Pharmaceutical Marketing Conference Leaders - The U.S. Climate for Switch 2010 · 2015. 7. 17. · Rx-to-OTC switches continue to be an engine of growth for the U.S. OTC industry

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© 2010 Kline & Company

The U.S. Climate for Switch 2010

OTC National Conference

OTC Perspectives

Philadelphia, PA

May 19, 2010

© 2010 Kline & Company 1

Contents

About Kline

Switch overview

Regulatory issues

Classes with potential for future switch

Conclusions


Contents

About Kline

Switch overview

Regulatory issues


Conclusions


Kline’s clients include most major manufacturers in the OTC and healthcare/

consumer products industries

Kline

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Consulting

Kline

Research

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clients to resolve tough

issues and help

implement solutions

Generating information

and insights for multiple

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Managed flow of

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About Kline

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Kline’s Strength is Our Methodology

OUR RESEARCH IS HEAVILY WEIGHTED ON PRIMARY RESEARCHFOR OBJECTIVE, ACCURATE INFORMATION

In-Depth interviews with:

Data collected from many

sources including:

OTC, personal care, & Rx industry executives

Regulatory agencies

Industry associations

Retailers

Suppliers

Distributors

Patent searches & trade journals Annual reports & company lit. Scanner data & FDA materials

INTERVIEWS ARE SUPPLEMENTED WITH SECONDARY RESEARCHWHICH IS USED TO VALIDATE AND REFUTE FINDINGS FROM

PRIMARY RESEARCH

About Kline


Contents

About Kline

Switch overview

Regulatory issues


Conclusions


Rx-to-OTC switches continue to be an engine of growth for the U.S. OTC

industry

Switch overview

Recent switches that have occurred in the past decade account for $1,862 million in

2009 sales, or 10.0% of the total industry’s sales

Sales of all branded OTCs that were brought to market through Rx-to-OTC switch

totaled $3,407 million, or 19.0% of total industry sales in 2008

When including sales of private-label OTCs that would not have been possible without

branded switches the share of total market sales attributed to switch is over 25%

http://www.abreva.com/default.aspx


Switches deliver higher growth than traditional OTC brands

Overall industry growth 2008-2009: 2.2%

Growth for recent Rx-to-OTC switch brands 2008-2009: 15.4%

Switch overview

$ Million

18,324 18,722

1,614 1,862

0

4,000

8,000

12,000

16,000

20,000

2008 2009 2008 2009

Total OTC Industry Recent Rx-to-OTC Switches

+2.2%

+15.4%


Factors driving future switch activity

Strong success of past switches provide encouragement to other manufacturers

seeking to switch products

Large number of patent expirations impacting sales of the Rx market and

consequently create opportunities in the OTC market

Continually rising health care costs, resulting in various groups in favor of novel cost-

cutting solutions such as Rx-to-OTC switches

Emerging OTC availability of several prescription drugs outside the United States,

providing a precedent for safe and effective nonprescription usage of the products

The FDA’s and other groups’ push to increase patient access to affordable

medications

Behind-the-counter (BTC) class may increase the likelihood of more complex

switches occurring

Switch overview


Trends leading to increased switch activity

Switch overview

Increased

Rx-to-OTC

Switch

Activity

Pharmaceutical

companies need

to mitigate losses

when patents expire

Past Rx-to-OTC

switches have been

successful

MCOs indirectly

support switches

Retailers expect

innovative products

each year

Consumers need

access to affordable

medicines

Possible

BTC classRegulators in favor

of increased patient

access to affordable

medicines

Many Rx drugs

losing patent

protection soon

Increased

nonprescription

availability of several

Rx drugs overseas

provides precedent for

the United States

OTC companies

use switches to bolster

growth by bringing

Rx users to OTC market

and often commanding

premium prices


Rx-to-OTC switches benefit consumers

Save money

Convenience

Consumers can self-treat embarrassing conditions

Save time

Gain wider access to affordable medications

Switch overview


Rx-to-OTC switches benefit pharmaceutical companies

Protects from generic cannibalization

Rx revenues typically decline by 65% to 80% or more

Some branded products have suffered revenue declines of more than 90%

Switch can buffer sales decline by providing new revenue stream

Because prices of OTCs are significantly lower than Rx medications, even broader

utilization of a nonprescription product can result in far less sales than on the Rx

market

Some of the most successful switch brands have sales between $300-400 million,

even for drugs whose U.S. Rx sales exceeded $3 billion

This is preferable to a virtually complete loss of revenues from the product

Successful OTC brands benefit from unlimited longevity so the revenue stream, albeit

smaller, lasts for many years

Switch overview


Rx-to-OTC switches benefit retailers

Switches are often launched with considerable advertising and promotional

campaigns by manufacturers

Such campaigns tend to pique consumers’ interest and bring them into retail stores

to get more information or buy the product

This increased consumer foot traffic benefits retailers tremendously

Many large retailers will conduct cooperative advertising/promotions for newly

switched brands

Switches in general help manufacturers and retailers work closer together and

assuming the switch brand’s launch is smooth, improve relationships

Switch overview


Rx-to-OTC switches benefit MCOs

MCOs have a vested interest in seeing expensive drugs switched from

prescription to OTC status, particularly when they are switched at the prescription

dosage

Most MCOs stop coverage for a drug when it switches from Rx-to-OTC status

Many MCOs also offer their members incentives to use lower cost generic

medicines

Often times, MCOs have created preferred drug lists based on a combination of

clinical effectiveness and cost, with generics a primary focus for savings.

De-reimbursing same-dosage OTC drugs represents additional cost savings to

MCOs for widely used drugs

Switch overview


Contents

About Kline

Switch overview

Regulatory issues


Conclusions


Switch Criteria

Regulatory issues

First, the condition that the drug addresses must be self-diagnosable

Second, the drug must be generally safe to use with a low incidence of adverse reactions

Third, there must be no need for regular physician monitoring of the patient while taking the medication

Drugs that address chronic conditions for which patients must take medication on a regular basis are less likely to be approved for switch than those that address transitory conditions

This is because the risk of adverse reaction increases dramatically with chronic use drugs


Switch Criteria (Continued)

Regulatory issues

Class

Self-

diagnosable

Low incidence

of side effects

Need for physician

monitoring

Temporary

condition

Allergy Yes Yes Sometimes Sometimes

BPH Yes-a Yes Yes No

Cholesterol No Sometimes Yes No

Digestives-b Yes Yes No Yes

Incontinence Yes-a Yes Sometimes No

Migraine Sometimes No Yes Sometimes

Sleeping aids Yes No No Sometimes

a- Need initial diagnosis by a physician to rule out more serious kidney and/or bladder conditions.

b- Information given for this category is for heartburn indication and does not apply to Rx indications for

ulcers or gastroesophageal reflux disease because these are unlikely OTC indications.


Do not need professional diagnosis/monitoring

(self diagnosable condition)

Need professional diagnosis/monitoring

NOTE: Large circles denote lower chance of side effects, and small circles denote higher chance of side effects.

Te

mp

ora

ry o

r acu

te c

on

ditio

nC

hro

nic

co

nd

ition

Digestives/

proton pump

inhibitorsAllergy

relief

products

Benign prostatic

hyperplasia

Sleeping

medications

Migraine

medications

Incontinence

medications

Statins

Safety criteria for Rx-to-OTC switches by class

Regulatory issues


Regulatory Issues for Cholesterol Switch

Regulatory Issues

Patient can determine if they are a candidate for therapy

Patient is given necessary information to make appropriate purchase decision

Patient has ability to know when to “de-select” product

Patient can monitor effectiveness and side effects while on

therapy and consults a physician when necessary

Patient can be expected to maintain reasonable compliance on therapy


BTC Class

Discussion and debate about a BTC class has continued for many years

Such a class would represent a midway point between Rx and OTC medicines

Physician’s examination and prescription would not be required for purchase, but

consumers would need to ask a pharmacist for the product

The pharmacist would then be responsible for patient screening and education

Currently several nonprescription drugs sold successfully from BTC:

Plan B emergency contraceptive (Teva)

All PSE-containing cold and allergy meds

Nonprescription asthma inhalers

Mucinex was also sold from BTC when it first entered the market

Regulatory Issues

http://www.planbonestep.com/index.aspx


BTC Class (Continued)

The FDA already allows a path to BTC through the “Ethical OTC” classification in

new drug and switch applications

Where Rx-to-OTC switch NDAs are submitted in which a product is voluntarily

classified as an Ethical OTC, the application can be approved for this product

without the establishment of a broader BTC class

In fact, during a May 2007 panel discussion at CHPA’s Regulatory and Scientific

Conference, the staff of FDA’s Office of Nonprescription Products reiterated that

they would consider individual switch applications that started with the assumption

that the product would be sold on a BTC basis

FDA is not authorized to reject switching a product from Rx-to-OTC status and

assign it instead to a third class without the voluntary agreement of the product’s

manufacturer

Regulatory issues



A BTC class would, however, fit with the current environment of increasing access to

health care products and services for all consumers

Retail health clinics are part of offer a broader trend towards consumer directed health

care

Pharmacists groups are also largely in favor of more products sold from BTC

Products sold from BTC need to demonstrate a proven health benefit and be

accompanied by available guidelines for patient identification and risk assessment

Mfters would likely be relied on for consumer educational materials and programs

through pharmacies, media, and marketing

Product placement, promotion, workflow, and staffing patterns should support direct

interaction with the pharmacist, while marketing devices, including print advertisements

and shelf-talkers should direct consumers with questions to the pharmacist

Regulatory Issues



There remain many unanswered questions about a BTC class:

Will MCOs offer coverage, maybe reduced coverage for BTC drugs?

If not, will MCOs continue to be in favor of notifying members and promoting newly switched drugs from Rx-to-BTC class? Offer coupons and incentives for members to try new BTCs?

Are there any changes to pharmacists’ liabilities when dispensing a BTC drug vs. an Rx or OTC drug?

How do pharmacists receive compensation for their time and counseling of patients and who is responsible to pay these fees? Patient, MCO, retailer, or drug manufacturer? Some combination of above? Built into retail price of the product?

Do pharmacies have necessary space for confidential patient counseling by a pharmacist? If not, are retailers required to create such a space?

Regulatory issues



Rx-to-BTC switches are likely to become more common in the future

Manufacturers will need to become creative with their marketing plans and NDA switch

applications to convince FDA that BTC status is appropriate for their drugs

In March 2010, the Kansas Board of Pharmacy awarded contract to help fight

methamphetamine production by tracking sales of PSE-containing OTCs

WA and AL governors also sign e-tracking legislation Mar 2010

These systems offer real-time e-tracking for medicines and such systems could be

implemented to make Rx-to-BTC tracking possible

Regulatory issues


International Precedent

There are a number of drugs that have been approved for sale without a prescription in overseas markets that could potentially serve as precedent for a U.S. FDA switch review

Protonix: In February 2009, the Committee for Medicinal Products for Human Use (CHMP) within the European Medicines Agency (EMEA) adopted a positive opinion, recommending to grant a marketing authorization for the Pantozol Control 20 mg for short-term treatment of reflux symptoms (e.g., heartburn, acid regurgitation) in adults, as a medicinal product not subject to medical prescription. The decision applies to the entire European Union of 27 countries The application was submitted by Nycomed GmbH, which will launch the

pantoprazole product in 2010

Flomax: In the United Kingdom, Flomax Relief is also sold as part of the Pharmacy class where consumers need to ask pharmacists for the medication

Zocor: Furthermore, Zocor Heart Pro (Merck) switched from prescription to a behind-the-counter pharmacist-dispensed class in the United Kingdom in 2005 and has established safe and effective usage of a statin without a physician prescription Pharmacists have a full protocol they need to go through to assess a patient prior to

dispensing the medication

Regulatory issues


International Precedent (Continued)

Imitrex: In June 2006, the new product launched in the U.K. containing the same

50 mg dosage as the prescription tablets

The availability of an OTC product allows consumers to try Imigran before obtaining a

prescription and could thereby bolster the sales of those products (injectable

Imitrex/Imigran) which still require a prescription

In Germany, several triptans have switched to behind-the-counter (BTC) status over

the past several years, substantially increasing consumer access to the drugs

Utilization of the BTC products has generally proven safe and effective, with no

significant reports of adverse reactions

Regulatory Issues


Expiration yearExpired:

Allegra

Ambien

Cardura

Carafate

Ditropan

Flomax

Flonase

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Astelin/AsteproEnablexRestoril

Protonix-a

Hytrin

Imitrex

Mevacor

Pravachol

Prevacid

Sonata

Zocor

LipitorOxytrol

a- At-risk generic versions of Protonix (pantoprazole sodium) entered the market in December 2007.

XyzalClarinexLescol

LunestaDetrol

Aciphex

Nexium

Crestor

Relpax

Zegerid

OmnarisRozeremVytorinZetiaZomig

Treximet

CaduetVesicare

Patent Expirations of Drugs Profiled

Regulatory Issues


Contents

About Kline

Switch overview

Regulatory issues


Conclusions


Several Rx-to-OTC switches are approved recently and several large switches

are anticipated over next few years

Rx-to-OTC Switches Approved Recently

Antacids Prevacid 24 Hour, Zegerid

Contraceptive products Plan B

Eye care products Alaway, Zaditor

Laxatives MiraLAX

Weight loss aid Alli

Allergy relief Zyrtec

Possible Future Rx-to-OTC Switches

Allergy

Antacids

BPH

Incontinence drugs

Sleeping aids

Switch Forecasts


Forecast Sales of OTC Market, including Future Switches, 2009-2014

$ Million

2009 2010 2011 2012 2013 2014 CAGR %

Existing OTC market 18,722 19,209 19,708 20,220 20,746 21,285 2.6%

Future switches 150 717 943 1,181 1,399 74.8

Total OTC market 18,722 19,359 20,425 21,163 21,927 22,684 3.9

Switch Forecasts


$ Million

Total OTC Market Forecast, including Future Switches, 2010-2014

Switch Forecasts

0

5,000

10,000

15,000

20,000

25,000

2009 2010 2011 2012 2013 2014

Existing OTC market Future switches


Contents

About Kline

Switch overview

Regulatory issues


Conclusions


Expect more switches

Additional switches will continue to occur in the future

Most of the switches on the horizon are more complicated than past switches

Therefore, switch applications will become even more cumbersome for

manufacturers to prepare and the money invested in clinical studies even greater

As a result switch strategies are being considered by manufacturers much earlier in

a drug’s life cycle

More creative marketing plans and post-marketing surveillance proposals will be

required from manufacturers to help convince FDA of safety of switches in the future

BTC placement will likely be a means to accomplishing more switches

Conclusions


Future switches will be important growth driver for the industry

Switch continues to be a strategy considered for most drugs

All major OTC companies will continue to derive strong U.S. growth from switches

including: Johnson & Johnson, Pfizer, GlaxoSmithKline, Bayer, Merck, Novartis,

Procter & Gamble, Sanofi-Aventis, and Boehringer-Ingelheim

Collectively, future switches are expected to add $1.5 billion in absolute dollars to

the OTC market by 2014

Most of this will come from new OTC users and will only cause minimal

cannibalization of sales of existing OTCs

Collectively, future switches are expected to drive growth near 4.0% for the overall

industry over the next five years

Conclusions


Questions

& Answers

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Europe___________

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sciences, and consumer products industries for over

50 years. For more information, visit www.KlineGroup.com.

Laura A. Mahecha, MBA

Industry Manager, Healthcare

Phone: 1-973-435-3446

E-mail: [email protected]

Documents

Pharmaceutical Marketing Conference Leaders - The U.S. Climate for Switch 2010 · 2015. 7. 17. · Rx-to-OTC switches continue to be an engine of growth for the U.S. OTC industry