Innovation in the consumer healthcarespace needs to be about “big, bold ad-vances and not so much about tinkeringaround the edges”, according to Andy Tis-

man, senior principal, consumer health at mar-ket researcher IMS Health.

Speaking to delegates at the 50th AnnualMeeting of the Association of the EuropeanSelf-Medication Industry, the AESGP in Lon-don, UK, Tisman said that while it was obviousindustry “recognised the need for innovation”,the question was: how well does it innovate anddo these innovations impact the consumer?

“Innovation is key as most of the volumegrowth in the market is pretty limited,” Tis-man pointed out. “The majority of growth inthe developing world in many cases comesfrom value growth rather than volume growth”(see Figure 1).

“So innovating to provide better products

with additional benefits for which consumersare willing to pay more money is really key,”he insisted.

“When we look at the growth drivers inthe past five years, taking Europe as an ex-ample, innovation really does drive all thegrowth in the market place,” Tisman explained.

Innovation drives growthGrowth of almost a quarter in the Euro-

pean OTC market in the past five years hadcome from innovation, Tisman noted, with 17%of the growth coming from line extensions and7% from new products (see Figure 2).

However, the figures in Europe offered awarning to industry, Tisman said. “We countinnovations as all the new products and lineextensions,” he pointed out. “In fact, the major-ity of innovation we cover here comes from lineextensions, which by definition are probably

not adding huge benefits to the consumer”.“I think industry is doing a number of things

to innovate, but does it need to be thinking ofthe bigger picture and driving more meaning-ful innovation to the consumer?” he asked.

Other sectors, including the fast-moving con-sumer goods (FMCG) and consumer packagedgoods industries, could provide models for suc-cessful innovation, Tisman noted, as they rolledout simple advances – such as in dosing anddelivery technologies – that added benefits forthe consumer and increased margins througha slightly higher price point.

It was also clear, Tisman explained, that dueto global diversity there was not a “one-size-fits-all” approach to innovation.

“Europe alone is 30-40 different countries,Latin America 15-20, Asia-Pacific is many coun-tries and there is a huge diversity of consumersthere,” he pointed out.

“So, while we need to think about break-through innovation, we also need to think aboutwhat is right for each country,” Tisman said,“and it is probably true that a one-size-fits-allapproach probably isn’t going to work.”

Looking at the European market more close-ly, Tisman said that in the region new products– defined as products launched in the past twoyears – accounted for 4% of the OTC marketin value terms in 2013, with contribution vary-ing between countries.

In Belgium and Switzerland, Tisman point-ed out, new products took just a 2% share ofthe market, while in Poland this increased to8% (see Figure 3).

What was also interesting, he noted, was the“inverse relationship” between the “average

20 OTC bulletin 27 June 2014

OTC AESGP MEETING

Figure 1: OTC growth in both volume and value terms broken down by key regions worldwide in 2013(Source – IMS OTC Global Analysis)

Japan North Western EMEA* Central and APAC** Latin AmericaAmerica Europe Eastern Europe

* Europe, the Middle East and Africa ** Asia-Pacific, excluding Japan

20

15

10

5

0

-5

Volume growth

-1.1 -2.1

3.54.3

6.4

10.9

15.7 16.0

0.61.6

6.78.9

-0.3-2.1

Value growth

Cha

nge

(%)

Figure 3: Share of the OTC market in various European countries obtained by new products in 2013(Source – IMS OTC Global Analysis)

Poland

Italy

Spain

German

y

Russia

France UK

Switzerl

and

Belgium

10

8

6

4

2

0

8

7

6

4 4

2 233

New

prod

ucts

shar

e(%

)

World GrowthVolume: 3.4%Value: 8.1%

Figure 2: Breakdown of contribution to growthbased on five year sales from 2009 to 2013(Source – IMS Elements of Growth)

Central and Europe WesternEastern Europe Europe

80

60

40

20

0

-10

Base value growth

-6-12 -15

7 5

31

29

12

17

1313

6

Cha

nge

(%)

Price increase

Line extensions New products

Innovation key to driving OTC marketWhile the consumer healthcare industry accepts that innovation is key to drivinggrowth, it needs to think bigger and focus more on what the consumer wantsand is prepared to pay, according to IMS’ Andy Tisman. Matt Stewart reports.

OTC27-06-14p20-23_Layout 1 26/06/2014 15:57 Page 2

price premium for innovation” and the contri-bution innovation was making to the category.

“The vitamins, minerals and supplements(VMS) category, which has the lowest pricepremium for new products, also has the highestcontribution from new products,” Tisman ex-plained, “whereas skincare is the other wayround (see Figures 4 and 5).”

“Is this telling us something about the needto get the right balance with innovation be-tween the benefits and the price we are askingthe consumer to pay?” he asked.

Furthermore, innovation should be aboutmore than just product development, Tismansaid. Social media was now “ever present inconsumers’ daily lives”, he pointed out, butneeded to be used better by consumer health-care companies.

Meanwhile, healthcare apps were growingrapidly, with cardio, diet and women’s healthapps accounting for half of the volume, Tismanadded. Devices designed to improve efficacyand control were becoming more common and‘wearable tech’ products gave consumers dir-ect feedback on the current state of their health.

“Science is important and will continue tobe so, but there are many other aspects to con-sider in this ‘techno’ age – which includes digi-tal, devices, and many other ways of engagingwith the consumer – apart from just tweakingthe product formulation,” Tisman said.

Despite the growth of new areas of innova-tion, one area continued to provide “big, game-changing innovation in OTC” and that wasswitching, Tisman admitted.

“It has been a big driver of growth over theyears,” Tisman pointed out, “and the path toswitch in both North America and Europe iswell established.”

In the US, six of the top-10 OTC brands –

including Sanofi’s Allegra Allergy, Procter &Gamble’s Prilosec and Johnson & Johnson’sZyrtec – were recent prescription-to-OTCswitches, Tisman said, accounting for 9% oftotal OTC sales in the country.

It was a similar picture in Europe, Tismanadded, with switch products accounting foreight of the top-20 OTC brands and 6% oftotal OTC sales.

Historically there had been quite a “strongfocus on switching within traditional OTCcategories”, such as pain relief and digestion,Tisman noted, but this was starting to change.

“We’ve seen things like GlaxoSmithKline’sweight-loss drug Alli,” Tisman said, “like Merck& Co’s Oxytrol for Women – which createdthe new OTC treatment category in the US ofoveractive bladder in women – and of coursethe announcement of Sanofi’s plan to switcherectile dysfunction drug Cialis” (OTC bulletin,30 May 2014, page 1).

Huge interest in CialisThere would be huge interest in the Cialis

switch, Tisman predicted, as it was public know-ledge that Pfizer had looked at the erectiledysfunction category in the past with Viagra.So far, Tisman noted, Pfizer had not been able

to get the product into the OTC marketplace.Although the innovation potential of the

OTC space could be exploited better, growthin the global OTC market continued to out-pace that of the total pharmaceuticals sector,Tisman said.

Looking at value sales for the calendar year2013, Tisman pointed out that the OTC markethad moved forward by 7.2% compared to the4.6% growth in the worldwide pharmaceutical

2127 June 2014 OTC bulletin

AESGP MEETING OTC

Andy Tisman, senior principal, consumer health atIMS Health, called for industry to embrace “big, boldadvances” in product development

0 2 4 6 8

VMS*

Pain relief

Cough, cold& respiratory

Digestives

Skincare

6

4

4

4

3

Change (%)

* Vitamins, minerals and supplements

0 50 100 150

VMS*

Pain relief

Cough, cold& respiratory

Digestives

Skincare

21

37

79

99

142

Change (%)

Figure 6: Value sales growth in the global pharmaceutical and OTC market over the past 11 years(Source – IMS OTC Global Analysis)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

10

8

6

4

2

0

9.5

5.0

3.2

6.7 6.26.7

7.6

4.4

5.65.1

7.5

2.6

4.6 4.6

7.27.4 7.2 7.2 6.9 6.8

3.94.7

Cha

nge

(%)

Pharma growth OTC growth

Figure 7: Sales development in the cough, cold,respiratory category and the total OTC marketacross 14 European countries as of March 2014(Source – IMS Pharma Trend International)

Latest Latest Latest movingquarter six months annual target

5

0

-5

-10

-15

Cough, cold, respiratory

-12.4

-1.2

-7.4

0.6

-1.5

2.6

Cha

nge

(%)

Total OTC

* Vitamins, minerals and supplements

Figure 4: Growth of value share of new productsacross key European OTC categories in 2013(Source – IMS OTC Global Analysis)

Figure 5: Price premium of new products acrosskey European OTC categories in 2013(Source – IMS OTC Global Analysis)

OTC27-06-14p20-23_Layout 1 26/06/2014 15:57 Page 3

market overall (see Figure 6 on page 21).OTC sales of C86 billion accounted for

12.3% of a global pharmaceuticals industryworth C701 billion in 2013, he added.

However, this big advance in 2013 hadbeen driven by a strong end to the 2012/2013 cough and cold season, Tisman said, warn-ing that the full 2013/2014 winter period hadbeen significantly weaker.

Drawing on figures from 14 European coun-tries, Tisman said that in “the whole 2013/2014winter”, the cough and cold category had beendown “by 7% or 8%” compared to last year.As a result, the total OTC market during thelast winter period had been “pretty flat” (seeFigure 7 on page 21).

“Although the global picture might notexactly represent this,” Tisman cautioned, “Ithink that directionally it is going to be correctand I think when we see the first-quarter datawe are going to see the moving annual targetgrowth drop noticeably.”

Emerging markets drive growthLooking at where the growth in the global

OTC market was coming from, Tisman said thatemerging markets were still driving the gains.

“Where we are seeing the growth is verymuch in the emerging markets, they now ac-count for over 50% of the total OTC market-place and around 80% of total OTC growth,”Tisman pointed out.

Asia-Pacific – excluding Japan – alone ac-counted for a third of the growth in the OTCmarket, he noted, while Central and EasternEurope, the Middle East and Africa (CEEMEA)combined with Latin America generated almosthalf (see Figure 8).

Industry was now facing the “importantchallenge”, Tisman said, “of maintaining scale

in the big markets of Western Europe and NorthAmerica while also taking advantage of thegrowth opportunities elsewhere”.

“When we look at the one- and three-yearfigures, North America and Western Europehave both increased their growth a little bitcompared to the historical picture, due to thecough and cold season we’ve seen in calendar2013,” (see Figure 9) Tisman noted.

“But Latin America, South-East Asia, andCentral and Eastern Europe (CEE) continue togrow more strongly,” Tisman said, adding thatthe China figure was “overstated.”

The sub-regions of Australasia had falleninto decline in the past year, Tisman noted,while Japan was still struggling to improve.

Looking at the key firms around the worldin 2013, Tisman pointed out that during the pastfew years the main leading global players didn’tseem to quite keep up with the global OTCgrowth rate of 8.1% (see Figure 10).

This was partly down to the fact they were“not as strong in the developed markets”, Tismannoted, “and partly due to the fact that the 2013growth was heavily driven by cough and cold”.

The cough and cold boom, however, had

been beneficial to Reckitt Benckiser (RB), Tis-man added, which had had a “fantastic 2012/2013”, especially with the Mucinex FastMaxcough and cold range in the US.

“The other companies closest to the globalgrowth rate – Novartis and PGT Healthcare –are the ones also focused strongly on the coughand cold business,” he said.

New world order in OTCWhile Johnson & Johnson topped the global

rankings by a slight margin, there was a “newworld order coming” in the shape of the Glaxo-SmithKline/Novartis consumer healthcare jointventure (OTC bulletin, 25 April 2014, page 1)and a bigger Bayer once it completed its ac-quisition of Merck & Co’s OTC business (OTCbulletin, 9 May 2014, page 1).

Who would then be number one was anyone’sguess, Tisman noted, as you could “cut the dataany which way you wanted” and it was “too closeto call”. But IMS’ data agreed somewhat withthe public announcements of the companies in-volved, he added, that GlaxoSmithKline/Novar-tis would be number one and Bayer number two.

22 OTC bulletin 27 June 2014

OTC AESGP MEETING

Figure 8: Contribution to sales and growth in theglobal OTC market in 2013 broken down by region(Source – IMS OTC Global Analysis)

Share of sales Share of growth

100

80

60

40

20

0

-20

* Asia-Pacific, excluding Japan** Central and Eastern Europe, the Middle East and Africa

23

22

1123

33

17

8

-3

13

24

18 9

Cha

nge

(%)

Western Europe North America

CEEMEA** Latin America Japan

Figure 9: OTC sales growth by region in 2013 and in the three years ended 2013 (Source – IMS OTC Global Analysis)

Latin America

South Asia

Centraland Eastern

EuropeGlobal

North andSouth-East Asia

WesternEurope

China

Australiasia Three years average growth (%)

30

25

20

15

10

5

0

-5

Japan

North America

Lat

estY

ear

Cha

nge

(%)

-10 -5 5 10 15 20 25 30

Figure 10: Value share and value growth of the top 10 global OTC firms in 2013 (Source – IMS OTC Global Analysis)

Johnson & Johnson

Novartis

Bayer

Sanofi

Pfizer

PGT Healthcare

GlaxoSmithKline

Boehringer Ingelheim

Reckitt Benckiser

Takeda

0 1 2 3 4

3.7

Value growth(%)

+1.7

+6.4

+3.9

+5.5

+2.0

+7.7

-1.2

+3.8

+12.3

+8.9

3.7

3.6

3.5

2.5

2.4

2.3

2.2

1.9

1.5

Value share (%)

OTC

Asia-Pacific*

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