OTC Sector Growth Jeopardised By Lack Of Innovation

BMI View: The over-the-counter (OTC) medicines segment is a steadily expanding opportunity for several multinational firms and many local manufacturers, in both developed states and emerging markets. We are observing more sophisticated marketing campaigns that aim to exploit the trend of sales channel liberalisation. However, the sector is at risk from a lack of innovation, with growth driven by increased volume sales, rather than margins. 

Marketing And Advertising: Advanced commercialisation activities by manufacturers of OTC medicines are becoming more common. This trend is being driven by increased penetration of multinational firms into emerging and frontier markets. The internet is also regarded as a key medium for promotional efforts, as well as an additional sales channel. As a result, a number of OTC brands are becoming truly global in their reach.

Markets in trend alignment: Nigeria, Australia, China, Hong Kong, Malaysia, South Korea, Croatia, Kazakhstan, Latvia, Lithuania, Moldova, Romania, Russia, Slovenia, Sweden, Turkey, Uzbekistan, Brazil, Chile and Colombia.

BMI View: The over-the-counter (OTC) medicines segment is a steadily expanding opportunity for several multinational firms and many local manufacturers, in both developed states and emerging markets. We are observing more sophisticated marketing campaigns that aim to exploit the trend of sales channel liberalisation. However, the sector is at risk from a lack of innovation, with growth driven by increased volume sales, rather than margins. 

Marketing And Advertising: Advanced commercialisation activities by manufacturers of OTC medicines are becoming more common. This trend is being driven by increased penetration of multinational firms into emerging and frontier markets. The internet is also regarded as a key medium for promotional efforts, as well as an additional sales channel. As a result, a number of OTC brands are becoming truly global in their reach.

Markets in trend alignment: Nigeria, Australia, China, Hong Kong, Malaysia, South Korea, Croatia, Kazakhstan, Latvia, Lithuania, Moldova, Romania, Russia, Slovenia, Sweden, Turkey, Uzbekistan, Brazil, Chile and Colombia.

Sales Channel Liberalisation: Government are increasingly allowing the sale of OTC medicines outside pharmacies and in outlets such as supermarkets, petrol stations, convenience stores, newsagents and kiosks. Consumers appreciate these options and also benefit from prices being driven down by competition. However, authorities are concerned that an excess of self-medication could put the health of citizens at risk.

Markets in trend alignment: Morocco, South Africa, Japan, South Korea, Thailand, Czech Republic, Estonia, France, Greece, Italy, Ireland, Lithuania, Moldova, Netherlands, Slovakia, Slovenia, Sweden, Turkey, Ukraine, Chile, Colombia, Morocco and South Africa.

Prescription-To-OTC Switches: Many manufacturers are seeking to change the status of prescription drugs with a well-established track record of patient safety. For a switch to be permitted, associated adverse events from a drug need to be minor and infrequent. This allows the company to create a new revenue stream for a product nearing the end of its life cycle. Governments, especially those in austerity-hit Western Europe, are also encouraging switches as a mechanism to lower expenditure on prescription medicines.

Markets in trend alignment: Australia, China, India, Japan, Philippines, Singapore, South Korea, Belgium, Bulgaria, Croatia, Estonia, France, Germany, Hungary, Italy, Lithuania, Netherlands, Portugal, Serbia, Slovakia, the UK, Sweden, Chile, Colombia, Canada and the US.

Blurred Definitions: In many countries, especially emerging markets, it is possible to purchase a prescription medicine without a prescription from a physician. These transactions are sometimes classified as contributing to the OTC medicine market, distorting assessments of the commercial landscape. As regulations improve, the distinction between prescription drugs and OTC medicines will become clearer.

Markets in trend alignment: Algeria, Egypt, Ghana, Kenya, India, Malaysia, Thailand, Vietnam, Moldova, Russia, Argentina, Brazil and Colombia.

Reduced Reimbursement: Governments are beginning to end the reimbursement of OTC medicines. By their very nature, these drugs are for acute conditions and a course of treatment is affordable to the majority of people - with the exception of those on extremely low incomes. Shifting payments from the state to the private sector will lower overall spending, which is negative for manufacturers.

Markets in trend alignment: South Korea, Taiwan, Austria, Czech Republic, France, Greece, Netherlands, the UK and Iran.

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Related sectors of this article: Pharmaceuticals & Healthcare, OTC
Geography: Global
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