OTC Claritin set to have major impact on US market

Author: Charles Burrows

Date published: 16 Jan 2003

With Schering-Plough's Claritin going on general sale nationwide in the US on December 10th 2002, a new breed of OTC antihistamine is about to shake up the allergy remedies sector.

Prescription-only antihistamines include Claritin by Schering-Plough, Alavert by Wyeth, Allegra by Aventis, and Zyrtec by Pfizer. The first is the best-selling of the three, with all three worth over US$3bn in prescription sales in 2001.

Following intervention by insurers, the FDA approved them as switch candidates in 2001 because of their superior efficacy and safety over current OTC antihistamine drugs. In a prosperous economy, the price difference between these products, which is significant and includes the cost of a doctor’s appointment, and OTC products, is offset by the tangible benefits that they offer over existing OTC medications.

In allergy remedies, products sales of new generation prescription antihistamine Claritin have been high due to a massive advertising campaign. Claritin spent US$56.5 million on direct-to-consumer advertising in the first six months of 2001, and achieved full year US sales of US$2.7 billion. Sales were made easier by its distinct advantage over the existing OTC offering of not causing drowsiness.

Repayments to end

Co-payments for prescription medications are more costly than non-prescription versions of loratadine, and there are already hundreds of anti-allergy products on general sale in the US. The government and insurers stood to lose by paying for popular drugs like Claritin that are similar to existing general sales products. Consequently WellPoint Health Networks, one of the nation’s largest health insurance providers, had petitioned hard for the FDA to switch them.

The switch will bring Claritin into line with the rest, as previously it was one of very few products on the market paid for by the government and insurers.

Schering-Plough prescription business takes a hit

However manufacturers, particularly Schering-Plough, have been reluctant to switch their products to OTC status because OTC sales would severely cut into the their far more lucrative prescription drug business.

Schering-Plough has tried to block other drug companies’ generic OTC and prescription loratadine products, which include the other non-sedating antihistamines Allegra, Zyrtec and Alavert. With the loss of this legal action, it stands to lose a significant element of its Claritin sales.

OTC leaders protecting market share

These OTC non-sedating antihistamines may threaten market share of existing treatments, such as Pfizer’s Benadryl. With a massive advertising budget and the advantage over Benadryl of being allowed for use by children from the age of two, Claritin will challenge the current market leaders and market share is likely to evolve accordingly.

However Pfizer responds, Claritin will be the no. 1 seller in antihistamines/allergy remedies in 2003. Although Benadryl will not necessarily lose sales directly to Claritin, its US$60mn lead will be cut and overtaken. It is likely that Pfizer will market Zyrtec alongside the Benadryl brand to protect the company’s market share. It will certainly be pushing Zyrtec as a child-specific brand (Zyrtec Syrup is the prescription version) in order to offset the damage to Benadryl sales.

Switch is key driver to future growth

In the US, the marketing groundwork has already been laid and the sales potential is very high. Claritin’s success as a prescription drug was due to its heavy direct-to-consumer advertising. Other prescription allergy medications, including Allegra and Zyrtec, are also attracting consumers. Total advertising to consumers by makers of prescription allergy medications totalled over US$237 million between January and June 2001.

By way of comparison, the US prescription antihistamine market is estimated at US$3.8 billion, only US$380 million less than the US$4.2 billion retail value of the total US OTC cough, cold and allergy products sector. Euromonitor anticipates that these switches will add over 50% real terms value to OTC allergy remedies by 2006.