As one of the largest constituents of the over-the-counter (OTC) market, analgesics are a cornerstone of many top consumer health producers’ portfolios. The category is emerging from a tumultuous period marked by supply shocks, far-reaching regulatory changes, new competitive dynamics and demographic shifts that could all have substantial long-term effects on how consumers engage with the category. Looking forward, an understanding of the trends affecting the largest and fastest-growing markets will be essential to fully exploiting the category’s massive potential.
Systemic analgesics: A mainstay of consumer health
Analgesics is one of consumer health’s largest categories. In 2013, global retail value sales grew over 2% to US$22.7 billion. That its year-on-year growth slightly underperformed the consumer health industry on whole, analgesics still account for over 10% of total industry retail sales and nearly one quarter of all OTC sales. With retail value sales topping US$4.7 billion in 2013, the US is the world’s largest market by a substantial margin. However, four other countries – Brazil, Japan, Germany and China – topped the US$1 billion (RSP) mark in 2013, and substantial markets can be found in every region around the world. While strong branding legacies have made some brands (Johnson & Johnson’s Tylenol, Bayer’s Aspirin, etc.) synonymous with pain relief in some countries, throughout most of the world, consumers enjoys a fairly broad array of products. Within systemic adult analgesics, four categories – acetaminophen, ibuprofen, combination products and aspirin – generated over US$2.5 billion in retail value sales 2013, and naproxen, the fastest-growing of the adult systemic analgesics, is expected to reach nearly US$1 billion in retail value sales by 2018. Among paediatric products, the selection tends to be much more limited, with acetaminophen and ibuprofen accounting for over 85% of paediatric systemic analgesic’s US$1.6 billion in retail sales in 2013.
Top Adult Systemic Analgesic Markets by Sales (US$, RSP), 2013
Source: Euromonitor International
Big changes overcome, but plenty still in store
The category recently overcame a period of rolling recalls that disrupted supplies in the US, the world’s largest market. The two most heavily hit producers – Johnson & Johnson Inc and Novartis AG – both saw sales of their popular analgesic brands collapse (with Johnson & Johnson’s Tylenol and Motrin starting with recalls and production stoppages in 2009, followed by Novartis’ 2012 production issues, which hit the country’s number one combination analgesic Excedrin). However, both companies seem to have overcome their supply issues and have launched significant marketing campaigns to recapture consumers who may have switched brands or even switched to new active pharmaceutical ingredients. In the case of Johnson & Johnson’s, the brand Tylenol has launched a massive TV and print marketing campaign around its preferred status among medical practitioners in the US, while Novartis has sent US$1.4 million free packs of Excedrin to former users identified through customer loyalty programs at major US retailers and launched the mobile app My Migraine Triggers, which allows consumers to track the causes of their migraines and share them with a physician. Both campaigns seem to be working quite well, as both Tylenol and Excedrin are expected to vastly outpace the overall US adult systemic analgesics market in 2014.
In addition to the US supply shocks, regulators around the world are increasingly scrutinizing the category over safety. Concerns surrounding overuse are common among regulators, and have led a number of markets to restrict pack sizes of certain active pharmaceutical ingredients. While pack size restrictions are common in many developing markets, where concern over health literacy is high, pack size restrictions have also hit some of the world’s most liberal OTC drug markets. From Canada’s 2011 decision to move packages with over 18g or roughly 45 extra-strength tablets of ibuprofen from unscheduled (can be sold by any non-pharmacist to any person) to schedule III (can only be sold by a pharmacist within the “Professional Products Area” of a licensed pharmacy) to Australia’s 2013 decision to restrict acetaminophen to no more than 10g per package (a nearly 20% reduction from the most common pack size), increased regulatory scrutiny has been levied on nearly every active pharmaceutical ingredient in every region.
Despite these hurdles, the category is expected to benefit from a number of consumer factors moving forward. Aches and pains are among the most common basic maladies across all markets, and, in general, consumers in both developed and developing markets are largely comfortable self-treating with OTC analgesics. The category is also uniquely situated to benefit from the widespread greying of the global population. By 2030, fully 35% of the population of the G20 nations – which together account for 73% of all global analgesics retail sales – will be over the age of 50. Combined with concerns over cardiovascular health, which drive many middle-aged and older consumers toward low-dose aspirin regimens (nota bene: daily, low-dose aspirin is a prescription product in many markets), an aging population beset with aches and pains are expected to help maintain sales growth in the future. Companies like GlaxoSmithKline Plc are already actively targeting the population directly with products like Panadol Osteo, which is positioned specifically around arthritis relief. However, producers will likely have to invest more heavily in new formats to appeal to older users, for whom pill fatigue is a growing concern. New formats, such as Goody’s Headache Relief in shot format (Prestige Brands Holdings Inc) or Bayer Aspirin’s MicroAktiv-Technologie with an easier-to-swallow coating are examples of this trend.
Competitive landscape shifting
Systemic analgesics was long a two-horse race category, with Johnson & Johnson and Bayer battling for supremacy. However, the competitive landscape has shifted substantially since 2008. Johnson & Johnson’s significant supply issues in North America witnessed its global retail sales plummet by 40% between 2009 and 2012. While it returned to growth in 2013, it slipped behind GlaxoSmithKline and is within striking distance for Pfizer Inc, Sanofi and Novartis. While Bayer was able to build out its lead during this period, its time in the sun may be nearing an end. With the impending joint venture between GlaxoSmithKline and Novartis, there will almost certainly be a new global number one in total analgesics (systemic and topical) by the end of 2015 (the deal, which will result in GSK owning 64% of the joint venture, is expected to close in the first half of 2015). In addition to the blockbuster systemic analgesics Panadol (GSK) and Excedrin (Novartis), the company will stand head and shoulders above the competition in the topical analgesics market, where it will manage major brands like Voltaren (Novartis) and Iodex (GSK). Looking at total analgesic retail value sales in 2013, GSK and Novartis combined generate US$2.3 billion in analgesics, or nearly 10% more than Bayer. Though it will undoubtedly continue to invest in innovative new products and highly visible marketing campaigns, Bayer may find it difficult to regain top billing, as Euromonitor International’s most recent forecasts suggest its marquee adult aspirin category will underperform total analgesics through 2018.
Top Total Analgesic Companies by Market Share (RSP), 2008 vs 2013