OTC Opportunity Knocking

at the door

Mala Raj

Transitioning a medicine from prescription-only to over-the-counter status is big business—and the Emerging Markets hold the key to sustained growth for OTC marketers. But manufacturers looking at such

opportunities for growth have number of questions in mind. This article clarifies many such issues and challenges of the stakeholders and typical segments to encash on.

‘Knock Knock’ whereas just 24% prefer to go to the doctor, and 9% choose to do nothing. Thus, nearly 68% of 'Who is it?'Indian consumers already qualify as prospects

'Opportunity’ for OTC marketing! Translated into population terms, this represents a strong target audience of 'Opportunity! What, Where, How? 700 million.

‘OTC Opportunity – Some here, Some there & Some everywhere – Over The Counter’ 1.2 A demanding lifestyle and high stress

conditions coupled with poor eating & sleep Right at this moment, many Pharma business habits have given rise to a variety of health strategists are experiencing a similar mental disturbances and lifestyle related diseases exchange debating whether or not to venture amongst majority of urban population. This into the tempting OTC medicine market. section also has more access to avenues for self-Exploring the dynamics of this segment, please medication and are willing to take preventive find below the critical details of this issue . measures to maintain health & vitality.

1. Why is there so much buzz about the OTC 1.3 Increased earning across all strata of society drugs market in India?has led to an upward shift in the basic Maslow's The current Indian consumer is getting hierarchy of needs for all Indian consumers. critically evaluated by Indian as well as global This has had its ramifications on the healthcare marketers. The entire world is slowly expenditure of the family as well. awakening and taking note of the untapped

opportunities that our country presents across 2. What are OTC Drugs?all types of markets, be it FMCG, luxury goods, As per OPPI's recent e-publication, OTC Drugs healthcare, pharma, B2B transactions, or value-are 'drugs legally allowed to be sold “Over The added services. The OTC healthcare market, a Counter” by pharmacists, i.e., without the part of this burgeoning Indian potential, was prescription of a registered medical estimated to be about `7434 Crores in 2008-09 practitioner.' Although the term 'OTC' has no ($1.8 billion), with an annual growth rate of legal recognition in India, all drugs not included 23% and CAGR of 10% from 2005 to 2009. in the list of 'prescription-only drugs' are India ranks 11th in the global OTC market and considered to be non-prescription drugs / OTC.is expected to reach 9th position within the next

few years.For any medicine to be sold OTC, it must be safe, effective and for a condition that the The key factors contributing to this booming patient can manage without the need for segment are listed below:supervision by a licensed health professional.1.1 For non-serious ailments like cough, cold,

fever, pain, sprains, indigestion, pimples, etc., In India, the key categories with OTC potential 23% of the Indian consumers prefer either to include Vitamins and minerals, health tonics, treat themselves with home remedies or self-cough & cold, gastrointestinals, analgesics, medication, 45% prefer to go to the chemist,

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dermatologicals, and herbal/ayurvedic ? Maximum Retail Price (inclusive of all taxes) medicines which do not contain any substance There are no separate labeling requirements for listed in Schedules G, H, or X. Apart from OTC, OTC drugs.one more term that is used frequently in the market is OTX. It refers to prescription plus 3.6 Product Pricing & Margins to Trade: As per over-the-counter; for example, Revital is DPCO norms, for controlled drugs, margins for considered an OTX while the i-pill is OTC now. stockists and retailers are 8% and 15%,

respectively. For products which are not 3. What about regulations for OTC controlled under DPCO, margins are on a medicines? higher side, namely, 10% for stockists and 20% There is no separate policy for OTC drugs. for retailers.Some of the salient regulations applicable to OTC medicines are listed below: 4. How can Pharma companies enter the OTC segment?3.1 OTC Drugs Definition: As per the Drugs Various ways in which Pharma companies can and Cosmetics Act and Rules, there is no plan their entry into the OTC market areseparate category of drugs called OTC drugs. ?Convert one of the current ethical brands into Currently, those drugs which are not covered an OTC brand-Eg. Revital of Ranbaxy, under Schedule H or G and their formulations Gelusil MPS of Pfizer, Nasivion of Merck, (except their products for external applications) Calcium Sandoz of Novartis.can be called OTC drugs. ?Launch a new OTC brand / range of OTC brands-Eg. Paras Pharma’s Moov, Crack Dr 3.2 Stocking, Distribution, & Sales of OTC Morepen's range.Medicines: All OTC medicines should also be ?Launch a new OTC division-Eg. Ranbaxy, stocked, distributed, and sold through premises Merck India, Morepen, Himalaya.licensed for sale, except for those which have ?Buy an existing OTC brand-Eg. Piramal been specifically exempted by inclusion in Healthcare’s purchase of i-pill from Cipla.Schedule K of Drugs and Cosmetics Act and ?By Government Regulations-Eg. Emergency Rules. Contraceptive pills (i-pill, Unwanted-72) granted OTC status in 2005. 3.3 Promotional Claim in Advertisements: ?Tie-up / Acquisition with FMHG company-Advertisement of OTC drugs using media Eg. Sanofi-Aventis 's acquisition of consumer aimed at the common public, such as television health company Chattem in US in 2009and print advertisements, is permissible. However, the Drugs and Cosmetics Act 1940 5. Which are the typical segments to encash and the Drugs and Magical Remedies Act 1954 on? Are there any new avenues?do not allow any claim to prevent or cure The typical segments encashed by existing diseases in Schedule J of the Act, which players are:includes 51 conditions such as cancer, height ?Vitamin,Minerals & Supplements-35.0%gain, etc. ?Gastrointestinals -18.3% ?Cough, Cold, Allergy-17.5%3.4 Ayurvedic Medicines: OTC proprietary ?Analgesic-14.3%drugs which are registered as 'Ayurvedic ?Dermat-13.0%Medicines' (traditional Indian medicines ?Lifestyle OTCs-1.8% containing natural/herbal ingredients) are also Of the above leading 6 groups, the highest regulated by the DCA and DCR. However, they growth is seen for the Lifestyle OTCs, primarily do not require a drug licence and can therefore due to the shift of emergency contraceptive pills be sold by non-chemists. There is no price into the OTC segment.control on 'Ayurvedic medicines.' In each of these groups, in addition to the existing molecules/products, several niche 3.5 Product Labelling: Rule 96 of DCR areas that have not yet been fully exploited can mandates minimum information which needs to be identified. (Refer exhibit 1) In most of these be put on the label of all medicines. This niches, a high degree of self-medication can be information includes observed even today, mostly through word-of-? Generic and trade (brand) name mouth publicity, personal experiences, ?Net contents and content of active ingredients chemists' push, etc.?Name and address of manufacturer including

manufacturing licence number 6. Is there any checklist for a successful entry ?Distinctive batch number, manufacturing and into the OTC segment?

expiry date, etc. Organisations must critically evaluate their

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The reputation that the brand enjoys during its patent protection regime coupled with a lowering of cost in the post-patent years, to match price competition. Combination of brand reputation and lowcost in these cases help gain immense consumer support. Some examples include Claritin by Schering-Plough and Allegra by Sanofi-Aventis in the US. 6.4 Current perception, usage, Rx versus chemist push / repeat purchase for the brandThe marketing team must conduct thorough research to assess the status occupied by the brand in the consumers' mind. The FAQs should be: Does the brand have a regular 'self-user' following, is it being purchased by a regular set of customers, how is repeat purchase occurring, component of Rx versus OTC purchase for the brand, do chemists recommend the brand, are customers brand loyal, are they price sensitive, what is the perceived image of the brand, why

status with respect to the following criteria prior do customers prefer/not prefer the brand, etc. to entry into the OTC segment. The more thorough the research, the better

would be the decision making with respect to all 6.1 Strategic purpose behind OTC entry marketing elements— brand name, packaging, Having clarity of purpose and a long-term pricing, distribution, ad strategy, etc. for the vision is essential for this strategic decision. proposed new OTC brand.OTC presence calls for higher investments on all fronts, be it manufacturing, marketing, sales, 6.5 Ability to sustain a strong marketing or distribution. The organisation must be geared program for the brand – both for short term for this. & long term for brand building & customer

retention6.2 Choice of brand/s with legal and medical With only rare exceptions to the rule, the scrutiny for qualifying as permissible for general dictum in OTC marketing is 'Out of OTC drug status sight, out of mind.' To retain customers, a heavy All identified molecules, combinations, new ad budget with regular ad reminders is essential formulations, or NDDS shortlisted for OTC for OTC success. OTC brands have very high marketing must be critically reviewed by promotional budgets (expense to sales' being as experts for legal as well as medical accuracy. high as 20–25%) as compared to ethical brands Shortlisted drugs must be safe, effective, and (just 5–10%). e.g. Benadryl has spent `7.5 cr for a condition that the patient can manage on a brand turnover of `35 cr, while Glycodin without the need for supervision by a licensed has spent `4.5 cr on a turnover of `18 cr. Such health professional. They should not contain high budgets lead many organisations to resort any substance listed in Schedules G, H, or X. to sporadic ad campaigns and mere occasional

spending, which do not help in retaining 6.3 Stage of the brand in the Product Life customers.Cycle / Patent Status of the brandIt is often seen in ethical marketing that a few years after the launch of a molecule, it tends to reach a maturity level of saturation and thereafter a decline begins in its usage, as it gets replaced by newer drugs with better features and benefits. At this stage, when the incremental growth in sales declines, it is appropriate to consider the OTC potential of that molecule/brand. (Refer exhibit 2)

Internationally shifting products that are likely to go off-patent into the OTC segment is a well-known strategy to fight generic competition.

Decision makers need to critically evaluate shortlisted brands for their future prospects via both alternatives:

1. Continuing with current ‘Ethical Status’ or2. Switching to ‘OTC Status’

Opportunity for Switching

Product Launch

Patent Expiry

Ethical Sales of Product

OTC Sales of Product

The lifecycle of a pharmaceutical product with and without a switch to OTC status

Time

Sa

les

Exhibit: 2

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Group Potential Niches for OTC –Can be tapped further

Vitamins, Minerals, & Supplements

Specific nutritional products for adolescent girls, geriatrics, pregnant women, diabetics, cardiac well being, children with vision defects, arthritics, Jet-lag, menopausal women

Gastrointestinals Safe anti-diarrhoeal, products for paediatric vomiting, motion sickness

Cough, Cold, Allergy

Seasonal rhinitis, Insect-bite allergy (Mosquito bite allergy), Cough syrup without sugar (for diabetics), ready-to-use palatable cough gargles (without dilution), non-sedative cold preparation

Analgesics Specific for dental pain, dysmenorrhoea, colic pain in infants

Dermatologicals For boils, ringworm, burns, acne, blemishes, warts, corn, dandruff, head lice

Lifestyle OTCs Slimming aids, Weight gain aids, Aphrodisiacs, Performance enhancers

Exhibit: 1

Coldarin and Sloan's liniment are examples of aimed activities that have to be carried out with popular brands that have very modest presence chemists' participation, and only occasional currently. doctor visits for reminders. Hence, it is Thus, sound financial planning for both short- advisable for corporates to set up a new entity and long-term is mandatory prior to embarking with its own separate personnel for OTC on OTC ventures. business.

6.6 Ability to widen the distribution network 7. Which brands are likely candidates for & infrastructure switching to OTC status?The average reach of chemists is reported to be The situation in our country is such that even 4%, while that of a general store is 14%, a Schedule H drugs are freely available without grocer 52%, and others 22%. prescription & many popular brands are often

purchased directly by the consumer. With years Currently, in India, OTC medicines are of usage, some heritage brands have attained permitted to be sold through the conventional that 'Unofficial OTC' status. A few examples chemists' retail outlets and also through retail include A to Z (Alkem), Shelcal (Elder), chains at select departmental stores and Cobadex (GSK), Antoxid (DRL), Dexorange supermarkets. OTC switch aims at reaching out (Franco India), Febrex Plus (Indoco), Sinarest to a much wider audience who are also (Centaur), Incid-L (Bayer), Domstal (Torrent), geographically spread across the length and Voveran (Novartis), and Duoflam (Svizera). breadth of the country. Hence, the organisation Some of these brands have good potential to must provide for easy access to safe and attain even higher sales if granted permission effective products by expanding the by DCGI to switch over to OTC status.distribution network to include a much higher proportion of approved retail outlets and rural In conclusion, the foray into OTC drugs market retail outlets. This would require the is also likely to be hampered by a few deployment of both Pharma and FMCG challenges like reduction in doctors' support, d is t r ibutors with much higher cost focus on consumer pull, limited reach of implications. Due care must be taken to ensure pharma distributors, heavy expenditure on that the entire distribution set-up is such that the brand building, need for continuous promotion, product storage conditions are adequately met pricing restrictions, fierce competition from and that the efficacy and safety of the contents FMCG and need to meet consumer expectation. are not compromised. Such investments are However, to be successful in the OTC business, feasible for bigger companies like Glaxo and meticulous research and planning with regard Ranbaxy; smaller firms, however, would find it to the issues deliberated above must be very difficult to expand their distribution accompanied by bold new initiatives with the network. This creates need for developing a associated risks. clear-cut distribution expansion plan with cost So are you willing to open the door and grab this implications clearly spelt out. opportunity?

6.7 Ability to have a dedicated field set-up References:In the 'Ethical to OTC' switch, the focus also 1 . w w w. i n d i a o p p i . c o m - I n d i a O T C shifts from the 'Doctor' to the 'Chemist' and to Pharmaceutical Profile 2010the 'End-user consumer.' Hence, deploying the 2.www.expresspharmaonline.com/20100630/same medical representatives who are attuned market01.shtmlto the typical '10 Dr + 4 chemist call' mentality 3. The Pharmaceutical OTC Outlook to 2010 for OTC selling is not the most appropriate by Kate Bradle, choice, although it is the most popularly www.globalbusinessinsights.comemployed strategy by most Pharma companies 4. www.fmcgmarketers.blogspot.comwho have ventured into OTC business. OTC /2007/12/otc-market-in-india-marketing-business calls for extensive and repeated (even fmcg-way.html 5.Priti Sugandh, Pharmabiz, weekly) chemist visits for a variety of end-user March 10 2004, http://www.pharmabiz.com

Ms. Mala Raj, is a senior consultant at Interlink. She is a brand management expert and is well versed with the intricacies of Pharma Marketing in the country. She is an excellent trainer for marketing strategies and selling skills for MR's

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