Prospective switch sponsors who invest more heavily in direct-to-consumer advertising when their products are still Rx reap greater post-switch OTC market share, according to an OTC marketing expert.

“There is a positive correlation between OTC share of the switch items and the intensity of the direct-to- consumer marketing support for the product when it was a prescription,” said Lisa Buono, a client insights principal for market research firm IRI Worldwide, Jan. 15 during the Consumer Healthcare Products Association’s webinar, “Rx-to-OTC Switch Part 1: Making the Case for a Switch Development Program.”

“The higher the investment spend behind creating awareness and activity for a prescription product, the higher the [category] share for the OTC switched item,” Buono said.

To capitalize fully on a switch, a firm should plan and initiate a full marketing campaign while the product still is a prescription drug, Buono said. This should include direct-to-consumer advertising for the Rx version and engaging retailers before the OTC launch.

DTC advertising of the Rx version raises brand awareness and familiarity that can help drive OTC sales, Buono said.

DTC advertising also generates prescription sales, which increase the base of consumers likely to follow the molecule OTC. “In general, you are looking at anywhere from 46% to 53% of the volume of the switched item coming from the prescription,” Buono said.

Buono noted 53% of first-year sales of Johnson & Johnson’s allergy drug Zyrtec (cetirizine) came from people who used the prescription, a Pfizer Inc. drug. Similarly, Procter & Gamble’s proton pump inhibitor Prilosec OTC (omeprazole) drew 47% of first-year sales from patients who used AstraZeneca PLC’s Rx version; Schering-Plough’s (now Merck’s) antihistamine Claritin (loratadine) 49%;Novartis Consumer Health Inc.’s PPI Prevacid24HR (lansoprazole) 51%; and Sanofi’s subsidiary Chattem Inc.’s antihistamine Allegra 46%.

The percentage of Allegra sales that migrated from Rx were slightly lower than the other products because it faced generic Rx competition before it switched, so some users continued with Rx generics rather than change to the OTC branded product, Buono said.

AstraZeneca’s proton pump inhibitor Nexium will be a good test case for the strength of Buono’s argument. The company has spent more than $1 billion since 2001 marketing Nexium as “today’s purple pill,” generating consumer brand awareness and establishing heritage that will serve the drug well if it switches OTC as expected in early 2014.

AstraZeneca, which sold the global rights to OTC Nexium to Pfizer Inc. for $250 million, filed an application to switch the heartburn medicine in the second quarter of 2013 ([A#05131202001]). But Nexium will face a crowded OTC PPI market, including its predecessor Prilosec OTC, which AstraZeneca licensed to P&G for OTC sale, along with two other branded PPIs, generics and other heartburn drugs.

Buddy Up To Retailers

Engaging retailers leading up to a switch launch is another key marketing element, Buono said.

“Buddying up with key retailers can help make or break your switch quickly. … You can’t waste a day of time when it comes to switches in your promotion,” she said.

Sponsors should use in-store signs, displays and circulars “with great fanfare” to educate consumers about the switch and “to build excitement and anticipation around the launch,” she said.

Sanofi’s Chattem used breakout displays in retail stores and reached 80% distribution within two weeks of the launch of Allegra. Combined with branded content on retailers’ websites, including a pollen count forecaster, sales of the drug grew the OTC category 13% in the first year post-launch, Buono said.

Novartis Consumer Health, on the other hand, did not reach out as aggressively to consumers directly during the launch of Prevacid – opting instead to focus on informing pharmacists with packets, clinical details and frequently asked questions. While the strategy helped the PPI category grow 23% during the first year after launch, it had limited effect on pulling sales from the competition, according to Buono.

Post-Launch Push

Marketers must continue to invest heavily in marketing for at least two years after the launch to gain a switch’s full potential, Buono said.

“It is rare that one year of support is enough to really speed a product in the marketplace, and this is particularly true for seasonal business,” Buono said.

She noted the most successful recent switches continued to invest in media heavily in the second year. Zyrtec sold $160 million in all outlets in year one, but Johnson & Johnson still invested $116 million in media the first year and $93 million the second. Schering-Plough also invested $96 million the first year of Claritin, when it sold $552 million in all outlets, and invested $109 million in year two.

Sponsors also should continue to detail health care providers with samples and information after a switch goes OTC “because that is how a lot of the Rx [users] switch to the OTC. Because the patient learns about it from the health care provider,” Buono said.

She acknowledged this strategy can be a tough sell because the short-term return on investment ranges from “only pennies to a mere 30 cents for Rx-to-OTC switches.” But, she added, the long-term return is estimated to six to eight times the short-term return.

She also noted a recent case study revealed calls to specialists are twice as effective as to primary care providers.

Managed Care Outreach

Another important strategy to boost switch sales is working with managed care organizations about changing formula controls, which push consumers to use the OTC product rather than the generic prescription alternative, Buono said.

For example, she said, managed care organizations can increase consumers’ co-pay for Rx products after a drug switches to create a better value proposition for buying the OTC. Managed care plans raised the co-pays for prescription fexofenadine by 50% from 2011 to 2013 after Allegra OTC launched, Buono pointed out.

Managed care plans also began rejecting fexofenadine prescriptions more to discourage consumers from switching to another Rx product instead of the OTC, Buono said, noting the original rejection rate was about 5% and it climbed to 35% in two and a half years.

Johnson & Johnson also worked with managed care organizations to drive sales when Zyrtec switched, as Novartis Consumer Health Inc. did for Prevacid (Also see "Prevacid Initial Launch Efforts To Focus On Switching Prescription Users" - Pink Sheet, 16 May, 2009. and Also see "Zyrtec Model Shows Managed Care’s “Softer” Side For Switching Patients" - Pink Sheet, 1 December, 2008.).

Beyond Control: Order Of Entry, Consumer Preference, Exclusivity

Some factors that influence a switch’s success cannot be controlled – such as order of entry into OTC – but should be accounted for when sponsors set realistic investment and return goals, Buono said.

While the first category entrant generally secures the highest share followed by the second and third entrants taking lower portions, that does not mean late entrants should not bother, she noted.

“Business can still be made from products that are second or even third entries,” she said, noting that Zantac was the third entrant in the H2 blocker category, but now is No. 1 in sales. Likewise, Zyrtec was the No. 2 switch in its category, but at times its sales have been higher than the first entrant, Claritin.

“Our advice would be: Try to be first but … don’t out of hand be totally deflated from launching a switch if you know you are going to be second or third or worse. You must size up the opportunity in total and then decide,” Buono said.

When sizing up the opportunity, firms should consider consumer dissatisfaction with existing OTC options in the category, she said. The more unhappy consumers are with the existing choices available OTC in the category, the more likely they are to try a new entrant.

For example, according to IRI data, 24% of allergy sufferers say they are not happy with currently available medicines and 75% of those consumers want additional choices. Buono said the IRI information shows that allergy sufferers are more likely to try a new product spontaneously than heartburn consumers – 70% of whom say their current product works.

Exclusivity is another key factor for success that is difficult to control, Buono said.

To the extent possible, switches should launch prior to private label – gaining exclusivity through patent protection, new dose forms and other unique characteristics, she said.

“The longer the better, in general, to give your brands time to seize in the minds’ of patients and consumers,” Buono said.

However, exclusivity is not always possible, in which case sponsors should realistically model sales and promotions to reflect private label competition, she said. This means factoring in 25% to 50% of sales lost to private labelers once generic versions launch, she said.

She based this figure on IRI data showing private label sales reached about 25% of Allegra sales after it lost exclusivity, 30% of Zyrtec sales and 41% of Prevacid sales after one year of competition in each case.

Damaging Factors

There are several factors that can damage a switch’s success, including premium pricing and inconsistent messaging or formula transitions, Buono warns.

Consumers will figure out quickly not to buy a premium priced product that does not differentiate itself from competition, she said.

Prevacid sales suffered because of high prices without meaningful product benefit differences, while Zyrtec was able to match premium prices with a superior speed claim, Buono said.

She also noted brands are more successful when they switch all formulations OTC at the same time, as Allegra and Zyrtec did, than when they transition only certain doses and formulas as Prevacid did.

Splitting formulas between OTC and Rx “tends to be a bit confusing to the public and even some health care professionals,” she explained.

Ultimately, with so many factors there is no set formula for success, but accurate planning and sales estimates are key to continued outreach and penetration, Buono said.

DTC Spending During Rx Life Yields OTC Switch Market Share

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