A Different World

Sep 01, 2009
By Pharmaceutical Executive Editors

From home improvement and manufacture to film and print publishing, do-it-yourself is one of the world's most popular consumer trends. And pharma is no exception. Self-medication is on the rise, and in the last ten years, over-the-counter (OTC) pharmaceuticals have become increasingly important to industry portfolios. For the first time in 2008, OTC drug sales grew faster than the prescription drug market, and the future is even brighter, with lifestyle changes, therapeutic opportunities, and regulatory regimes all favorable to OTC.

With that (and the looming patent cliff) in mind, Big Pharmas are reassessing the value of consumer healthcare, and refocusing resources on the transition from prescription drugs to OTC in an effort to extend the life cycles of their most lucrative brands. Brent Saunders, senior vice president and president of Global Consumer Health Care at Schering-Plough, stands at the forefront of this strategic rethinking. As the grandson of a pharmacist and a frequent speaker on compliance and risk management issues, Saunders brings a unique perspective to the consumer healthcare unit, based on a sharp understanding of market innovations and brand awareness. He recently sat down with Pharm Exec to discuss the intricacies of consumer healthcare, including globalization, regulation, and what makes OTC a different world from prescription drugs.—Matthew Kalash

Pharm Exec: Tell us a bit about how pharma companies have historically looked at OTC.

Brent Saunders: Historically, OTC was viewed by the pharmaceutical industry as a place to put your assets after they no longer had Rx (prescription) patent life. Over the last 10 years, we've seen a nice evolution of consumer healthcare as a strategic asset for pharmaceutical companies.

We've seen CEOs talk about the strategic value of their consumer healthcare units. It's gone from an afterthought to now really being part of the core strategy of how to extend the life of pharmaceutical products.

PE: Has that been gradual? Because it seems that all of a sudden we're hearing more about this aspect of the business.

BS: For some companies it's been gradual. For some it's been a change in strategy. Some, like Schering-Plough, have historically recognized the value of having those assets and being able to commercialize and switch. And some of the companies are just now doubling down on consumer healthcare, or investing more heavily in consumer healthcare. They're doing it in part because they view the prolonged life of their assets or their brand as important. But they're also looking at two other factors: the constant value of a good brand, and the uncertainty of the regulatory environment.

Take Dr. Scholl's, for example. It's been around for 100 years. Pharmaceutical brand managers tend to think of their [brand] life span in chunks of about 10. To have a brand for 100 years is great—and if we do what we hope to with Claritin, it should be around for 100 years as a consumer brand, too.

The second factor is an increasing trend towards self-medication around the world. As budgets for healthcare continue to explode, governments are looking at how we can get the consumer more involved in the selection and cost of their healthcare treatment. Over-the-counter medicines and consumer healthcare tend to do both of those things effectively for governments.

PE: In the past, was OTC viewed only as a way to extend patents? Or is it the actual sales that have been important?

BS: Like any industry, the pharmaceutical industry tends to have cycles, and at one point it was in vogue to have high growth businesses only, so a lot of companies became pure play pharma companies. They sold off their non-Rx or non-core businesses to achieve high growth rates to satisfy Wall Street.

What you see now is a slowing in the Rx growth rates. In fact, OTCs grew faster than Rx last year. I'm fairly certain that was the first time the OTC market grew faster than the Rx market.

So instead of looking for growth, companies are looking for stability and consistent earnings. And even if you have some diversification like a consumer healthcare unit, you can create a base of stability and then ride the roller coaster of the Rx products.

lorem ipsum