"5-Pharmaceuticals" via MaRS

Robert Buckeldee, Service Model Director, Europe
Jim Mansfield, Customer Development
Nicholas Hall, CEO, Nicholas Hall

SUMMARY: Transitioning a medicine from prescription-only to over-the-counter status is big business—and yields significant benefits for almost all involved. But manufacturers looking at new opportunities for growth need to start planning well in advance of such a launch and look beyond traditional markets.

In recent years, a number of prescription drugs have gone over-the-counter (OTC), which has been a boon to consumers who can now obtain medications for allergies or stop-smoking aids without having to deal with the time—and sometimes red tape—of doctors and insurance companies. It’s also benefited the companies that manufacture these products. While the recession has impacted the over-the-counter drug industry, the consumer focus on healthcare and the continued increase of Rx-to-OTC switches has enabled sustained growth, and shows few signs of abating.

Global OTC markets are forecast to outpace GDP by 21% or 0.9% percentage points in 2010, according to Nicholas Hall & Company. The OTC industry continues to outpace global GDP, reporting growth from 2007 through 2009 ahead of GDP 0.2%, 1.1%, and 5.3%, respectively. The significant 2009 growth was 5.3% points ahead of GDP which supports the consumer focus on healthcare and self-medication.

New Areas of Growth
Identifying which countries to execute a global strategy is critical for OTC manufacturers looking for new growth opportunities. In the U.S.—the largest OTC market—growth is forecast to be lower than in other countries, due largely to the fact that this market is mature. The emerging BRIC countries (Brazil, Russia, India and China) have and continue to experience double digit OTC growth.

OTC Growth
Country	2009	2010 (forescast)
USA	2.60%	3.20%
China	9.70%	10.00%
Japan	-0.60%	0.10%
Germany	-0.30%	0.10%
France	2.70%	1.00%
Brazil	15.90%	10.00%
Italy	2.80%	1.70%
Russia	23.50%	15.00%
UK	2.20%	1.00%
Canada	5.80%	4.00%
India	10.70%	11.00%
Source: The Nielsen Company

Switching Opportunities
Over-the-counter manufacturers looking to expand should consider the Rx-to-OTC opportunity. Nielsen conducted a historical macro analysis of 26 prescription and over-the-counter categories in the U.S. and found that in 12 currently marketed categories, a number of potential prescription brands and technologies have yet to switch from Rx to OTC. Assuming a historical OTC share of 20% of the prescription and OTC dollars in these 12 categories, a potential five-year forecasted opportunity of $44 billion exists.

Of the 12 categories, the top five comprise a significant share of the $44 billion:

1. Respiratory or Asthma
2. Antacids
3. Insomnia
4. Analgesics
5. Acne

The remaining seven categories include feminine hygiene, smoking cessation, athlete’s foot, cough-cold-allergy, diet-obesity, hair growth and laxatives. These values were adjusted with current share already achieved for the OTC products within combined prescription and OTC dollars.

Script to Self Watch-Outs
Looking forward at potential Rx-to-OTC switches in categories that are prescription only, nine categories were identified: cholesterol reducers, hypertensive agents, diabetes insulin-non-insulin treatments, anti-infectives, oral contraceptives, osteoporosis, anti-fungals, overactive bladder-incontinence and sexual function-erectile dysfunction. Before these categories are moved from prescription to OTC, three key issues (besides regulation) need to be addressed. However, the dollar opportunity is considerable—valued at $45 billion in the U.S.

First, infrastructure to track consumers’ purchases is warranted for some products. The good news is that the beginnings of an infrastructure for tracking are already developed and being used. Today, pharmacies who sell a product containing pseudoephedrine—the “D” for some cough-cold-allergy products—are required to track the consumers information. The process requires the pharmacy to enter a consumer’s driver’s license or other identification number into the computerized system, which is then reported to governmental agencies to tally purchases.

Second, the role of the pharmacist must expand as many consumers will engage a healthcare professional at the shelf or behind the counter for counseling on a variety of safety, efficacy, dosing and administration questions. Education of and counseling for lab, blood pressure, and other diagnostic tests is also vital. While consumers in some countries already view their pharmacist as a key source of healthcare information and advice, it will be paramount to anticipate the expanded role of the pharmacist to fully understand this dynamic when considering OTC launches.

Third, the healthcare system must evolve to the degree that self-medication is revolutionized. Important catalysts to advance the momentum include managed care to pay for OTC therapy via adjudications (electronic claims at pharmacy via formulary status), desire for the political administration to consider that OTC medications decrease healthcare costs, and lastly expanded use of in-store clinics and/or pharmacy clinics.

Time Consuming and Complicated
The duration of moving an entire category from the prescription space to over-the-counter has shown to take approximately two decades. Additional findings suggest a market capitalization on a particular category—in essence, almost a maximum ceiling of spending by consumers or the healthcare system for a disease or condition. This ceiling can be increased through innovation and managed care catalysts or lowered by the trend of generics and private label.

The sequential process of moving from Rx to OTC is complicated and the aspects of prescription brand, generic, managed care, innovation, technology, dosing, and forms need to be considered in addition to private label and competitive response for over-the-counter products. Understanding and anticipating the place of a brand in the sequential Rx-to-OTC process can result in significant or diminished success.

Switch and Save
While an $89-billion opportunity in the U.S. is a tantalizing prospect for the over-the-counter industry, what does this mean for the healthcare system, employers, the government as a payee, and consumers? To understand the potential cost savings, Nielsen studied ten of the 12 categories that made the Rx-to-OTC switch and found that average prescription costs decreased 7% between 2007 and 2009.

Applying the 7% costs savings to prescription drug cost forecasts in 2014 as reported by the U.S. Centers for Medicare & Medicaid Services, the prescription drug savings would be $12.92 billion. Consumers would save $2.35 billion, employers vis-à-vis private health insurers would save $4.87 billion, and the government including federal, state, local, Medicare, and Medicaid would save $5.70 billion.

Clearly, the transition of medicines from prescription-only to OTC presents tremendous opportunities. For consumers, it offers easier access to important treatments and lower costs. For manufacturers, it provides new growth opportunities. And for the healthcare system as a whole, it can save significant amounts of money. However, the process from Rx-to-OTC is a long one, and the most significant immediate growth opportunities exist in developing countries, which have very different dynamics than those found in the more mature markets of the U.S. and Europe. Fully understanding these factors will ultimately determine the success of a product launch.

Hello, everyone. Nothing like a sunny Sunday morning to catch up on some reading. Here on the shiny Pharmalot corporate campus, we are doing just that. And, of course, quaffing a cup or three of needed stimulation. Later, we hope to take the official Pharmalot mascot for the usual constitutional. Whatever you do today, we hope it is enjoyable. Meanwhile, here are a few items to keep you fresh. Have a great time…

Bristol-Myers Squibb chose to lob some bad news over the weekend that it received a complete response letter from the FDA concerning its belatacept medication for kidney transplantation. In disclosing the setback, the drugmaker says no new clinical trials were requested, but the FDA does want 36-month data from ongoing Phase III studies to further evaluate long-term effects. The Biologics License Application submitted for belatacept included 24-month data from the Phase III studies (see statement).

Johnson & Johnson is voluntarily recalling various OTC liquid meds for children - Tylenol, Motrin, Zyrtec and Benadryl - due to manufacturing problems, which may affect the potency, purity or quality. The FDA is investigating the plant where the products were made to make sure there were no other problems (the FDA statement and the J&J statement).

From the Website:

These are the top 25 psychiatric medications by number of U.S. prescriptions dispensed in 2009, according to IMS Health. I’ve also provided their 2005 ranking. To put the percent change into perspective, the U.S. total population rose approximately 4 percent from 2005 to 2009.

Direct to Complete List

Source: IMS Health (via Psych Central)

Welcome back, everyone. We hope the weekend was pleasant and relaxing. Now, of course, the routine returns and so we are brewing another cup of stimulation to jumpstart the process. Good luck with those meetings and deadlines, and stay in touch…

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