The U.S. Climate for Switch 2010

Transcription

1 The U.S. Climate for Switch 2010 OTC National Conference OTC Perspectives Philadelphia, PA May 19, Kline & Company

2 Contents About Kline Switch overview Regulatory issues Classes with potential for future switch Conclusions 2010 Kline & Company 1

3 Contents About Kline Switch overview Regulatory issues Classes with potential for future switch Conclusions 2010 Kline & Company 2

4 About Kline Kline s clients include most major manufacturers in the OTC and healthcare/ consumer products industries Kline Management Consulting Kline Research Working with individual clients to resolve tough issues and help implement solutions Generating information and insights for multiple clients through in-depth market research studies Managed flow of people, ideas and data 2010 Kline & Company 3

5 About Kline Kline s Strength is Our Methodology OUR RESEARCH IS HEAVILY WEIGHTED ON PRIMARY RESEARCH FOR OBJECTIVE, ACCURATE INFORMATION In-Depth interviews with: OTC, personal care, & Rx industry executives Regulatory agencies Industry associations Retailers Suppliers Distributors INTERVIEWS ARE SUPPLEMENTED WITH SECONDARY RESEARCH WHICH IS USED TO VALIDATE AND REFUTE FINDINGS FROM PRIMARY RESEARCH Data collected from many sources including: Patent searches & trade journals Annual reports & company lit. Scanner data & FDA materials 2010 Kline & Company 4

6 Contents About Kline Switch overview Regulatory issues Classes with potential for future switch Conclusions 2010 Kline & Company 5

7 Switch overview Rx-to-OTC switches continue to be an engine of growth for the U.S. OTC industry Recent switches that have occurred in the past decade account for $1,862 million in 2009 sales, or 10.0% of the total industry s sales Sales of all branded OTCs that were brought to market through Rx-to-OTC switch totaled $3,407 million, or 19.0% of total industry sales in 2008 When including sales of private-label OTCs that would not have been possible without branded switches the share of total market sales attributed to switch is over 25% 2010 Kline & Company 6

8 Switch overview Switches deliver higher growth than traditional OTC brands Overall industry growth : 2.2% Growth for recent Rx-to-OTC switch brands : 15.4% $ Million 20, % 18,324 18,722 16,000 12,000 8,000 4, % 1,614 1, Total OTC Industry Recent Rx-to-OTC Switches 2010 Kline & Company 7

9 Switch overview Factors driving future switch activity Strong success of past switches provide encouragement to other manufacturers seeking to switch products Large number of patent expirations impacting sales of the Rx market and consequently create opportunities in the OTC market Continually rising health care costs, resulting in various groups in favor of novel costcutting solutions such as Rx-to-OTC switches Emerging OTC availability of several prescription drugs outside the United States, providing a precedent for safe and effective nonprescription usage of the products The FDA s and other groups push to increase patient access to affordable medications Behind-the-counter (BTC) class may increase the likelihood of more complex switches occurring 2010 Kline & Company 8

10 Switch overview Trends leading to increased switch activity Consumers need access to affordable medicines Possible BTC class Regulators in favor of increased patient access to affordable medicines Retailers expect innovative products each year MCOs indirectly support switches Increased Rx-to-OTC Switch Activity Pharmaceutical companies need to mitigate losses when patents expire Past Rx-to-OTC switches have been successful Many Rx drugs losing patent protection soon OTC companies use switches to bolster growth by bringing Rx users to OTC market and often commanding premium prices Increased nonprescription availability of several Rx drugs overseas provides precedent for the United States 2010 Kline & Company 9

11 Switch overview Rx-to-OTC switches benefit consumers Save money Convenience Consumers can self-treat embarrassing conditions Save time Gain wider access to affordable medications 2010 Kline & Company 10

12 Switch overview Rx-to-OTC switches benefit pharmaceutical companies Protects from generic cannibalization Rx revenues typically decline by 65% to 80% or more Some branded products have suffered revenue declines of more than 90% Switch can buffer sales decline by providing new revenue stream Because prices of OTCs are significantly lower than Rx medications, even broader utilization of a nonprescription product can result in far less sales than on the Rx market Some of the most successful switch brands have sales between $ million, even for drugs whose U.S. Rx sales exceeded $3 billion This is preferable to a virtually complete loss of revenues from the product Successful OTC brands benefit from unlimited longevity so the revenue stream, albeit smaller, lasts for many years 2010 Kline & Company 11

13 Switch overview Rx-to-OTC switches benefit retailers Switches are often launched with considerable advertising and promotional campaigns by manufacturers Such campaigns tend to pique consumers interest and bring them into retail stores to get more information or buy the product This increased consumer foot traffic benefits retailers tremendously Many large retailers will conduct cooperative advertising/promotions for newly switched brands Switches in general help manufacturers and retailers work closer together and assuming the switch brand s launch is smooth, improve relationships 2010 Kline & Company 12

14 Switch overview Rx-to-OTC switches benefit MCOs MCOs have a vested interest in seeing expensive drugs switched from prescription to OTC status, particularly when they are switched at the prescription dosage Most MCOs stop coverage for a drug when it switches from Rx-to-OTC status Many MCOs also offer their members incentives to use lower cost generic medicines Often times, MCOs have created preferred drug lists based on a combination of clinical effectiveness and cost, with generics a primary focus for savings. De-reimbursing same-dosage OTC drugs represents additional cost savings to MCOs for widely used drugs 2010 Kline & Company 13

15 Contents About Kline Switch overview Regulatory issues Classes with potential for future switch Conclusions 2010 Kline & Company 14

16 Regulatory issues Switch Criteria First, the condition that the drug addresses must be self-diagnosable Second, the drug must be generally safe to use with a low incidence of adverse reactions Third, there must be no need for regular physician monitoring of the patient while taking the medication Drugs that address chronic conditions for which patients must take medication on a regular basis are less likely to be approved for switch than those that address transitory conditions This is because the risk of adverse reaction increases dramatically with chronic use drugs 2010 Kline & Company 15

17 Regulatory issues Switch Criteria (Continued) Class Selfdiagnosable Low incidence of side effects Need for physician monitoring Temporary condition Allergy Yes Yes Sometimes Sometimes BPH Yes-a Yes Yes No Cholesterol No Sometimes Yes No Digestives-b Yes Yes No Yes Incontinence Yes-a Yes Sometimes No Migraine Sometimes No Yes Sometimes Sleeping aids Yes No No Sometimes a- Need initial diagnosis by a physician to rule out more serious kidney and/or bladder conditions. b- Information given for this category is for heartburn indication and does not apply to Rx indications for ulcers or gastroesophageal reflux disease because these are unlikely OTC indications Kline & Company 16

18 Temporary or acute condition Regulatory issues Safety criteria for Rx-to-OTC switches by class Do not need professional diagnosis/monitoring (self diagnosable condition) Digestives/ proton pump inhibitors Allergy relief products Migraine medications Benign prostatic hyperplasia Sleeping medications Chronic condition Incontinence medications Statins Need professional diagnosis/monitoring NOTE: Large circles denote lower chance of side effects, and small circles denote higher chance of side effects Kline & Company 17

19 Regulatory Issues Regulatory Issues for Cholesterol Switch Patient can determine if they are a candidate for therapy Patient is given necessary information to make appropriate purchase decision Patient has ability to know when to de-select product Patient can monitor effectiveness and side effects while on therapy and consults a physician when necessary Patient can be expected to maintain reasonable compliance on therapy 2010 Kline & Company 18

20 Regulatory Issues BTC Class Discussion and debate about a BTC class has continued for many years Such a class would represent a midway point between Rx and OTC medicines Physician s examination and prescription would not be required for purchase, but consumers would need to ask a pharmacist for the product The pharmacist would then be responsible for patient screening and education Currently several nonprescription drugs sold successfully from BTC: Plan B emergency contraceptive (Teva) All PSE-containing cold and allergy meds Nonprescription asthma inhalers Mucinex was also sold from BTC when it first entered the market 2010 Kline & Company 19

21 Regulatory issues BTC Class (Continued) The FDA already allows a path to BTC through the Ethical OTC classification in new drug and switch applications Where Rx-to-OTC switch NDAs are submitted in which a product is voluntarily classified as an Ethical OTC, the application can be approved for this product without the establishment of a broader BTC class In fact, during a May 2007 panel discussion at CHPA s Regulatory and Scientific Conference, the staff of FDA s Office of Nonprescription Products reiterated that they would consider individual switch applications that started with the assumption that the product would be sold on a BTC basis FDA is not authorized to reject switching a product from Rx-to-OTC status and assign it instead to a third class without the voluntary agreement of the product s manufacturer 2010 Kline & Company 20

22 Regulatory Issues BTC Class (Continued) A BTC class would, however, fit with the current environment of increasing access to health care products and services for all consumers Retail health clinics are part of offer a broader trend towards consumer directed health care Pharmacists groups are also largely in favor of more products sold from BTC Products sold from BTC need to demonstrate a proven health benefit and be accompanied by available guidelines for patient identification and risk assessment Mfters would likely be relied on for consumer educational materials and programs through pharmacies, media, and marketing Product placement, promotion, workflow, and staffing patterns should support direct interaction with the pharmacist, while marketing devices, including print advertisements and shelf-talkers should direct consumers with questions to the pharmacist 2010 Kline & Company 21

23 Regulatory issues BTC Class (Continued) There remain many unanswered questions about a BTC class: Will MCOs offer coverage, maybe reduced coverage for BTC drugs? If not, will MCOs continue to be in favor of notifying members and promoting newly switched drugs from Rx-to-BTC class? Offer coupons and incentives for members to try new BTCs? Are there any changes to pharmacists liabilities when dispensing a BTC drug vs. an Rx or OTC drug? How do pharmacists receive compensation for their time and counseling of patients and who is responsible to pay these fees? Patient, MCO, retailer, or drug manufacturer? Some combination of above? Built into retail price of the product? Do pharmacies have necessary space for confidential patient counseling by a pharmacist? If not, are retailers required to create such a space? 2010 Kline & Company 22

24 Regulatory issues BTC Class (Continued) Rx-to-BTC switches are likely to become more common in the future Manufacturers will need to become creative with their marketing plans and NDA switch applications to convince FDA that BTC status is appropriate for their drugs In March 2010, the Kansas Board of Pharmacy awarded contract to help fight methamphetamine production by tracking sales of PSE-containing OTCs WA and AL governors also sign e-tracking legislation Mar 2010 These systems offer real-time e-tracking for medicines and such systems could be implemented to make Rx-to-BTC tracking possible 2010 Kline & Company 23

25 Regulatory issues International Precedent There are a number of drugs that have been approved for sale without a prescription in overseas markets that could potentially serve as precedent for a U.S. FDA switch review Protonix: In February 2009, the Committee for Medicinal Products for Human Use (CHMP) within the European Medicines Agency (EMEA) adopted a positive opinion, recommending to grant a marketing authorization for the Pantozol Control 20 mg for short-term treatment of reflux symptoms (e.g., heartburn, acid regurgitation) in adults, as a medicinal product not subject to medical prescription. The decision applies to the entire European Union of 27 countries The application was submitted by Nycomed GmbH, which will launch the pantoprazole product in 2010 Flomax: In the United Kingdom, Flomax Relief is also sold as part of the Pharmacy class where consumers need to ask pharmacists for the medication Zocor: Furthermore, Zocor Heart Pro (Merck) switched from prescription to a behindthe-counter pharmacist-dispensed class in the United Kingdom in 2005 and has established safe and effective usage of a statin without a physician prescription Pharmacists have a full protocol they need to go through to assess a patient prior to dispensing the medication 2010 Kline & Company 24

26 Regulatory Issues International Precedent (Continued) Imitrex: In June 2006, the new product launched in the U.K. containing the same 50 mg dosage as the prescription tablets The availability of an OTC product allows consumers to try Imigran before obtaining a prescription and could thereby bolster the sales of those products (injectable Imitrex/Imigran) which still require a prescription In Germany, several triptans have switched to behind-the-counter (BTC) status over the past several years, substantially increasing consumer access to the drugs Utilization of the BTC products has generally proven safe and effective, with no significant reports of adverse reactions 2010 Kline & Company 25

27 Regulatory Issues Patent Expirations of Drugs Profiled Astelin/Astepro Enablex Restoril Protonix-a Lipitor Oxytrol Xyzal Clarinex Lescol Lunesta Detrol Aciphex Nexium Crestor Relpax Zegerid Omnaris Rozerem Vytorin Zetia Zomig Treximet Caduet Vesicare Expired: Allegra Ambien Cardura Carafate Ditropan Flomax Flonase Hytrin Imitrex Mevacor Pravachol Prevacid Sonata Zocor Expiration year a- At-risk generic versions of Protonix (pantoprazole sodium) entered the market in December Kline & Company 26

28 Contents About Kline Switch overview Regulatory issues Classes with potential for future switch Conclusions 2010 Kline & Company 27

29 Switch Forecasts Several Rx-to-OTC switches are approved recently and several large switches are anticipated over next few years Rx-to-OTC Switches Approved Recently Antacids Contraceptive products Eye care products Laxatives Weight loss aid Allergy relief Prevacid 24 Hour, Zegerid Plan B Alaway, Zaditor MiraLAX Alli Zyrtec Possible Future Rx-to-OTC Switches Allergy Antacids BPH Incontinence drugs Sleeping aids 2010 Kline & Company 28

30 Switch Forecasts Forecast Sales of OTC Market, including Future Switches, $ Million CAGR % Existing OTC market 18,722 19,209 19,708 20,220 20,746 21, % Future switches ,181 1, Total OTC market 18,722 19,359 20,425 21,163 21,927 22, Kline & Company 29

31 Switch Forecasts Total OTC Market Forecast, including Future Switches, $ Million 25,000 20,000 15,000 10,000 5, Existing OTC market Future switches 2010 Kline & Company 30

32 Contents About Kline Switch overview Regulatory issues Classes with potential for future switch Conclusions 2010 Kline & Company 31

33 Conclusions Expect more switches Additional switches will continue to occur in the future Most of the switches on the horizon are more complicated than past switches Therefore, switch applications will become even more cumbersome for manufacturers to prepare and the money invested in clinical studies even greater As a result switch strategies are being considered by manufacturers much earlier in a drug s life cycle More creative marketing plans and post-marketing surveillance proposals will be required from manufacturers to help convince FDA of safety of switches in the future BTC placement will likely be a means to accomplishing more switches 2010 Kline & Company 32

34 Conclusions Future switches will be important growth driver for the industry Switch continues to be a strategy considered for most drugs All major OTC companies will continue to derive strong U.S. growth from switches including: Johnson & Johnson, Pfizer, GlaxoSmithKline, Bayer, Merck, Novartis, Procter & Gamble, Sanofi-Aventis, and Boehringer-Ingelheim Collectively, future switches are expected to add $1.5 billion in absolute dollars to the OTC market by 2014 Most of this will come from new OTC users and will only cause minimal cannibalization of sales of existing OTCs Collectively, future switches are expected to drive growth near 4.0% for the overall industry over the next five years 2010 Kline & Company 33

35 Questions & Answers 2010 Kline & Company 34

36 Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit If you require additional information about the contents of this document or the services that Kline provides, please contact: Americas Asia Europe Laura A. Mahecha, MBA Industry Manager, Healthcare Phone: Laura.Mahecha@KlineGroup.com Kline & Company, Inc. Overlook at Great Notch 150 Clove Road Little Falls, NJ Phone: Fax: