James Dudley Management

James Dudley Management

'Prescription only Medicines to OTC Switches' are back on the Strategic Agenda

When it comes to ‘switching’ a prescription only brand variant to OTC the question is about whether the active ingredient will make an attractive consumer proposition or not. If the answer is yes then the question of whether to or not ‘switch’ changes to one of when and by whom? Says James Dudley one of Europe’s leading ‘switch’ strategists and author of Scrip Reports latest strategic marketing study Rx to OTC Switching Strategies – Frameworks for Success.

The objectives of this new study are to explore prescription to OTC ‘switches’ as a viable option in the brand lifecycle management of prescription only brands and to demonstrate best practice in creating ‘winning strategies’ in a consumer driven OTC environment. Furthermore, this study examines the important and unfolding themes that will present new opportunities and increase challenges for managers involved in ‘switch’ decisions.

The study shows that there is a new and growing interest in ‘switches’.

  • Companies such as Novartis that were reluctant to enter the Rx to OTC arena in the first round of ‘switches’ have become exponents with new and exciting ‘switches’ such as Voltarin (topical diclofenac) and Lamisil (topical terbinefin) and systemic diclofenac.
  • There is pressure from industry stakeholders and government on companies to make ‘switches’ both in Europe and the USA (antihistamines, omeprazol and emergency contraception)
  • A number of companies are beginning to enter the ‘switch’ arena with third party ‘switches’ i.e. ‘switches’ of active ingredients for which they are not the original patent holder (e.g. omeprazol)
  • Progressive deregulation and liberalization is likely to deliver a new generation of ‘switch’ opportunities over the next decade

It draws on a number of case studies to demonstrate how ‘switch strategies have evolved over the last ten years and draws out the innovative marketing concepts that have contributed to the success of a number of major brands.

‘In creating the strategic framework for a ‘switch’ the idea that the project begins with the consumer proposition rather than merely finding a marketing position for a reclassified chemical entity marks the clear difference between companies that have more successes than failures and those that do not.

Successful companies recognize that the ultimate criterion is winning sufficient consumer usage and brand loyalty to ensure that the brand provides long term shareholder value. As with any other new entity this begins at the brand concept stage and is only completed when the consumer proposition becomes a tangible reality. Even then, building and defending the brand will require innovation and rejuvenation through out its product life cycle.

The success rate of new consumer healthcare brands from newly ‘switched’ actives are several times higher than those based on existing actives or late ‘me too’ brands. Even so, ‘switches’ do not succeed just because the medicinal supply status of the active ingredient changes from prescription only to non-prescription.

Inherent in all successful ‘switches’ is the strategic molding of competitive advantages of new actives into a brand proposition that either raises or changes consumers’ expectations and beliefs.

One of the problems with ‘switching’ is that all too often the regulatory processes dominate the agenda and as a result there is often a tendency to ignore the strategic marketing work until the regulatory issues are resolved. While it has to agreed that the complexities of the regulatory pathway determine the speed of all ‘switch’ projects, the need for this to be integrated into an overall strategic framework at the outset can only be emphasized’ says James Dudley author of the report.

The argument as to whether ‘switching’ is a viable option in the lifecycle management of a prescription only brand is one that has consumed many thousands of hours of management debate. For many leading companies there is a clear support for the concept and attractiveness studies are undertaken quite early in the commercial patent life of their prescription brands.

Novartis and Roche for example not only fall into this group but are also active proponents and encourage other companies to follow their lead.

‘Switching’ from prescription only to non-prescription can contribute to improving the product portfolio in several ways i.e.: -

  • Offsetting some of the sales losses to brands declining in price and volume as a result of generic pressure in a post-patent expiry environment
  • Creating a greater opportunity with a consumer OTC positioning than that afforded by the prescription sector for certain indications or product forms e.g. Lamisil Cream (Novartis) and Zovirax (GlaxoSmithKline)
  • Extending returns on initial research investment long after the prescription brand has reached the end of its prescription life.
  • Creating a long-term intellectual property which provides both an earning stream and good will value as an asset in the OTC division

‘Switches’ have created a number of large non-prescription brands for their owners over the last twenty years. Some major brands would not exist today if companies had not pioneered the prescription only to OTC opportunity.

Indeed, all the ‘switches’ in Europe since 1983 taken together contributed €1.4 billion to a €14 billion non-prescription pharmaceutical market in 2002. The top twenty ‘switched’ brands accounted for over €650 million or 45% of the aggregated €1.4 billion sales. Between 2001 and 2002 these twenty brands added almost €40 million to the overall non-prescription market growth.

The top twenty European ‘switched’ brands are listed in the table below.

Table 1
Top 20 ‘Switched’ Brands in Europe (main markets)

Brand

€ millions

Rank

Brand

€ millions

Rank

Nurofen

95

1

Canesten

20

11

Voltaren

81

2

Frenadol

17

12

Nicorette

80

3

Fastum

16

13

Niquitin

69

4

Claritin

16

14

Zyrtec

38

5

Nicopatch

14

15

Nicotinelle

38

6

Pevaryl

13

16

Zovirax

36

7

Lamisil

10

17

Imodium

35

8

Zantac

9

18

Advil

29

9

Piriton

8

19

Polase

24

10

Levonelle

8

20

Source: James Dudley Management/ medotceurope.com 2003

This report is available from Scrip Reports. For information call ++44 (0) 208332 8965 or email scripreports@pjbpubs.com

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