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OTC Pharmaceuticals Market Report 2008
Key Note Publications Ltd, Jan 2008, Pages: 134
The market for over-the-counter (OTC) pharmaceuticals resides within a healthcare market that is largely free at the point of delivery for the majority of patients. Around 87% of prescriptions are dispensed free of charge — even medicines for minor complaints such as coughs and colds can be obtained in this way. Medicines that are deemed safe enough, and are in sufficiently controlled dosages, can be released from prescription-only medicine (POM) status and sold to consumers either under the supervision of a pharmacist; through a pharmacy only (P) or in the wider retail market (on general sale; GSL), but this `switching' system is tightly controlled.
As such, there are strong constraints on what the OTC pharmaceuticals market can achieve in terms of stimulating consumer interest in new products and increasing uptake. However, for consumers who are not exempt from the prescription charge, OTC medicines offer an attractive and often cheaper alternative than going to the doctor; the industry is keen to target this core consumer group of young and middle-aged working adults.
Performance in the market has been slow over the review period: we estimate that, between 2003 and 2007, the market for OTC pharmaceuticals grew by 6.3%, to £2.13bn. Fierce retail competition among the pharmacy multiples, and price wars stimulated by grocery multiples that are keen to increase share in this sector, have eroded value growth. Where there has been sector growth, it has largely been in so-called `lifestyle' products, such as smoking deterrents and skin creams, as well as vitamins, minerals and supplements (VMS).
The Government is keen to widen the scope for self-care and the self-management of illness within the health service. However, moves to increase the role of pharmacies and pharmacists in treating minor conditions, and to free up general practitioners (GPs), have so far lacked any real, established national cohesion. The number of NHS-contracted community pharmacies has increased since 2005/2006, reversing a trend of decline from 2000, and there are signs that the Government is committed to giving increased emphasis to self-care, albeit slowly.
Despite the low growth rates in the overall market, OTC brands of popular products are a strong target for pharmaceutical companies looking to strengthen sales. Margins are usually high for OTC pharmaceuticals, since the cost of generic production is low. Brand loyalty is also high for popular brands, such as Nurofen, Anadin and Gaviscon. Two major mergers in 2006 — between Johnson & Johnson and Pfizer's consumer division, and between Reckitt Benckiser and Boots Healthcare International — underlined the fact that, although currently flat, this market is a robust and reliable one for investors.
Although future growth rates are forecast to be flat — with our forecasting year-on-year increases of between 0.8% and 1.8% to 2012 — this is in no way a declining market. Some up-and-coming product development in areas such as obesity, points the way for future expansion.
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