MarketLine Blog

The OTC Healthcare Market has Become Increasingly Attractive in Recent Years

In recent years, a number of major healthcare companies including Pfizer, Roche, and Bristol-Myers Squibb (BMS) have sold their over-the-counter (OTC) healthcare divisions in a bid to focus their attention on pharmaceuticals. Bayer acquired Roche Consumer Health in 2004, while BMS sold its OTC unit to Novartis in 2005. Pfizer sold its Consumer Healthcare business to Johnson & Johnson in 2006.

However, more recently this trend has reversed with companies re-entering the OTC healthcare market. For example, Pfizer marked its re-entry to the market in 2009 with its acquisition of Wyeth. Furthermore, established OTC healthcare companies such as Johnson & Johnson and Novartis are focusing on their OTC divisions with new investments and entry into new OTC sectors.  Procter & Gamble has gone as far as to divest its pharmaceutical business in an attempt to focus on consumer healthcare.

Despite the financial difficulties that have been experienced on a global scale in recent years, the OTC healthcare market has continued to grow steadily and consistently. Datamonitor research estimates that the global market for OTC products grew by 4% in 2011, a growth of almost 16% since 2007, with the value standing at around $138 billion. Furthermore, the OTC market has been consistently outgrowing the pharmaceutical sector in recent years. According to IMS Health, growth in OTC sales surged ahead of growth in prescription pharmaceuticals in 2008 for the first time ever.

Performance within mature pharmaceutical markets has been hindered in recent years due to regulatory constraints and the so-called “patent cliff”. A large number of the globally best-selling pharmaceutical patents have reached their expiration dates in recent years, and many more will be expiring in the near future. As such, companies relying on their best-selling pharmaceuticals are facing declining sales. Western Europe is a clear example of the crisis being faced in the pharmaceuticals market in developed economies, with MarketLine research suggesting a 0.4% fall in revenues in 2011. Meanwhile growth in the US market dropped to just 0.5% in 2011.

Conversely, the OTC market is being driven forward by a number of factors such as the growth of the market in emerging economies, the growth of new distribution channels allowing increased access to products, the encouragement by market players of self-medication, and the development of strong brands. The trend for companies to increasingly focus on OTC products looks likely to continue in coming years, as market players’ fight off losses in the pharmaceuticals sector.

For a more detailed look at the leading player in the OTC healthcare market, please read our case study: ‘Johnson & Johnson: Product recalls in the OTC pharmaceuticals business’.

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