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PRESCRIBING A PLACE

A cornerstone of the whole-health proposition is self-care, and no retail segment drives today's broad range of over-the-counter medications more than prescription-to-OTC switch products. According to the Colorado Springs, Colo.-based General Merchandise Distributors Council's "Do-It-Yourself Health" study, released last year, OTCs are projected to represent $5.7 billion in supermarket sales by the

A cornerstone of the whole-health proposition is self-care, and no retail segment drives today's broad range of over-the-counter medications more than prescription-to-OTC switch products. According to the Colorado Springs, Colo.-based General Merchandise Distributors Council's "Do-It-Yourself Health" study, released last year, OTCs are projected to represent $5.7 billion in supermarket sales by the year 2000, approximately a 36% market share. Retailers who are successful in incorporating switch products into a whole-health merchandising scheme, providing shoppers with health care solutions, can boost their chances of getting a fair share of what is projected to be a $16 billion self-care market in just the next three years.

Aside from the increase in consumers cutting costs and guiding their own health care by self-medicating, factors that make OTCs a growing business include aging baby boomers and a pipeline of nearly three dozen switch candidates the Food and Drug Administration will be reviewing in the next few years.

"As retailers have come to understand the consumer's interest in switch products, they've become more aggressive in featuring them, displaying them and maintaining ongoing support," said Susan Lavine Coleman, president of NCI Consulting, Princeton, N.J. According to Coleman, drug chains are setting the standard.

"They give it more space, more visibility and, most importantly, more ongoing promotional support," she said. "A big obstacle right now is many food stores are allocating limited space to their OTC sections. That's a disservice, and it reduces the profit supermarkets could potentially be making on these high-margin items."

Consumers are used to seeing OTC products for pain, colds and allergies. Nowadays, the trend is prescription drugs switching to create new OTC categories such as vaginal yeast medications and baldness remedies. "With each successive switch, many of them are really quite newsworthy," Coleman said.

Take smoking cessation, for example. In February 1996, SmithKline Beecham's Nicorette, a prescription drug in chewing-gum form, became the first smoking-cessation product approved by the FDA for OTC use. Next came McNeil Consumer Products' Nicotrol patch, which went OTC in July of that year, followed by SmithKline's Nicoderm patch a month later.

Food, drug and mass-merchandiser sales of these products now exceed half a billion dollars annually, with category growth hitting 75% in 1997 alone, according to a new-product study by Information Resources Inc., Chicago, presented at the Food Marketing Institute's annual convention. (The Nicoderm patch, with $243 million in sales last year, was rated the top "pace-setting" product -- food or nonfood -- by IRI.)

The prospect of successfully cross merchandising food and nonfood items throughout the store -- an ideal of whole-health true believers -- is an intriguing idea, Coleman said, although she was unsure how prescription-to-OTC switches might fit in.

"It all depends on the product. If you get a category like cholesterol-lowering, which is in the queue to switch, there's a very logical connection with produce, antioxidants and high-fiber products," she said. "But hair regrowth? I don't know about that."

More than 30 ingredients have been identified as potential switch candidates to treat ailments ranging from acne to ulcers. Each of these product categories will attract competing brands based on the same prescription heritage. The sheer number of products and the resulting battle in the marketplace are changing the rules of OTC marketing for manufacturers. These drugs will have to be handled like new brands more than ever before.

"Today a switch is literally like a new brand launch," said Jeffrey Hill, managing partner of Meridian Consulting Group, Westport, Conn. "There's a responsibility and an opportunity for the marketing organization behind the switch to establish a product identity and an equity, as they would a new brand that had no heritage at all.

"So it is absolutely fundamental to carve out a unique product-based point of difference," stressed Hill, who has consulted for several OTC companies over the years.

"A unique product-based point of difference is something that consumers can relate to well beyond simply the notion of being available over the counter."