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The OTC Pharmaceutical Market in Emerging Countries

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                      The OTC Pharmaceutical
                          Market in Emerging
                                    Countries
                          Market overview, key trends,
                      competitive landscape and growth
                                             strategies



                                            Report Price    $3835
                                         Publication date   August 2010
H E A L T H C A R E
                                                         The OTC Pharmaceutical Market in Emerging Countries
                                                        Market overview, key trends, competitive landscape and growth strategies




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Report overview
The over-the-counter (OTC) pharmaceutical market includes non-
prescription medicines that are sold directly to consumers through                     Pages            121
pharmacies, drugstores, convenience stores and grocery stores. Most
countries follow the “two-class system” for the classification of medicines           Figures                  40
as prescription (Rx) or non-prescription (OTC). The OTC pharmaceutical
                                                                                      Tables                          16
market may be segmented into multiple categories such as analgesics,
cold, cough and allergy, digestive remedies, traditional medicines, and
vitamins and minerals..
                                                                                         “Use this report to gain an
China, Brazil, Russia, India, Turkey and Mexico – the key emerging markets               overview of key drivers and
– have always been attractive markets for pharmaceutical companies                       trends that have impacted
looking for low-cost manufacturing. However, manufacturers have started to               the OTC pharmaceutical
realize the growth potential for pharmaceuticals including OTC products in               market across all six
these markets.                                                                           emerging countries.”


Demographic trends, lifestyles changes, growing economies, affordability,
and awareness about self medication are driving the OTC market in
emerging countries. Moreover, the increased number of Rx-to-OTC
switches has also widened the market significantly. Rx-to-OTC switch signifies the change of status of a medicine
from prescription to OTC. The pharmaceuticals industry is facing a major patent cliff, where patents for most of its
blockbuster drugs are nearing patent expiry, which in turn is resulting in more product switches to OTC driving
their sales and reducing competition from generics. The regulatory environment varies in each country, with
Brazil, Mexico and Turkey moving towards more stringent guidelines for OTC distribution, while the regulations in
India, China and Russia remain relatively liberal.
                                                        The OTC Pharmaceutical Market in Emerging Countries
                                                       Market overview, key trends, competitive landscape and growth strategies




Key findings
       The leading players in the OTC market in emerging
       countries include J&J, GSK, Bayer, Novartis and
Sanofi-aventis. They have started to increase their focus on
the R&D activities for their OTC divisions with the aim of
introducing new innovative products in the global OTC
market.

       ANVISA, the National Health Surveillance Agency of
       Brazil, which regulates the registration of drugs,
cosmetics and medical devices, introduced a new regulation
that restricts the sales of OTC products only through                Figure 6: OTC pharmaceutical market by value
pharmacies as Behind-the-counter (BTC) products. This has            in emerging countries, 2004–09
resulted in the growth of registered pharmacies within the           “The OTC market in the six key emerging countries
supermarket.                                                         (Brazil, Russia, India, China, Mexico and Turkey) reached
                                                                     $28bn in 2009, exhibiting a Y-o-Y growth of 8%. The
                                                                     traditional medicine category led the market with
        India and China have large rural populations, with           around one-fifth of the market, followed by cough, cold
        limited accessibility and affordability to healthcare        and allergy and analgesics. The distribution channels for
facilities. Manufacturers aiming to penetrate the rural market       OTC products in emerging markets was dominated by
                                                                     pharmacies followed by supermarkets and grocery
are offering OTC products at a different price point to lure
                                                                     stores. This was primarily due to the fact that a
rural consumers.                                                     significant number of OTC products are not allowed to
                                                                     be dispensed through any other channel than
      The OTC market in Mexico has grown due to the                   pharmacy.”
      increasing accessibility of OTC medicines which were
previously available as prescription only.




Use this report to...

 • Gain a comprehensive understanding of the                 • Gain up-to-date competitive intelligence
   dynamics of the OTC pharmaceutical                          across the OTC market and understand the
   market across the key emerging markets.                     major challenges affecting key players in the
                                                               emerging countries.
 • Discover how each of the OTC markets
   differs widely across countries and the                   • Compare the performance of leading
   influence of the economic and demographic                   pharmaceutical players with respect to their
   factors on the market.                                      performance in the OTC segment and R&D
                                                               activities.
 • Discover which OTC category has the
   greatest potential for growth and                         • Gain a comprehensive understanding of the
   understand the growth drivers in the                        impact of the government regulations on the
   emerging markets.                                           growth of the OTC market in emerging
                                                               countries.
                                                         The OTC Pharmaceutical Market in Emerging Countries
                                                        Market overview, key trends, competitive landscape and growth strategies




Key issues...
       Rx-to-OTC switches: Rx-to-OTC switches are primarily a company's strategy to increase the life of a
       product. A product nearing patent expiry is due to encounter generic competition, but the switch from
RX-to-OTC provides the company with exclusivity for additional years, provided the company supports the
switch with additional clinical trials to prove the efficacy and safety of the OTC formulation.

        Product availability at a different price point: In India, OTC products have always been considered to
        be targeted toward the urban population. As a result, OTC products have struggled to penetrate the
rural markets. Most of the leading companies now offer products at all price points to capture all segments of
the population. Moreover, many companies are launching products specifically targeting the rural market, such
as the 'sachet' concept for OTC products.

       Growing disposable income in Russia: Despite the economic crisis, consumer spending on healthcare
       has not declined in recent years. This is primarily due to high levels of disposable income, preference for
preventive medication, and growing concern for appearance among Russian consumers. Moreover, Russians are
very brand-conscious and prefer to buy expensive international brands which they associate with quality (rather
than products from local manufacturers which are not GMP-certified).

       'Natural' buzz gaining grounds in OTC market: The consumer trend of shifting to natural products is
       becoming widespread in the OTC industry. Consumers are shifting to traditional/herbal medicines in
most emerging geographies, particularly China and India. Indeed, in China, the traditional medicine category
led the market in 2008 with around a 30% market share. The boom in traditional medicines in emerging
markets is due to the fact that these countries have significant rural populations which have faith in traditional
medicines.




Discover...
 • How has the OTC market in emerging                        • How is the regulatory environment in different
   countries evolved in the last 5 years?                      countries affecting the OTC players?


 • What are the current trends within the OTC                • Why are the governments in almost all the
   markets in the emerging countries?                          countries promoting self-medication?


 • What are the current drivers and challenges in            • Which are the leading players in the OTC
   the OTC market in each of the emerging                      pharmaceutical market in emerging countries?
   countries?
                                                             • What are the growth strategies of leading
 • How are the demographic and economic                        players to succeed in the emerging countries?
   conditions impacting the OTC market in
   emerging countries?
                                                              The OTC Pharmaceutical Market in Emerging Countries
                                                              Market overview, key trends, competitive landscape and growth strategies




Table of Contents
EXECUTIVE SUMMARY                                                      - Key trends
                                                                         -   Increased M&A activity
• The global OTC pharmaceutical market
                                                                         -   Rx-to-OTC switches
• The OTC pharmaceutical market in emerging countries                    -   OTC market players adopting 'small packs'
• The OTC pharmaceutical market in Brazil                                -   'Natural' buzz gaining ground in OTC market

• The OTC pharmaceutical market in Russia
                                                                  CHAPTER 4 THE OTC PHARMACEUTICAL MARKET
• The OTC pharmaceutical market in India
                                                                    IN BRAZIL
• The OTC pharmaceutical market in China
                                                                   • Summary
• The OTC pharmaceutical market in Mexico
                                                                   • Brazil
• The OTC pharmaceutical market in Turkey                             - Overview
• Competitive landscape                                               - Brazil's OTC pharmaceutical market
                                                                      - Market segmentation
CHAPTER 1 INTRODUCTION                                                - Regulatory framework
   - What is this report about?                                       - Growth drivers
     - Countries covered                                                 - Expanding distribution channels
     - Companies analyzed                                                - Affordability of OTC products
   - Methodology                                                         - Favorable government regulations for OTC


CHAPTER 2 THE GLOBAL OTC PHARMACEUTICAL                           CHAPTER 5 THE OTC PHARMACEUTICAL MARKET
  MARKET                                                            IN RUSSIA
• Summary                                                          • Summary
• The global OTC pharmaceutical market                             • Russia
   - Definition                                                       - Overview
     - Regulatory bodies                                              - Russia's OTC pharmaceutical market
   - Market overview                                                  - Market segmentation
   - Market segmentation                                              - Regulatory framework
     - By category                                                    - Growth drivers
     - By geography                                                      - Growing popularity of direct and online sales channels
   - Growth drivers                                                      - Growing disposable income
   - Market outlook                                                      - Growing smoking and obese population


CHAPTER 3 THE OTC PHARMACEUTICAL MARKET                           CHAPTER 6 THE OTC PHARMACEUTICAL MARKET
  IN EMERGING COUNTRIES                                             IN INDIA
• Summary                                                          • Summary
• Introduction                                                     • India
• OTC market landscape in emerging countries                          - Overview
                                                                      - India's OTC pharmaceutical market
• Drivers and resistors
                                                                      - Market segmentation
  - Drivers
                                                                      - Regulatory framework
     -   Strong economic growth in emerging countries
     -   Growing smoking and obese population
                                                                      - Growth drivers
     -   Regulatory environment                                          -   Changing consumer attitudes
     -   Widening distribution channels                                  -   Widening distribution channels
     -   Growing consumer awareness and confidence in self-              -   Liberal regulatory guidelines for OTC
         medication                                                      -   Product availability at different price points
                                                                         -   Higher margins in OTC
   - Resistors
     -   Lack of appropriate infrastructure
     -   Product pricing for diverse population
     -   Difficult to achieve brand loyalty
     -   Intensified competition
                                                             The OTC Pharmaceutical Market in Emerging Countries
                                                             Market overview, key trends, competitive landscape and growth strategies




Table of Contents
CHAPTER 7 THE OTC PHARMACEUTICAL MARKET                          • Bayer
  IN CHINA                                                          - Company overview
• Summary                                                           - Leading consumer healthcare products
                                                                    - R&D: consumer healthcare
• China
                                                                    - Financial performance
  - Overview
                                                                    - Growth strategy
  - China's OTC pharmaceutical market
                                                                       - Mergers and acquisitions
  - Market segmentation                                                - Investing in fast-growing countries
  - Regulatory framework                                               - Growth through focus on core brands
  - Growth drivers
    -   Booming economy
                                                                 GlaxoSmithKline
    -   Growing obese and smoking population
                                                                     - Company overview
    -   Aging population
    -   Growing consumer awareness and confidence in self-
                                                                     - Leading consumer healthcare products
        medication                                                   - R&D: consumer healthcare
                                                                     - Financial performance
CHAPTER 8 THE OTC PHARMACEUTICAL MARKET                              - Growth strategies
                                                                       -   Focus on emerging markets
  IN MEXICO
                                                                       -   Innovative 'innovation hubs'
• Summary                                                              -   Strategic partnerships and acquisitions
• Mexico                                                               -   Retail partnerships
  - Overview                                                     Johnson & Johnson
  - Mexico's OTC pharmaceutical market                               - Company overview
  - Market segmentation                                              - Leading consumer healthcare products
  - Regulatory framework                                             - R&D: consumer healthcare
    - Form of preparation                                            - Financial performance
    - Nature of the drug                                             - Growth strategies
   - Growth drivers                                                    - Acquisition to build-on consumer segment
    - Intensified competition from private label brands                - Focus on building strong brands
    - Retail competition
                                                                 Novartis
    - Unwillingness to spend
                                                                    - Company overview
                                                                    - Leading consumer healthcare products
CHAPTER 9 THE OTC PHARMACEUTICAL MARKET
                                                                    - R&D: consumer healthcare
  IN TURKEY
                                                                    - Financial performance
• Summary                                                           - Growth strategies
• Turkey                                                               - Geographical expansion in high-growth markets
   - Overview                                                          - Focus on core industry
   - Turkey's OTC pharmaceutical market                                - Targeting potential growth categories in each geography
   - Market segmentation                                         Sanofi-Aventis
   - Regulatory framework                                           - Company overview
   - Growth drivers                                                 - Leading consumer healthcare products
    - Economic crisis and government initiatives                    - R&D: consumer healthcare
    - Intensified competition from local players                    - Financial performance
    - New avenues for advertising                                   - Growth strategies
                                                                       - Partnerships and acquisitions
CHAPTER 10 COMPETITIVE LANDSCAPE                                       - Focus on consumer healthcare
• Summary                                                              - Focus on emerging markets

• Competitive landscape
                                                                 APPENDIX
  - Overview
                                                                 • Glossary
  - Rx-to-OTC switches in the US during 2002–09
                                                            The OTC Pharmaceutical Market in Emerging Countries
                                                            Market overview, key trends, competitive landscape and growth strategies




Table of Contents
TABLE OF FIGURES                                                 • Leading consumer healthcare products of J&J
• Regulatory bodies in major markets                             • J&J's financial contribution, by operating segments,
• Global OTC pharmaceuticals market, by value, 2004–09             FY2009
• Global OTC market segmentation, by category, 2009              • Leading consumer healthcare products of Novartis
• Global OTC market segmentation, by geography, 2009             • Novartis' financial contribution, by operating divisions,
• Benefits and risks of self-medication                            FY2009
• OTC pharmaceutical market by value in emerging                 • Leading consumer healthcare products of Sanofi-Aventis
  countries, 2004–09
• OTC market segmentation in emerging countries, by             TABLE OF TABLES
  category, 2009                                                 • Market share of leading players in major categories in
• Drivers and resistors of the OTC pharmaceutical market in        China
  emerging countries                                             • Top 10 global OTC brands, 2009
• Smoking population as a percentage of total population         • Rx-to-OTC switches in the US, 2002–09
  in five emerging countries                                     • Bayer snapshot
• Obese population as a percentage of the total population       • Bayer consolidated financial performance, FY2009
  in five emerging countries                                     • Bayer's segmental performance of consumer healthcare,
• Trends in the OTC pharmaceutical market in emerging              FY2009
  countries                                                      • GSK snapshot
• Brazil's population growth                                     • GSK’s consolidated financial performance, FY2009
• Brazil's OTC pharmaceutical market, by value, 2004–09          • GSK segmental performance of consumer healthcare,
• Brazil's OTC market segmentation, by category, 2009              FY2009
Russia's population growth                                       •   J&J snapshot
• Russia's OTC pharmaceutical market, by value, 2004–09          •   J&J's consolidated financial performance, FY2009
• Russian OTC market segmentation, by category, 2009             • J&J's segmental performance of consumer healthcare,
• Smoking and obese population as a percentage of the              FY2009
  total population in Russia                                     • Novartis snapshot
• India's population growth                                      • Novartis consolidated financial performance, FY2009
• India's OTC pharmaceutical market, by value, 2004–09           • Sanofi-Aventis snapshot
• India's OTC market segmentation, by category, 2009             • Sanofi-Aventis' consolidated financial performance,
• China's population growth                                        FY2009
• China's OTC pharmaceutical market by, value, 2004–09
• China OTC market segmentation, by category, 2009
• Obese and smoking population as a percentage of
  China's total population
• Mexico's population growth
• Mexico's OTC pharmaceutical market, by value, 2004–09
• Mexico's OTC market segmentation, by category, 2009
• Turkey's population growth
• Turkey's OTC pharmaceutical market, by value, 2004–09
• Turkey's OTC market segmentation, by category, 2009
• Leading consumer healthcare products of Bayer
• Bayer's financial contribution, by operating subgroups,
  FY2009
• Leading consumer healthcare products of GSK
• GSK's financial contribution, by operating segments,
  FY2009
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