Drug Wars

In a recent interview, Malcolm Allison, SmithKline Beecham’s vice-president marketing international said of over-the-counter (otc) pharmaceuticals: “There is no reason why you shouldn’t have the same sort of promotions as you do on soap powders. Manufacturers have got to address the customer’s needs in the same way as they would if they were selling chocolate bars.”

He added that otc analgesics will need to find new differentiators such as palatability, shape and presentation – they needed to develop the same type of branding as toothpaste and soft drinks.

Nick Wall, product manager for Aspirin at Bayer, agrees: “We are moving closer and closer towards classic packaged goods marketing.” Major drug companies were even planning to market family packs, containing different strengths of the same product aimed at babies, children and adults.

In short, manufacturers were ready for the fightback. Then, last week, the Medicines Control Agency (MCA) published a consultation document proposing a reduction in the number of paracetamol or aspirin tablets sold in shops in the wake of widespread fears about overdosing and liver failure. Paracetamol is likely to be reduced from 25- to 12-packs as a result of pressure from consumer groups and doctors.

What appears to be a mild ache is turning into a permanent migraine for the drug industry.

The news came a year after Asda began its war on Resale Price Maintenance (RPM) of pharmaceuticals which could, if the Office of Fair Trading (OFT) gives the all clear, spark a painkiller price war.

Pharmaceutical giants such as Whitehall Laboratories, makers of Anadin, and SmithKline Beecham (SB), which manufactures Panadol and Solpadeine, have more than enough cause for concern.

Marketing painkillers used to be a simple business. The model T-Ford of analgesics, Anadin, had a single cure for all aches, as long as they were headaches.

In recent years the overall demand for analgesics has risen with the emergence of new compounds, new formulations and new distribution channels. But instead of diagnosing new opportunities, the owners of established analgesic brands have discovered new problems.

As in other packaged goods sectors, traditional analgesics brands have suffered at the hands of own label, which now has the biggest share of the category with 18.4 per cent by value.

Supermarkets are quickly becoming a primary source of distribution. According to AGB superpanel, the grocery sector now accounts for 30 per cent of analgesic sales and is catching up with the pharmacists.

Supermarkets have led an onslaught on the price of otc drugs. Asda has more than six own-label painkillers, each one costing less than half as much as its branded equivalent. Its own-label paracetamol is available at only 24p, almost seven times cheaper than some branded competitors.

A further cause for concern is new competition. Ibuprofen sales are estimated to be growing at ten per cent a year. The 12-pack of Crookes Healthcare’s ibuprofen brand Nurofen changed from pharmacy only to general sale in February. Nurofen has boosted the brand’s share of the adult analgesics category from 13.2 per cent in September 1995 to 15.2 per cent in September 1996 (IRI Infoscan).

More recently, the price of own-label painkillers containing ibuprofen has fallen to 69p for a pack of 12. Crookes Healthcare is likely to continue spending heavily to defend its market share. Nurofen has a 29 per cent share of voice, three per cent above SB’s total spend on its three main analgesic brands – Panadol, Hedex and Solpadeine (Register-MEAL). SB has responded to the new onslaught by producing its own ibuprofen-based Solpaflex, which was launched in the summer against Nurofen.

Whitehall’s Anadin Extra takes 14 per cent share of voice. Anadin Extra, is Whitehall’s own response to the trend towards increasingly powerful drugs.

Advil was brought over from the US by Whitehall to protect Anadin from Nurofen. One retailer says the Whitehall strategy is to push the ibuprofen brand into a head on battle with Nurofen.

Whitehall is segmenting the sector to maintain its market share. He says he wants Advil and Anadin to sit side by side in consumers’ medical cabinets. One for tackling strong muscular pain, the other for mild headache pain.

But it may not be enough. Asda’s move against RPM on otc pharmaceuticals persuaded the OFT to announce a review of retail prices on medicaments.

A price war seems inevitable. Jim Gardner, marketing director at Galpharm International, which also manufactures ibuprofen, says the price of own label will drop even further, possibly down to 49p for a pack of 12.

The Community Pharmacy Action Group (CPAG) was set up to lobby against the abolition of RPM by the Proprietary Association of Great Britain, the National Pharmaceutical Association and the Royal Pharmaceutical Society.

A CPAG spokeswoman says: “If RPM goes, it opens the door to discounting medicines, which is against the pharmacists code of ethics.” It would inevitably increase the consumption of analgesics, she says.

She adds that a price war in the supermarkets could give rise to two-for-one offers. These measures would make drugs more widely available and would need to be considered by the MCA in its consultation.

The manufacturers only have themselves to blame. In the rush to get pharmacy-only products swit-ched to general sale, they increased sales through improved distribution, but also created exposure to intense price competition and thereby reduced profits.

They should have fought for restrictions to be kept on stronger pharmacy-only formulations. That way, supermarkets would have been left with weaker formulations and smaller pack sizes.

Though the shift to general sale and wider distribution has helped expand the market, new painkillers are increasingly taking market share from others.

Paracetamol brands, such as Panadol and Anadin, are defending a shrinking market share as customers switch to the more powerful ibuprofen-based products. Apart from launching cold and flu variants and increasing the strength of sub-brands, there is little room for manoeuvre.

The traditional brands have been slow to respond to market developments, partly due to patent issues and partly to the rules governing marketing, but also because of re-structuring problems.

SB has suffered huge restructuring costs over the past two years, since it bought Sterling Health. Whitehall Laboratories’ parent company, American Home Products, has had similar problems in the US.

The branded manufacturers are keen to push the regulatory boundaries further to segment the market. But the latest regulatory pressures have stalled SB’s plans to defend its analgesic shares.

Companies such as Glaxo Welcome and SB are understood to be testing direct marketing to consumers to cut out retailers, a move which would face obvious regulatory problems.

In the current environment, there is little chance of analgesics being able to develop in such ways.

SB’s press office is at pains to emphasise that the company has no plan to start marketing otc analgesics in the same way as confectionery. “We are advertising medicines and as members of the PAGB we will do so responsibly,” says a spokeswoman.

If the latest launch from Whitehall is anything to go by, the word of SB’s Allison seem prophetic. The Advil launch includes a sugar-coated sweet-like product launched on a lifestyle proposition involving an airline stewardess who tells viewers that a drug she took was administered by a colleague.

It may only be a matter of time before the best laid plans of pain-killer manufacturers hit new problems as the regulatory authorities turn their attention from pack-size to product design and advertising self-regulation. More bitter pills may follow.