Encouraging US OTC Makers Into Nutraceuticals

19 May 1996

Over-the-counter drugmakers need incentives to do needed research to enter what they agree is the coming boom in nutraceuticals, Robert Donovan, OTC industry consultant and a former chairman of the US Nonprescription Drug Manufacturers Association, has told a Foundation for Innovation in Medicine-sponsored meeting on how Congress can help set up a research-intensive nutraceutical industry. Growth in nutraceuticals is best fostered within a marketing framework that emphasizes brands and brand-building, he said.

The OTC sector growth rate now is 506%, driven by demographics, a focus on wellness and self-medication and switch products, he said. The US market will exceed $16.5 billion without nutraceuticals by the year 2000; base products have the biggest volume but this is shrinking, with real growth coming from private-label store brands and switches. As mass-marketeers become more important in OTC sales and volume moves out of drug outlets, store brands are becoming the focus. Top-tier players are J&J, American Home Products and Warner-Wellcome, while Procter & Gamble, SmithKline Beecham, Novartis, Bayer, Bristol-Myers Squibb and Schering-Plough are second-tier.

Top Management Views Of Current Disincentives Culturally, nutraceuticals fit into the OTC industry mission, which is to improve quality of life. Also, targeted at both doctors and consumers, they are a good fit for OTC makers. The consumer is increasingly the mover in the market, whether for prescription drugs, OTCs or nutraceuticals, and OTC companies have the skills needed to succeed. However, an informal survey of presidents or marketing directors at eight of the top 10 OTC makers found agreement that the current environment is not conducive for such a move. Reasons included: the Dietary Supplements Health Education Act, while a start, is not enough; the risk/reward ratio is far out of kilter; mixed signals at the Food and Drug Administration; and industry uncertainty with current groundrules.

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