10 Truths of OTC No. 1: Recognizing there's a problem in the first place
Over the last 20 years, DewGibbons + Partners has helped design some of the world’s most iconic and successful OTC brands, resulting in a deep appreciation of the visual and physical cues — and regulatory limitations — in the self-care and OTC marketplace. The need to challenge those cues and limits is becoming far more frequent.
The inexorable rise of digital technology and an attitudinal shift towards wellness and prevention finds consumers starting to think very differently about how they manage their health. Many traditional OTC businesses have been very slow to adapt to this, if at all, when compared to consumer product brands.
Nick Vaus and Sara Jones, of DewGibbons + Partners, recently took a step back to look at what works for customers, healthcare practitioners and retailers against a backdrop of wider economic, cultural and digital trends. The result is the "10 Uncomfortable Truths that OTC has to deal with to survive and thrive in the 21st century."
Each week, for the ensuing 10 weeks, Drug Store News will publish one "Uncomfortable Truth" in the DSN Health & Wellness e-newsletter that is disseminated on Tuesday.
The first truth is recognizing there’s a problem in the first place.
Truth 1: OTC isn’t in particularly robust health
The stats vary, but overall the song remains the same: the global OTC market will continue to grow by reasonable, if not stratospheric, amounts through 2021 (+2.6% CAGR says Kline Group, +4.6% suggests Nicholas Hall and +6% suggests Research and Markets).
So there’s growth – even exciting growth in BRICS countries [Brazil, Russia, India, China and South Africa]. And numbers of products in the self-medication market are proliferating due to an aging demographic, the lower cost of self-managing minor health issues and a general rise in acceptance of self-medication. Great.
But here’s the rub.
Switch blockbusters like Pfizer’s digestive product Nexium and GSK’s allergy offering Flonase drive a disproportionate share of OTC market growth. According to Nicholas Hall, just 13 switches contributed to over 17% of the total U.S. market growth between 2012-2016, within a wider market of hundreds of thousands of OTC products. Even as Galderman’s acne treatment Differin Gel and Sanofi’s 24-hour allergy relief drug Xyzal are now online, the switch pipeline isn’t exactly full, apart from ongoing talk about Sanofi’s erectile dysfunction drug Cialis.
With molecule-oriented switches stripped out, the branded OTC market consists largely of a hugely competitive, fragmented and often confusing mix of products fighting to stand out on the shelf against a rising tide of generic alternatives. Words like ibuprofen, cetirizine and simvastatin – once confined only to HCP lips – are now commonplace. Consumers increasingly believe it’s the action of the molecule that matters, not the manufacturer or indeed the brand.
The rise of generics is exacerbated by pharma’s trust problem. In Edelman’s annual Trust Barometer 2017, 82% of global respondents said that the pharmaceutical industry needs greater regulation. In detailed figures from the previous year, consumer healthcare, including OTC, rated at 55% (and just 40% in the EU) compared to technology businesses’ 77% trust rating. High-profile cases like Nurofen Australia marketing duplicate actives at significant price premiums to different consumer segments compound the problem and undermine the perceived value of branded drugs.
So far, OTC’s response to all this has been manifestly workaday: a wave of M&A activity leading to company and product consolidation. In the short-term this works. In the mid to long-term, with an absence of truly novel innovation in product types, or entirely rethinking how to engage brands with consumers in a digital age, it’s just shuffling increasingly interchangeable (and expensive) packets of pills on a shrinking branded shelf. Far more radical and wide-reaching action is absolutely necessary.
Come back next week to take a deeper dive in the second truth impacting the OTC business, which is OTC isn’t actually in the pharmacy business.
Sara Jones
Partner and client services director, DewGibbons + Partners
Sara runs DewGibbons + Partners alongside NickVaus, and heads up the client services team, leading branding and communications programmes for household names in OTC and health care. She’s always had a bit of a secret passion for OTC branding. Her Grandma was a pharmacist in London’s West End, leaving her with an abiding curiosity about active ingredients and how medicines work. She’s (in)famous for reading patient information leaflets cover to cover. Email her, follow her on Twitter or connect on LinkedIn.
Nick Vaus
Partner and creative director, DewGibbons + Partners
As well as running the agency with Sara Jones, Nick leads the studio in providing solutions that are innovative, creative, economic, and effective. Powered by Beautiful Thinking – a unique combination of right and left brain thinking that seamlessly binds together strategy, design and brand communications – he ensures that his clients’ businesses, brands and consumers are at the heart of each and every brief. Email him, follow him on Twitter, or connect on LinkedIn.