Robert Buckeldee, Managing Director, OTC/Pharmacy Services, Nielsen Europe

SUMMARY: The over-the-counter (OTC) medicines category remains highly attractive with significant growth potential from both developing markets and established European and North American markets. However, the economic downturn has affected usage in several ways, which is troubling for both governmental agencies and manufacturers of the OTC products.

The global market for over-the-counter (OTC) non-prescription medicines remains buoyant, with growth in value sales in 2009 estimated at 4.7%, bringing the value of the category to over $95 bn (source: Nicholas Hall Company).  Much of this growth has been driven by developing markets, with double-digit growth recorded in Brazil, Russia, India and China (BRIC).  Many established mature markets for OTC medicines recorded very modest levels of growth.

As wealth and economic prosperity filters down through the layers in the BRIC markets and consumers find they have more disposable income, categories like OTC medicines will benefit from consumers helping themselves to treat minor ailments and prevent illness.

But as economic woes continue to circle around North America and Western Europe, and governments need to tighten the belt of public spending to help manage record debt levels, spending on healthcare within these developed economies will also come under intense scrutiny.  Only recently, the government in Greece has withdrawn state reimbursement from non-prescription medicines and they will not be the last to make radical changes to their healthcare financing.

The market for OTC medicines in developed Western Europe markets should start to see significant growth over time as consumers are encouraged to take proactive involvement in managing minor ailments and make less reliance on the state for help.

Hands-On Health Care
Against this backdrop, it is important to gauge consumer sentiment towards OTC medicines since the height of global economic uncertainty.  One year ago in March 2009, Nielsen asked consumers around the world whether the global economic crisis would impact their usage of the OTC medicines category.  Close to 50% of consumers globally indicated behavior would change, with one-quarter stating they would use the products less frequently and one-fifth saying they were more likely to use natural and traditional remedies.

Move the clock forward one year after the global economic crisis has affected day-to-day life and the same questions elicit key changes.  Most notably, only one-third (34%) of consumers now indicate the global economic crisis will affect their usage of non-prescription medicines in the year ahead.  A year of experience of the “new world order” has made more consumers realize that self-care is too important to put at risk.

Of those who indicate they will change OTC usage, there are subtle shifts in intentions compared to last year.  The 2010 results show a greater percentage of consumers now plan to visit the doctor more, buy cheaper products, and stop buying the products completely.

Protecting Equity
There are some key regional variations behind these changes.  The notion of visiting the doctor more frequently, and by extension being prescribed medicine rather than buying OTC products, is troubling for governments who need to manage healthcare budgets.

A recent study published by the PAGB in the U.K. —the trade association for manufacturers of over-the-counter medicines and food supplements—estimated that 57 million general practice consultations take place each year to treat minor ailments at a cost of £2bn to the National Health Service (NHS).  Governments need to take positive action to ensure consumers to visit the pharmacy as the first point of care for minor ailments and encourage them to buy OTC medicines.

Of concern to manufacturers of OTC products is the increase of consumers intending to purchase cheaper products or to stop buying them altogether.  Buying cheaper products feeds into an established trend and the growth of store brands and generic products within OTC medicines is proof that consumers increasingly understand the power of the active ingredient, as opposed to the brand.  The issue of dropping out of the category was relatively strong in the U.S., India and South Africa.  Market trends later in the year will determine if this intention is followed-up by action.

Within OTC medicines, supply feeds demand for store brands and generics, not the opposite.  So it is no surprise that the intention to buy cheaper products manifests itself in countries where chains are prevalent or where generics already have a strong foothold.  While market shares for store brand or generic products are generally lower than more mainstream branded grocery categories, the trend is rising and manufacturers need to invest in brand equity to protect sales.

Divergent Growth Strategies for East & West
The OTC medicines category remains highly attractive with significant growth potential from both developing markets and established European and North American markets.  Consumers understand that they can use OTC medicines without breaking the bank of their personal finances.

In developing markets, it is up to manufacturers to sell the benefits of their products to new consumers.  In Europe and North America, strategies will need to involve a more complex partnership with government agencies, healthcare professionals, pharmacists and retailers to encourage consumers to treat minor ailments without resorting to aid from state infrastructure and public finances.

Spending the most doesn’t necessarily equate to efficiency in viewer recollection, however.  In fact, new research released by Nielsen IAG found that the top four most memorable TV commercials which launched in 2009 included brands that did not spend the most on their respective campaigns in 2009. The two most recalled ads for Flomax promoted awareness of BPH treatment, followed by the HPV vaccine Gardasil and newcomer, anti-depressant Pristiq – were not among the year’s largest spenders for TV advertising by a long-shot.

2009 Most Recalled Prescription Drug/Vaccine Ads

“As with any category of advertising on TV today challenged with the need to cut-through the clutter and drive awareness and ultimately, persuade target viewers to take action, creativity and clarity are essential ingredients for effective and efficient ad development and deployment.  Pharmaceutical drug ads are not exempt from this challenge,” said Fariba Zamaniyan, Senior Vice President within the healthcare practice of Nielsen IAG.

While TV spending for prescription drug advertising has declined over the years, a number of factors contributed to that decline: fewer drug launches, the economic downturn and the increasing scrutiny by the FDA for prescription drug ads to increase the clarity of the delivery of product claim information in the ads. Stricter guidelines have forced an increase in ad length for many prescription advertisers which has resulted in extended ad lengths and ultimately, higher costs. In fact, the number of Rx ads that are greater than 60 seconds in length has nearly tripled since from 2006 to 2009.

“Longer ad lengths has further compounded the pressure marketers in this space already feel to build break-through advertising,” said Ms. Zamaniyan.  “However, longer length ads do not drop the bar when it comes to achieving goals.  Several ads in the top 10 most recalled new ads of 2009 include ad lengths greater than 60 seconds which further demonstrates that compelling and unique creative executions will help you stand out from the rest even if the ad is more than one-minute long.”

In the first six months following its launch (January to June 2008), Zyrtec OTC shook up prescription and OTC allergy medication markets in the U.S.   Prescription allergy drug sales declined sharply, while over-the-counter allergy drug sales increased significantly.

By June 2008, prescription sales of Zyrtec had declined to nearly negligible levels.  Meanwhile, the OTC form quickly gained acceptance, capturing almost one-quarter of the OTC allergy medication market — the same share held by market leaders Benadryl and Claritin OTC, which have been available for several years.

More than 60% of Zyrtec OTC’s business came from patients who had not used an allergy product in the previous two years, or who use Zyrtec OTC concomitantly with other products, according to Nielsen and Wolters Kluwer.

Another 40% of Zyrtec OTC buyers switched from a competing prescription or OTC allergy medication.  Among this group, 84% of patients switched specifically from another OTC product.

Perhaps most surprisingly, while OTC products typically lure consumers with their cost savings, 68% of patients who switched to Zyrtec actually spent more than they did on their prior prescription or OTC allergy treatment, Nielsen and Wolters Kluwer found.

Nielsen and Wolters Kluwer tracked the market transition behavior of 57,000 consumers vis-à-vis Zyrtec over a 30-month timeframe.