Central, Eastern Europe Lead OTC Growth On Sector’s Top Continent
This article was originally published in The Tan Sheet
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Central and Eastern Europe continue to drive OTC sales growth on the continent, with even low-growth countries matching the best levels in Western Europe. Europe as a whole remains the leading region for OTC sales, selling twice as much as Japan and slightly outpacing the U.S., according to IMS Health market data. The main driver for global OTC growth remains innovative new products and line extensions, IMS Senior Principal Andy Tisman said in Rome at the annual meeting of the European Self-Medication Industry Association, AESGP. Innovation outstrips growth from price changes by three to one, according to IMS data based on nonprescription drug sales from pharmacies. CEE markets will drive Europe’s projected 7% growth until 2014. The key market is Russia, where the compound annual growth rate is expected to exceed 15%.
Global OTC Growth Drivers
Western Europe between 2005 and 2010 showed cumulative OTC sales growth of 6 percentage points –roughly 1.2 percent per annum – driven by new products and line extensions. However, while OTC sales in the CEE region grew by106 percentage points in that time, 40 points of the growth came from price increases. A Tale Of Three Europes France and Germany, where Rx purchases essentially are no longer reimbursed, are struggling to generate pharma growth, and the U.K.’s pharma sales are trending toward similar levels. The rest of Western Europe is doing somewhat better, recording growth of 2.5% to 3%. OTC sales in Italy are particularly buoyant – hovering around 7% growth – and Sweden is experiencing some growth, reflecting the government’s recent moves to liberalize the market and allow OTC sales outside pharmacies (“Sweden's pharmacy monopoly fading,” “The Tan Sheet,” Nov. 16, 2009, In Brief). “We do only measure the pharmacy sector, but on the information that we have on the non-pharmacy channels there is a positive picture in Sweden,” Tisman said June 10, the final day of AESGP’s three-day conference. But the clear stars are in Eastern Europe. Particularly impressive are Bulgaria and Russia, with growth rates of around 15 percent and 13 percent respectively in the last year.
Sales Slip For 3 of 5 Top EU OTC Firms
The OTC markets of Eastern European countries, like other regions, were impacted negatively by the global economic crisis. But while much of Western Europe continues to stagnate, these countries have achieved growth rates in the past year that are equal to their long-term growth trend. Russia’s growth in 2009-2010 was particularly impressive, boosted by the Kremlin’s support for cold and flu products during the winter, when it warned the populace to guard against swine flu. Within the next five years, France is expected to return to modest growth with a compound annual growth rate of 2.5%. Italy has a more impressive predicted growth rate of 6%, but Germany is not expected to grow, though its market will remain stable. Novartis Leads Sales, Sanofi Building The biggest European OTC player is Novartis, with a 6.7% market share by value and OTC sales growth of 5.5% in the past year, according to IMS. Europe’s No. 2 OTC firm – Sanofi-Aventis, with 4.9% market share and 3.8% growth – has made four acquisitions in the continent since 2009, part of CEO Chris Viehbacher’s plan to double the OTC segment's size in five years. Polish drug, dietary supplement and cosmetics firm Nepentes Group was Sanofi’s most recent European target (Also see "Sanofi Acquires BMP Sunstone To Expand Chinese Consumer Health Portfolio" - Pink Sheet, 1 Nov, 2010.). But sales slipped for the remainder of Europe’s largest OTC firms in the past year, with GlaxoSmithKline showing the largest dip at 7.8% while holding market share of 3.3%. After several quarters of slumping consumer health business, Glaxo is divesting some OTC brands (Also see "GSK Divests Non-Core OTCs To Focus On "Priority Brands," Emerging Markets" - Pink Sheet, 7 Feb, 2011.). Bayer’s European market share in 2010 was 4.6%, although its sales were down 2.5%, and Johnson & Johnson held 4.1% market share after sales slipped 1.3%, according to IMS data. Global OTC Outpaces Rx Growth Even with some Eastern European markets reaching 15% annual sales growth, the OTC champions of the future will be the emerging markets of Latin America and Southeast Asia, Tisman said. Worldwide, developing regions currently claim 32% of sales but 68% of growth, IMS data show. Growth in Southeast Asia will run at 15.8% per year until 2014, with Latin America close behind at 15.2%. Although U.S. sales will grow at a relatively modest 2.4% until 2014, the news for OTC sales worldwide is generally upbeat. For example, despite the significant global economic crisis, the OTC segment continues to look attractive because it outpaces prescription medicines sales in terms of growth. While global OTC sales are expected to rise 7% this year, Rx pharmaceutical sales will enjoy a less impressive growth of 4.6%. Global sales of all pharmaceuticals are an estimated $920.5 billion (€641 billion), with OTC sales accounting for $106.3 billion (€74 billion), or 11% of the total. Tisman says there are many reasons why OTC sales growth has the edge over pharma. The Rx industry is plagued by concerns including:
By contrast, OTC is flourishing, in part due to the critical mass of consumers in emerging markets such as China, India and Russia. Further, the less-developed reimbursement systems for Rx products in emerging markets tend to drive consumers to self-care products. Other global OTC growth drivers include firms increasingly looking for Rx-to-OTC switch opportunities; higher level of consumer acceptance as key players continue to build strong brand identities; increased access through new channels, such as online sales; and payers’ eagerness to promote self-care with an eye on cutting overall health care budgets |