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RX-TO-OTC SWITCH STRATEGY: RETAILERS SHOULD BE KEPT APPRISED

This article was originally published in The Tan Sheet

Executive Summary

RX-TO-OTC SWITCH STRATEGY: RETAILERS SHOULD BE KEPT APPRISED of a switch application's progress in order to assure premium shelf space, particularly for new OTC therapeutic categories, SmithKline Beecham Director of Regulatory Affairs Thomas Blake recommended Sept. 23. Speaking at an Rx-to-OTC switch conference sponsored by the Institute for International Research, Blake noted that retailers "should be kept in the loop because . . . a switch may represent a brand new . . . category and . . . not just another SKU." Diane Rose, managing director at Gross Townsend Frank Hoffman, echoed Blake's recommendation suggesting that companies "develop a really solid relationship with [their] retailer" since shelf space in the era of OTC line extensions is in short supply. SmithKline Beecham Brand Management Director David Cooke asserted that the "industry is getting better at communicating with retailers during the approval process." He cited several examples of recent Rx-to-OTC switches, including Tavist, Efidac/24 and Gyne-Lotrimin, where retailers were updated on the approval status of switch products. Cooke said that SmithKline Beecham "is trying to develop systems that will allow [it] to provide information to retailers so they can adjust their planning process" as the switch approval proceeds. SmithKIine's application for a cimetidine Rx-to-OTC switch is currently pending at FDA. Underscoring the point, Valu Food Director of Pharmacy/Health & Beauty Care Allen Karpe declared that pharmacists need "more timely advance notice" of when switch products are due out. Karpe pointed out that the pharmacist has "product knowledge and experience" and "can act as a salesman of [a] product . . . because he's there giving free advice." Furthermore, Karpe noted, advance notice from the manufacturer will help the pharmacy prepare for the new switch drug and coordinate ads, in-house displays and temporary price reduction specials with the launch of the product. Presenting the supermarket perspective, Ronald Turner, director of member affairs & education at the General Merchandise Distributors Council (GMDC), suggested that manufacturers "provide professional communication material to assist supermarkets in effectively communicating with its customers." In addition, Turner emphasized that retailers -- particularly non-pharmacy retailers -- need to have consumer information available since consumer "misunderstandings . . . about Rx-to-OTC products may limit their perception of the benefit these products offer." Turner suggested that in-store signage, promotional activities and customized information brochures about the new product would "satisfy the customers' need for information." For supermarkets without a pharmacy, he added, reference guides about switch products, in-aisle "hotline" phones linked to an on-duty pharmacist and computer "help" terminals would all help the consumer learn more about Rx-to-OTC switch drugs. The "shrinkage problem" of new Rx-to-OTC products is another issue retailers should be aware of, Thrift Drug VP-Professional and Public Affairs Janice Meikle advised. "Switch products," she continued, "are prime targets for theft." Meikle suggested that retailers and manufacturers need to work together "to develop a better method of tagging products with electronic sensor devices which cannot be removed or deactivated until the item is actually purchased." The problem, she explained, is that "there's no point in carrying a product if we're not going to sell it; it's only going to be stolen." Putting switch products behind the pharmacy counter is an alternative, Meikle suggested, but "nobody benefits from . . . it behind the counter. [The manufacturer] sells less of the units, we sell less of the units." Karpe agreed with Meikle, noting that switch drugs, such as the vaginal yeast infection products, are targets for theft due to their high price points. The National Association of Chain Drug Stores (NACDS) has initiated a joint retailer and manufacturer task force to explore the different ways in which electronic article surveillance systems can be used to reduce OTC product theft. Currently, three distinct surveillance technologies exist on the marketplace, NACDS noted, and virtually all chain drug stores use one of these systems in at least one of their stores. NACDS said that it is working to standardize these technologies and that it is exploring ways to embed the electronic sensor tags directly into products. Tags on the outside of packaging, NACDS explained, can be peeled off or deactivated.
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