Biomedical Engineering Reference
In-Depth Information
drugs, in the United States, the FDA regulates the approval and marketing claims for
OTC drugs and they require an approved label with drug facts for patient education.
There are two different forms of OTC products: (1) those that may only be dis-
pensed after a pharmacy employee has assessed the needs of the patients and has
given some patient education, (2) those that are just like any other consumer product
and are freely available in store. In case the OTC drug has a new indication, dosage,
or form, it is eligible for 3 years of market exclusivity.
OTC products make up 28 % of unit prescriptions in the United States, compa-
rable to other countries (Danzon and Furukawa
2008
). The advantage of OTC drugs
is that they can have high sales for a prolonged period of time. For example, Listerine
is available for over 100 years and still successful. The number of prescription drugs
approved for OTC usage has risen since the 1990s (Ling et al.
2002
). Older classes
of H
2
-antagonists (e.g., Tagamet, Zantac) and antacids are well-known examples of
prescription drugs that are converted to OTC. In Europe, switching a prescription
drug to OTC can be a good strategy as then it can then be advertised to consumers
(Kvesic
2008
). However, also in the United States where DTCA is allowed for pre-
scription drugs, OTC products are heavily advertised.
An OTC drug has the potential to expand the market for its molecule. In addition,
it has two opposing effects on the manufacturer. It can cannibalize sales of the
branded drug, but the fi rm can also benefi t from spillover effects between the pre-
scription and OTC drug. Often, the cannibalization is limited to a certain extent as
OTC drugs are mainly available in lower dosages, while higher dosages are still
prescription only. Spillover effects between the OTC and prescription drug are also
likely, as OTC drug can benefi t from the brand equity of the prescription drug and
the fi rm can benefi t from spillover effects in promotion.
Berndt et al. (
2003
) explore the effects of making prescription drugs available
over the counter for four drugs in the H
2
-antagonist category. They focus on the
impact of OTC switches on the sales of the branded prescription drug and the joint
sales of the OTC drug and the branded prescription drug. They fi nd that the amount
of cannibalization and the spillover effect between the OTC and the prescription
drug varies across brands, depending on whether generic alternatives are available
for that drug.
Ling et al. (
2002
) fi nd spillover effects of marketing prescription drugs on OTC
drug sales, but not vice versa. These spillover effects are found for detailing and not
for DTCA. They also fi nd an order-of-entry effect for OTC drugs. Later entrants in
the OTC market compensate for this by spending a higher percentage of their sales
on marketing.
8.3.7
Summary of Marketing Strategies
Marketing strategies to fend off generic entry are relatively easy to implement and
mainly have a short-term impact. Pricing and promotion can decrease the extent of
generic entry in a limited way. Price decreases to deter entry are infrequent in
Search WWH ::
Custom Search