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Report: OTC market not largely impacted by recession


LITTLE FALLS, N.J. The overall over-the-counter medicine market grew 3.2% during nonrecession years and only 1.2% during recessions, according to the latest research — Impact of Recessions on the U.S. OTC Market — from consulting and research firm Kline & Co.

The impact of recessions on the OTC market mainly comes from erosion of branded OTC sales by private-label products and is reflected in slower growth rates, Kline concluded.

The level of erosion varies by product classes and categories. However, Rx-to-OTC switches, major innovations and new product launches with related promotions that occur during recessions help cancel the effect of private-label erosion.

While overall the U.S. OTC market grows at slower rates than during non-recession periods, private-label OTC medicines outgrow 2007 rates by 5.7% over the same time period, suggesting that consumers are more aware of private-label products and are generally satisfied with the efficacy and price. Private-label products in categories such as general pain relievers, antacids and allergy medicines posted the highest growth, driven primarily by launches of private-label omeprazole (Procter & Gamble’s Prilosec OTC) and cetirizine (Johnson & Johnson’s Zyrtec).

Sales of Rx-to-OTC switch brands are either not impacted or are less impacted than regular OTC brands by recessions. For instance, the Rx-to-OTC switch of Claritin in 2003 only lost 18% of its sales to private-label competitors in the non-recession period, while private-label equivalents of Zyrtec launched in early 2008 seized one-forth of brand sales during 2009, a recession year.

“There is clear evidence that private-label OTCs grow at significant rates during a recession,” stated Laura Mahecha, industry manager at Kline’s Healthcare practice. “Consumers did trade down to private label, and branded products lost considerable shared private label, but at the same time, several switch products still did really well as consumers are still willing to pay extra for a product they feel is more innovative and offers more relief.” 

In previous recessionary periods, overall OTC sales declined two years in a row; from 1999 to 2000 overall manufacturers’ sales were down 0.6%, and then declined again from 2000 to 2001 by 0.5%.

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