OTC Switch Pathway Abroad Looks Smoother, But Payoffs Are Lower

Switching new Rx drug categories to OTC abroad may appeal to firms put off by the trickle of switches in the U.S., but the payoff abroad is smaller and there is no guarantee FDA will follow another government's decision, experts say.

Several firms are considering switches outside the U.S. because the hurdles are lower, said Susan Levine Coleman, president of NCI Consulting. But profits abroad can be lower than in the U.S. because OTC categories are not as developed abroad as in the U.S., she said.

A third class of behind-the-counter drugs in the U.K. and some other countries may make it easier than in the U.S. to switch drugs with complicated indications and directions because a pharmacist can talk to consumers about symptoms and products before administering the drug.

This in turn enables countries with a pharmacy drug status to consider a wider range of categories for switch than FDA will consider, explained Ed Hemwall, Johnson & Johnson-Merck VP of global OTC regulatory and scientific affairs.

"We're pretty tight in the United States right now with what can be switched that is outside the realm of the traditional indications and classes that have already switched. FDA continues to be open-minded toward ideas but remains conservative when it comes to approval requirements and decisions," Hemwall observed.

In part for these reasons, he noted, Merck - which recently acquired Schering-Plough - is looking at "more switching outside the United States where there is a third class."

"We're combining all possibilities for products that consumers would benefit from with greater access, but most of the opportunity from a regulatory perspective is outside the United States."

FDA Stays U.S. Data-Centric

Switching abroad first enables firms to amass safety data about the product that could help convince FDA to switch the product in the U.S., but so far the agency is interested mainly in "the safety database that's generated by the placebo-controlled trials and the adverse event database in the United States," Hemwall said.

Likewise, the marketing experience gained from an ex-U.S. switch could help a U.S. switch application, but Coleman said companies should know that BTC and OTC marketing are "really apples to oranges."

On that note, she said, while a successful switch in Europe "in theory" could help a firm switch the same product in the U.S., it hasn't helped yet.

She said, FDA's decision to switch a prescription drug OTC "all comes down to that issue of appropriate self-selection and self-use, and having uncontrolled access in the U.S. is seen by FDA as a totally different model than in Europe where you have the pharmacist making the decision for the consumer."

For example, an FDA advisory committee did not consider Merck's successful switch of the statin Zocor in the U.K. in 2004 when it refused to switch the same, to be sold as Mevacor Daily , in the U.S. (¹ (Also see "FDA Advisors Say Greater Insight Needed On Self-Selection Of OTC Statins" - Pink Sheet, 17 Dec, 2007.)).

"It didn't really help us, even though it's a successful switch [abroad] and there were no negative outcomes. The U.S. advisory committee just wasn't willing to factor that into their thinking," Hemwall observed.

"That's one example where outside the United States experience has not helped, but it's a valid argument."

The Trade Off: Easier Switch For Less Money

The ability to switch drugs behind the counter abroad may allow some products to switch earlier, but "the business potential" in Europe and in BTC situations is not as attractive as in the U.S. where there is full OTC access, Coleman said.

"When you have meaningful drugs about to hit patents, being able to switch in Europe is not going to deliver enough profit overall to excite most companies. It gets you something and it is worth doing as part of a larger strategy, but the money that is really going to impact shareholder value is hitting big in the U.S.," she said.

Switching products in Europe also poses other challenges, such as harmonizing the label to meet all European Union member countries' requirements and securing a common trade name when the EU's centralized procedure or its mutual recognition process is used, Hemwall noted.

However, the payoff of getting pan-EU approval with the same labeling through centralized switch is attractive.

"That's sort of the analysis that a company will make in determining their [European] switch strategy - the trade-off of getting a universal approval vs. the idea that you could be gambling and lose everything and have to come back in some other way, like going through individual countries," Hemwall said.

The gamble comes in part from individual EU members having veto power over centralized switch applications.

For instance, Pfizer pulled its centralized switch application for Viagra (sildenafil) in 2008 after disagreement among EU members surfaced during the process (² (Also see "Pfizer Pulls Back On European Viagra Switch As Questions Linger" - Pink Sheet, 24 Nov, 2008.)).

"There were some countries that were opposed to that and the entire switch was refused even though there were other countries that would have approved it," Hemwall said.

"In the centralized process, you're stuck with all or none. If one country becomes difficult or refuses, then the whole thing falls apart."

"It's a matter of concern for the industry in Europe that there be a more uniform, predictable switch process that can be applied across many countries. Nobody has a straight, clear pathway that would be the No. 1 choice for any particular product," Hemwall said.

The decentralized process and mutual recognition systems for EU switches are less challenging but offer smaller payoffs for sponsors, he said.

Likewise, switching products in emerging markets like China, India, Russia, former Soviet Union countries and South and Central America is challenging because their regulatory agencies are just now considering and implementing OTC switch policies and procedures, Hemwall said.

Patent protection, exclusivity and brand equity issues make it harder to launch new products in those countries.

Nonetheless, "global companies are looking very carefully and investing in building in those countries through switch," Hemwall said.

Joe McGovern, a consultant with The Atlantis Group, added that switch activity is up in those countries because the governments want more self care, and that the U.K. is "the most switch-friendly country and a place to start if you have a challenging switch."

Still, he cautions the U.K. switch process has "a long way to go" and is a "work in progress."

He added that switching abroad to bolster a U.S. switch application might be prohibitively expensive. "Switching in another country, seeing the results and then incorporating them in the U.S. submission would be a very long process and beyond the time horizons of most companies," he said.

- Elizabeth Crawford ( ³ [email protected] ) with reporting contributed by Malcolm Spicer ( ⁴ [email protected] )