related to this issue in December 2009.

“It was a scary year for this category,” said Chemlik. “Consumers feel like they do not know if they can trust these products. Once you open up that doubt, the consumer is open to giving private-label products a try.”

“With Tylenol off the shelf, private-label products made some big inroads,” said Mahecha. The children’s ibuprofen segment also benefitted from parental and pediatrician concerns about the use of ibuprofen in children. Sales of children’s ibuprofen saw double-digit increases, according to Kline.

Products that offered speedy pain relief gave a boost to the category. “It is all about rapid pain relief,” said Mahecha. Tylenol Rapid Relief Gelcaps and Bayer Quick Release Crystals were 2 of the most successful recent launches. “Anything that makes a product work faster is popular with consumers,” said Mahecha.

Dosing delivery systems also brought something new to the OTC category. “We saw further improvements to dosing delivery systems in children’s medicines as part of the industry’s overall effort to address accurate dosing and unsupervised ingestions,” said CHPA’s Funderburk. Predosed spoons and expanded meltaway and strip options debuted in the children’s OTC section, while “on-the-go”—sized and single-dose units of liquid concentrations provided something new to adult formulas.

Chemlik sees the popularity of patches, creams, and other topical analgesics growing. “People are confused by how much they should take and how long they should wait before they take more of oral medications,” she said. “The growing popularity of topicals could be a backlash against pills.”

Third Drug Class Still Offers Promise

Sales of contraceptives, according to Kline Group, were up 14%, an increase Mahecha attributes to sales of Plan B. “Since Plan B switched, the category has quadrupled from a $20-million to $25-million category to a $150-million category. A lot of that growth was driven from behind the counter,” said Mahecha.

Creating a third class of drugs to facilitate switches of drugs that need more supervision is still a hot topic in the industry. “A third class of drugs has not quite made it as a path for approvals,” said Elder. “Mevacor has tried, but has been denied a number of times, despite being approved in Europe.” Elder pointed out that statins, oral contraceptives and hormone replacement, and osteoporosis and sexual dysfunction drugs would be good candidates for third-class status.

Jack Plunkett, chief executive officer of Plunkett Research, agrees. “The most important Rx-to-OTC migrations over the next mid-term will be those that are important to baby boomers, since there are currently 76 million surviving boomers born between 1946 and 1964 who start turning 64 next year,” he said. OTC versions of statins and hormone replacement drugs could certainly cut health care costs, he said, if manufacturers could find a way to make them available to patients safely.

“These drugs are more complicated than an Allegra, where the company sends in an NDA [new drug application], and it is a no-brainer,” said Mahecha. “Anything that would create a new category of drugs would require some creativity—whether it is an extensive consumer education program or behind-the-counter status.”

What lies ahead for the OTC market, whether it includes a greater amount of Rx-to-OTC switches, a third class of drugs, or an increasing amount of new formulations, remains unknown; however, it will certainly be an interesting sector to watch develop. With a rough economic climate still on the horizon, patients will certainly be turning to OTC products more than ever in an attempt to keep their health care costs down. Pharmacists will play a vital role in counseling these patients on the appropriate and safe use of these products.

Ms. Sax is a freelance writer based in Chevy Chase, Maryland.