Companies are broad-basing their product mix in favour of OTCs

After years of stagnating the Over the Counter (OTC) market in India, is set to see exponential growth. What does this mean for the Indian consumer? Nicholas Hall, Chairman and CEO, Nicholas Hall & Company gives some insights to Viveka Roychowdhury

What are the drivers for the growth of the OTC market?

First of all, pharma companies want to broadbase their business strategies because if they are looking only at one huge prescription (Rx) drug, then when the patent expires, it's the end of the story. Therefore, they look at switching these Rx products to Over the Counter (OTC) because it extends the life of that product.

We are also beginning to see some non-medical companies showing some interest in OTC products. For example, Bausch & Lomb, which is an eye care company, is showing some interest in OTC.

Therefore companies like Pfizer, who sold their consumer business (to Johnson & Johnson) bought back into the OTC market within three years through Wyeth. They wanted to buy Ratiopharm to get into the generics business but Teva beat them to it.

All these companies want to now spread their base, whereas before they wanted to have a very narrow focus on pure research but now that's not a viable model.

According to the just released DB6 2010*, global OTC sales were up 4.6 percent in 2009 in line with the global GDP of five percent.

Not only did the global recession fail to make OTC sales decline, it also created new opportunities for consumer healthcare with value-for-money products, economy packs and single dose SKUs in demand. Peak performance at work and job security are now more important to consumers meaning that preventive remedies, convenience OTCs, energy boosters, brain-boosting supplements and formulations for sight and hearing provide growth opportunities, along with contraceptives for women who want to work longer before having children. Lifestyle medications such as obesity treatments, cardiovascular regulators and evidence-based supplements also hold untapped potential.

Interestingly point-of-care (P-o-C) is a major step towards pharmacies becoming a one-stop shop for healthcare solutions with lifestyle medications and OTCs for minor ailments among the products that will benefit. Comprehensive training of pharmacy staff, e-learning, in-store infomercials and a tailor-made programme for independent pharmacies all contribute to successful P-o-C campaigns

Meanwhile, an upturn of 10.7 percent in India made it one of the fastest-growing countries in terms of OTCs. Indian consumers are also becoming more demanding and require convenient, fast-acting, high efficacy products. Wellness is a big market with slimming centres, spas and ayurveda centres all growing, indicating that OTC wellness products could generate big business here too .The growing popularity of OTCs in India, is demonstrated by the fact that sales of Revital (Ranbaxy) and i-Pill (just acquired from Cipla by Piramal) overtook their Rx stable-mates in 2009.

What was the modus operandi of today's OTC veterans when they first tapped the OTC market?

In the past, most of the OTC brands have grown with excellent mass exposure strategies with adequate media support .Today also this holds true but with fragmented media and consumer attention, it is becoming increasingly cost prohibitive for OTC companies to create a high Share of Voice (SOV) on par with other FMCG brands which are much bigger in size.

What are the SOPs for companies following in their footsteps today?

The fact that OTC companies need to invest in brand building like other FMCG brands will always stay. The way to do it however can be multi-pronged which begins with knowing the consumers and segmenting them so that you can reach them in a more targeted manner. Minimum media wastage and therefore cost should be the mantra.

Simultaneously it is important to understand the role of the doctor and the chemist, as they can wield a significant influence in creating a positive recommendation for the brand. We call it as Rainbow Coalition strategy in OTC marketing. In that sense OTC marketing differs from pure FMCG marketing as there are many possibilities of doctors/chemists changing course of therapy even in common ailments or supplements.

Which are the markets that seem like the Indian market as far as the OTC market is concerned, where you are seeing the same trends, in terms of behavioral patterns, etc?

We are seeing some similarities between India and China, in the sense that we see a movement away from doctor-driven markets to pharmacy/chemist-driven markets. There are also some similarities with some of the markets of Latin America, Middle East and other parts of Asia of course. So although India has its own unique set of problems and challenges, there are a lot more commonalities with the rest of the world.

In China the enabling regulatory changes made in the last four-five years has helped the OTC industry to flourish. They have grown by leaps and bounds and have overthrown Japan to compete for the second position. These regulatory changes have also helped many global OTC players to invest in their local companies OTC divisions to build large OTC brands in the past four-five years.

Could you elaborate on these problems and challenges?

One is the huge number of chemists that you have in India. The Relationship Compass Survey conducted by CubeX showed that you have more than 700,000 chemists so it's a highly fragmented market, with very low penetration of chains (just a couple of thousand). Outlets are very small, compared to the chain stores in the rest of the world. So fragmentation in the chemist sector is a major problem that the manufacturers have to overcome.

It can be overcome but it requires very different strategies. It requires driving the brand through advertising and the chemist will not advertise, that's become very clear in this Survey. And this needs to be supported this effort with training at the Point of Sale (POS).

The next stage is e-learning and we found in the Survey that only 40 percent of the chemists in India have a computer on the premises. As that increases, we can begin to put in internet learning programmes, and that's the future.

There have been some markets where there have been reverse switches, where the brand has gone from Rx to OTC and then the regulator has reversed the switch. One example is Australia's National Drugs & Poisons Scheduling Committee which unscheduled paediatric cough and cold products and codeine combinations. Are these because of safety concerns?

Often these reverse switches are for concerns other than safety. For example, pseudoephedrine has been reverse switched not because it's an unsafe product but because it can be reverse manufactured into amphetamines. In fact, the New Zealand and Australian police calculate that more crime is now committed by people on amphetamines reversed manufactured from pseudoephedrine than any other drug problem they have. So it has nothing to do with the safety profile of pseudoephedrine, in fact it's an extremely safe an efficacious medication. It's a social issue.

And this has been the case in other countries as well. In Mexico, there have episodes of the raw materials being hijacked and in one recent case, the security guards were murdered when a 70-kg consignment was hijacked because its street value ran into millions of dollars. So in many of the Latin American and Asian markets, pseudoephedrine has gone behind the counter. But it's nothing to do with the efficacy of the medicine.

India too has seen the reverse switch of popular OTC ingredients, dextromethorphan, due to drug abuse issues. The point here in India is that there are too few representations from the industry going up to the authorities with the safety information. If you can really back up your demand for an OTC switch with safety data, rather that waging a verbal war with the regulatory authorities, then it possible to get an Rx to OTC switch approved.

That's what happened with the emergency contraceptive (EC) pills category. They were being advertised because they got the OTC nod from the concerned regulatory authorities. Then suddenly certain sections took an objection to the advertising asking that it be stopped. Rather than stopping the advertising of such products, we have to become responsible about educating the consumer in the right manner about such products. In this case, we have to tell the consumer clearly that EC pills are used in emergencies, and are not for regular use. So it's how you say it and what the advertisement says that you want to regulate, but not stopping the advertising.

You have to realise that reversing a switch is not going to stop usage, people will still use the product. There's a whole range of Rx products sold under the counter in India, like a range of non-sedating histamines. But what would you rather have: these products sold under the counter without the correct POS education or legitimising them through switch and then be done much more safely. So in the rest of the world it's actually believed that Rx to OTC switches actually promote public health.

Which are the major categories within the OTC sector registering good growth?

In terms of switch, the non-sedating antihistamines. Then NSAIDs is another area where we except a lot of activity. And the very newest area internationally is in the area of lifestyle products, which would be slimming products like Alli. If you want to look at a market that is in the forefront (of Rx to OTC switches), that is the UK or New Zealand. For example, we have switches involving cholesterol lowering products, triptans for migraine, omeprazole for acidity.

In fact almost all categories seem to be on an upswing compared to their earlier performance. In fact the OTC momentum has picked up in the last two years and we are seeing more companies setting up separate OTC divisions and also considering many mature brands for Rx to OTC shift strategies. Globally too, the emerging markets will be the growth drivers and so categories doing well in theses countries will dominate the global categories too.

What’s the pharma industry going to look like a few years down the line?

The high end of the pharma industry is going to be dominated by biomedicines and personalised medicines. At the other end, you have the mature Rx brands where the pharma companies are realising that there's no point going to doctors because they can only write a generic prescription, so if you want to influence consumption, you have to go the pharmacist/chemist. So all over the world we are seeing pharma companies making their old brands OTC and then saying if we are going to have OTC brands promoted through pharmacies, we might as well have an OTC business unit. So let's use our OTC business as a way to promote our mature brands. So that's the future to me.

viveka.r@expressindia.com