Rx to OTC: A Case Study

CHRISTINA VEIDERS

Speed to market is a gold-standard goal for any prescription to over-the-counter drug switch.

According to retail industry sources, French drug-maker Sanofi-Aventis received acclaim for moving its allergy prescription medication Allegra (fexofenadine hydrochloride), a second-generation antihistamine that is a fast, non-sedating and long-lasting treatment for seasonal allergic rhinitis (hay fever) and the treatment of uncomplicated hives, onto store shelves and in aisles.

There were a lot of doubters in the retail community that the switch could be accomplished effectively and satisfactorily given the short time frame of about a year, said Blair Ramey, vice president of marketing for Chattem, a Chattanooga, Tenn.-based consumer health care company, acquired by Sanofi to execute the switch.

A spokesperson for Giant Eagle, Pittsburgh, told SN, “The launch of Allegra in our Giant Eagle locations was one of the most successful recent HBW launches in terms of getting product to the shelf quickly, generating display availability and maintaining product supply levels necessary to satisfy customer demand.”

“They did a good job premarketing Allegra and getting it out to retail and not having a lot of out-of-stocks,” said Laura Mahecha, industry manager of health care for Kline & Co., Parsippany, N.J., who follows the prescription drug market.

There is a lot at stake in the switch process for both the retailer and supplier, especially if the switch comes with a loyal franchise of 8 million prescription users and 20 million prescriptions as was the case with the Allegra launch.

“The challenge for retailers is to recapture the dollars that came from the formerly prescription-only item. These are often big-ticket items that are also funded by insurance, so when an item loses its prescription-only status, it’s imperative for the retailer to recapture the shopper and convince them to buy the over-the-counter brand at their outlet and not somewhere else,” said Kathy Caldwell, senior vice president of client services and head of Acosta Sales & Marketing’s HBC division, Jacksonville, Fla. Acosta played an important distribution role in placing Allegra products and collateral materials in the food channel.

Allegra had maintained lucrative prescription sales — Allegra 180 mg and 60 mg had combined sales of $1.5 billion — before generic versions of the drug entered the market to eat into the brand’s prescription sales. In 2009, Allegra D-12 had annual sales of $600 million, according to data from Wolters-Kluwer.

The impact of prescription generics resulted in a precipitous drop in Allegra sales in 2010. Net sales in the United States plunged 53.6% to 147 million euros (about $200 million U.S. based on current exchange rates), according to the company’s annual report. To leverage the equity in Allegra’s prescription franchise and build a consumer products platform, Sanofi took Allegra OTC in March of this year after winning U.S. Food and Drug Administration approval in January.

It was Sanofi’s first switch endeavor in the U.S. The move, part of the company’s growth strategy, was significant in that Sanofi invested $1.9 billion to buy Chattem.

“The acquisition of Chattem will be a significant milestone in Sanofi-Aventis’ transformation strategy and will provide us with the ideal platform in the U.S. consumer health care market, which represents 25% of the current worldwide opportunity,” said Christopher A. Viehbacher, Sanofi’s chief executive officer, at the time of the announced acquisition in December 2009.

While the Chattem acquisition didn’t close until March of 2010. Plans to switch Allegra OTC were underway by January of that year, according to Ramey. This would also be Chattem’s first OTC switch.

The big challenge was “every single [retail] account expects the product on the first day it is available. You have to build a product and distribution plan that makes sure every one of the key customers is delivered product within a reasonable time frame. In our case we established almost a 24-hour window between 6 p.m. on March 2 and 6 p.m. on March 3 as the time frame when every single customer that wanted the product would get product within their distribution centers.”

Besides product distribution, there were individual requirements to be met from the big chain retailers’ rollout strategies as they maneuvered to capture or retain market share of the drug.

Ramey looked at it from the standpoint of “who had the most to lose and who had the most to gain” in how retailers shaped their strategies.

“Every retail pharmacy knew with this switch they could potentially lose a lot of volume because sales could migrate to channels that didn’t have as much development when Allegra was a prescription,” he said. Their objective was to retain Allegra prescription users and establish that the drug would now be available [in their stores] OTC.

Others, particularly food and mass-market channels without pharmacies in stores, had the most to gain because for the first time they could compete for share of the Allegra business, Ramey explained.

He added the supermarket channel announced the Allegra rollout with “authority.”

“They [major food chains] all jumped on it. They not only had product on the main shelf but also supported it with off-shelf displays and promotions. They were all proactive and recognized the opportunity to take share of Allegra and save customers a trip to the drug store.”

The Allegra placement included 11 individual items in three areas of the store — children’s pediatric allergy, adult allergy and adult with pseudoephedrine, Allegra D, sold from behind the pharmacy counter.

Besides the product placements, there were 25 different display formats from clip strips to pallets to be distributed to stores depending upon volume, traffic and product mix specifications. “With continued focus on inventory levels, retailers must rely heavily on the manufacturer’s forecasts to ensure they have enough product on hand,” said Acosta’s Caldwell.

Chattem called on Acosta to do the in-store detailing on the merchandising pieces in the food channel.

This was no ordinary Rx conversion, according to Acosta executives. The requirement was to roll out Allegra OTC to more than 16,000 grocery outlets in a two-week period, with 70% of those stores to be covered in week one.

“Clearly there was significant upside to the cough/cold category in food, drug and mass retail stores” said Jason Henney, Acosta’s client services director, in a case-study report. “Consumers seek out a new OTC product and will turn and walk out of a store, even their favorite store, if they don’t have it.”

Acosta used its SharePoint platform to ensure alignment of the rollout across all teams — including Acosta departments, Chattem’s team and the retailers. “SharePoint provides a secure virtual private network that allows all parties to keep informed about the latest details, plan changes and progress 24/7,” explained Henney.

Acosta covered 16,000 stores coast-to-coast in just two weeks, exceeding targets.

Within three weeks of the launch, Allegra gained the No. 2 position between No. 1 Claritin and No. 3 Zyrtec based on Nielsen data, said Ramey. In its second-quarter report, Sanofi said first-half sales of Allegra OTC in the U.S. reached 143 million euros ($194.4 million U.S. based on current conversion rates).

Allergy Partnership

PITTSBURGH — Facing yet another record-high pollen count fall, Giant Eagle here partnered last month with allergy medication Allegra to offer free in-store allergy screenings for patients ages 18 and older.

“Customer response to our free allergy screenings was extremely positive,” said a Giant Eagle spokesman. Data was not available.

The grocery chain supported the launch of Allegra in print and online versions of Giant Eagle’s weekly circular, via its Facebook and Twitter vehicles, on radio and with a $2 eOffer sent to thousands of customers via email.

In-store, Allegra was merchandised in the allergy section near other leading allergy brands — Claritin and Zyrtec. It was also positioned on endcaps throughout the HBC department.

The chain this fall is currently offering a $2 eOffer on Allegra 20-count or larger, as well as a bonus fuelperks! program that awards 20-cents off per gallon of fuel at any GetGo locations with the purchase of any one Allegra 20-count or larger.

“Giant Eagle customers have responded very favorably to the product’s launch. If customer interest continues, Allegra may become one of the more popular allergy offerings available,” the company spokesman told SN.