OTC Market Overview

No one is calling 2005 a banner year for OTC products. Yet, despite a lack of significant Rx-to-OTC switches and few blockbuster introductions, a number of categories showed respectable growth.

Lack of Switches

The only Rx-to-OTC switch to speak of in 2005 was Zantac 150 (ranitidine). "It was a quiet year for switches, but the maximum strength antacids seem to have done well against Prilosec," said Laura Mahecha, industry manager for health care at Kline and Co. She said that the category may see some additional switches on the horizon when Prevacid (lansoprazole), which will be marketed as an OTC by Novartis, and Wyeth's Protonix (pantoprazole sodium) lose patent protection.

Of course, there is the potential for a blockbuster switch with GlaxoSmithKline's prescription Xenical (orlistat), which is undergoing FDA review to be released over the counter as Alli. "This is a weightloss drug that has the potential to shake up a category dominated by me-too products that are touted to reduce appetite but are restricted as to what ingredients they can use for OTC sale," said Amy Kasza, an industry writer and researcher at Hamacher Resource Group. "Xenical actually blocks fat absorption, which would build a major new wing in the weight-control category. But Alli has no clear timeline yet; it is in the hands of the feds right now."

The fate of Plan B (levonorgestrel), Duramed Pharmaceuticals' emergency contraceptive that continues to be steeped in controversy, remains uncertain. Because the drug has been approved in 7 states, Bob Doyle, senior vice president of Information Resources Inc's (IRI's) Healthcare Solutions Group, believes that it is a product to watch. "It has potential," said Doyle.

Cough/cold Category Performing Well

One notable category was cough/cold and allergy. Although there was some concern that sales might suffer from pseudoephedrine legislation in some states, IRI data (for the 52 weeks ended December 25, 2005) showed that sales of cough syrup jumped by nearly 13% in all 3 channels. Cough drop sales were up by 11.1%, and sales of cold/allergy/sinus liquids were up by 12.2%. Tablet sales rose by more than 12% as well.

Legislation may have actually helped the category in drugstores. Hamacher's Kasza noted that drugstores did especially well with cough/allergy/sinus liquids. "Since drugstores are the primary outlet where pseudoephedrine products are sold?often from behind the counter, depending on the state?they really seem to have benefited from legislation," Kasza said.

Pain Relief Category Flat Pain relief remained a mature, flat category in 2005. Concerns about the safety of prescription products may have brought some additional consumers to the OTC aisles, but OTC products pose their own concerns.

"There always seems to be something in the press about pain relief safety," said Mahecha. "My sense is that consumers feel safer with OTC pain relievers as a result of the prescription problems, though sales gains were very modest," said Hamacher's Kasza. Sales of pain relief products grew by a meager 3.3% in drugstores, according to IRI data.

In a mature category rife with safety concerns and impacted by private label, manufacturers are looking to grow the category through conditionspecific products and new formulations. Kasza cited Extra Strength Tylenol eZ Tabs, coated tablets touted as easier to swallow, as one strong introduction in 2005.

IRI's Doyle said that liquids, liquid gels, and rapid-release gel products are all innovations that drive the category. "Manufacturers are looking outside of traditional OTC categories for new ideas on how to market the category," he said.

External analgesics also are a bright spot in the category. "Pain relief patches are hitting their stride," Kasza said. "They started out small and are now innovating, with Icy Hot in particular now offering a combination brace with a patch that fits inside." Look for more innovation in this segment.

Feminine Hygiene a Bright Spot

Feminine hygiene showed strong growth, particularly in personal lubricants and contraceptives. "Personal lubricants did really well, with nearly 10% growth," said Mahecha. "J&J's [Johnson & Johnson] K-Y extensions did very well. It is a category that is being driven by demographics and also by the increased use of erectile dysfunction drugs. I think we will continue to see growth in this segment."

In addition, the contraception category saw good growth and some interesting new products. "Church & Dwight introduced [its] line of condoms, Elexa, aimed at the female demographic," said Kasza. "Speaking to the female consumer in a category dominated by products for men is a new approach we had not seen any other manufacturer use before. Sales have yet to tell the rest of the story, but so far gains have been good." Condom sales were up by 3.8% in drugstores, according to IRI.

Technology Surging in Diagnostics

Technology continues to drive the diagnostic testing-kit category, with the most significant advances occurring in the diabetes-care segment. "Blood-glucose meters are getting smaller, more convenient, easier to use, and more portable," said Kasza. She cited the Sidekick by Home Diagnostics, which pairs a small meter with a carrying space for test strips, as a key new introduction.

Sales of ovulation and pregnancy test kits continue to grow as Americans delay having children. Mahecha said that cholesterol test kits also continue to grow. "We are seeing a slow, steady growth of cholesterol tests, but if the FDA approves statins for OTC use, sales of the kits will explode," she said.

Ms. Sax is a freelance writer based in Chevy Chase, Md.