OTC SWITCH CLIMATE IS SUNNY, BUT CLOUDS LOOM

MICHAEL SLEZAK

NEW YORK -- Supermarkets can anticipate a bright future selling new prescription to over-the-counter drugs, although the Food and Drug Administration may ultimately slow the flow of those products onto retail shelves.

But despite the FDA's stepped-up scrutiny levels, which are delaying many OTC switches, a broad range of products will ultimately make their way to supermarket HBC departments. Once these products are switched to OTC status, though, supermarkets must be prepared to battle a storm of competition from drug stores and mass merchants, said Susan Lavine Coleman, managing partner at NCI Consulting, Princeton, N.J. Coleman was one of several OTC experts who spoke at the Rx to OTC Switch Conference presented here Feb. 16 and 17 by The Marketing Institute, a division of The Institute for International Research here. She said that despite the FDA's stricter stance on OTC approvals, there are several emerging trends which will support the approval of new switch products.

"Over the next 10 years the [guidelines for OTC switch approval set by the FDA] are going to expand, and will broaden to include preventive therapies, to maintain good health," said Coleman. In the future, she said, OTC products will become available for consumers "with no pre-existing ailments. The treatment and the medication, are integrated into a lifestyle modification plan."

The consultant said she is "very confident" the prescription drugs Tagamet, which treats ulcers, and Pepcid, a heartburn remedy, "will absolutely switch in about the next year," followed by Zantac later on. Supermarkets must stay on top of these switches, she said, because "these are categories worth billions of dollars."

Coleman further predicted that as the FDA's guidelines for OTC switch products change, the agency may approve OTC switches for many oral contraceptives and Premarin, a drug designed to help prevent osteoporosis.

"Looking way down the road, you could see self-diagnosis for chronic ailments. An explosion is likely to happen in diagnostic devices," she continued. "Once those diagnostics are out, there is a possibility for the consumer to accurately assess what their condition is, and with the availability of those products, you introduce the possibility of [OTC] treatments for those ailments."

OTC manufacturers became optimistic after the FDA's 1991 approval of Gyne-Lotrimin and Monistat-7, vaginal yeast infection cures, seemed to indicate a change in the agency's attitude toward switches, said Coleman.

"For the first time, we were discussing [switching products] not just for treatment, but for cure, and we were talking about [dealing with] recurrent infections. The guise under which [yeast infection cures] were approved was that consumers could self-recognize conditions they previously had," she said.

"That [approval] opened up a promise of many more switch opportunities." Coleman added that promise has yet to be fulfilled due to changes in FDA philosophy where a product's "meaningful efficacy" is taken into account.

However, no matter what the product or the indications it is used for, Coleman said supermarkets will control their own level of success on switch products.

"It's all in the hands of the supermarket industry. The way they responded on Aleve (launched June 1994) really set a new standard," said Coleman in an interview with SN after her speech. "What grocery did differently with the Aleve OTC-switch was they got it on the shelves fast, put it on display early and announced to consumers that the product was available. She called the supermarket OTC challenge a "process of re-educating the consumer, because they don't necessarily think of food stores as having real drugs."

David Hoo, senior director of marketing, OTC new products, Schering-Plough Healthcare Products, Liberty Corner, N.J., also spoke at the conference, and discussed eight critical factors in the success of an OTC switch.

He said the first four factors to an OTC product's success are fundamental, particularly that the switch has meaningful product differentiation. The OTC product must also have: prescription brand equity; a positive order of entry into the market [being first or sometimes last onto the market is a plus]; and competitive insulation through a patent or other means of exclusivity.

Four other factors determine the success of any OTC switch, Hoo added, and they are: the way the product is positioned by its manufacturer; the product's marketing spending; the product's profit expectations and the product's pricing.