27
Lifecycle Management Through the Rx-to-OTC Switch
prescription products) and a negative profit and
loss (P&L) for the first one to three years.
Barr Pharmaceuticals (later acquired by
Teva) did an excellent job of building an orga-
nization around the switch product Plan B. As a
prescription product, Plan B’s revenue was $30 to
$35 million and was not expected to more than
double when it initially switched to an OTC
product in 2006.43 Although mainly a manu-
facturer of generic drugs, Teva sold Plan B One
Step, its only OTC brand within its specialty
medicines portfolio of prescription products to
Foundation Consumer Healthcare in 2017 for
$675 million. Today, Plan B One Step has US
retail sales of $274 million44 and is the number
one selling OTC SKU at retail.
Switching a prescription asset with an
OTC partner requires finding the right con-
sumer healthcare company at the right time in
the prescription product’s lifecycle. While this
strategy provides lower risk for the pharmaceu-
tical company, it also can provide a lower return
(compared to the pharmaceutical company
commercializing the product itself). Nonetheless,
up-front payments, milestones, and royalties can
be used by the pharmaceutical company to fund
more strategic prescription product programs.
Recent partnering deals include Sanofi’s
2019 agreement with Roche to switch Tamiflu,45
Perrigo’s 2018 deal with Merck to switch
Nasonex,46 and an announcement from Eli Lilly
in 2014 that it has provided Sanofi with the
switch rights to Cialis.47
In most cases, the terms of these deals are
not material to either party and are therefore not
revealed. Nonetheless, in 2012, Pfizer paid $250
million up-front, plus milestone and royalty pay-
ments, to AstraZeneca for the global OTC rights
on Nexium, plus the right of first refusal for
Rx-to-OTC switch rights on Rhinocort.48 On
a much smaller scale, in 2006, Schering-Plough
paid Santarus $15 million up-front, in addition
to a potential $65 million in regulatory and sales
milestones and a low double-digit royalty for the
Rx-to-OTC switch rights on Zegerid.49
It is not unheard of for a pharmaceutical
company to acquire a consumer healthcare com-
pany to secure Rx-to-OTC switch capabilities.
While this strategy requires a major financial
outlay and the availability of an OTC company
to buy, it is a strategy that can make sense if the
pharmaceutical company has a pipeline of viable
switch candidates.
In 2009, Sanofi paid $1.9 billion to acquire
the consumer healthcare company Chattem,50
which provided capabilities to switch Sanofi’s
portfolio of upper respiratory assets: Allegra,
Nasacort, and Xyzal. Subsequently renamed
Sanofi Consumer Healthcare, the company has
now demonstrated its capabilities to successfully
switch and commercialize prescription assets,
resulting in deals to switch Tamiflu and Cialis, as
noted above.
Pharmaceutical companies seeking to assess
the capabilities of potential consumer healthcare
partners should consider not only the deal terms,
but also the potential partner’s ability to get the
drug switched and the competency to maximize
the drug’s OTC sales. Currently, only three
consumer healthcare companies have dedicated
Rx-to-OTC switch teams that have successfully
switched prescription products in the last 10
years (GlaxoSmithKline, Sanofi, and Bayer).
Rx-to-OTC switches do not occur that
often, and there are dramatic differences between
prescription and consumer healthcare capabili-
ties. Identifying appropriate switch assets, finding
the right partner, and securing OTC approval
are time-consuming for the right asset with
the right partner, Rx-to-OTC switch programs
enable significant public health benefits and
produce brands that can live into perpetuity.
Conclusion
Not all Rx-to-OTC switches have been com-
mercially successful. An assessment of the switch
product’s value must be carefully considered
before expending organizational resources and
external costs on the switch program. There are
several factors that must be considered when
evaluating the potential commercial value of
an Rx-to-OTC switch some of these factors
are inherent in the drug itself (i.e., lack of side
effects, benefits versus existing OTC therapies)
and some of these factors are within the con-
trol of the company conducting the switch (i.e.,
media spend, ability to execute with excellence).
Lifecycle Management Through the Rx-to-OTC Switch
prescription products) and a negative profit and
loss (P&L) for the first one to three years.
Barr Pharmaceuticals (later acquired by
Teva) did an excellent job of building an orga-
nization around the switch product Plan B. As a
prescription product, Plan B’s revenue was $30 to
$35 million and was not expected to more than
double when it initially switched to an OTC
product in 2006.43 Although mainly a manu-
facturer of generic drugs, Teva sold Plan B One
Step, its only OTC brand within its specialty
medicines portfolio of prescription products to
Foundation Consumer Healthcare in 2017 for
$675 million. Today, Plan B One Step has US
retail sales of $274 million44 and is the number
one selling OTC SKU at retail.
Switching a prescription asset with an
OTC partner requires finding the right con-
sumer healthcare company at the right time in
the prescription product’s lifecycle. While this
strategy provides lower risk for the pharmaceu-
tical company, it also can provide a lower return
(compared to the pharmaceutical company
commercializing the product itself). Nonetheless,
up-front payments, milestones, and royalties can
be used by the pharmaceutical company to fund
more strategic prescription product programs.
Recent partnering deals include Sanofi’s
2019 agreement with Roche to switch Tamiflu,45
Perrigo’s 2018 deal with Merck to switch
Nasonex,46 and an announcement from Eli Lilly
in 2014 that it has provided Sanofi with the
switch rights to Cialis.47
In most cases, the terms of these deals are
not material to either party and are therefore not
revealed. Nonetheless, in 2012, Pfizer paid $250
million up-front, plus milestone and royalty pay-
ments, to AstraZeneca for the global OTC rights
on Nexium, plus the right of first refusal for
Rx-to-OTC switch rights on Rhinocort.48 On
a much smaller scale, in 2006, Schering-Plough
paid Santarus $15 million up-front, in addition
to a potential $65 million in regulatory and sales
milestones and a low double-digit royalty for the
Rx-to-OTC switch rights on Zegerid.49
It is not unheard of for a pharmaceutical
company to acquire a consumer healthcare com-
pany to secure Rx-to-OTC switch capabilities.
While this strategy requires a major financial
outlay and the availability of an OTC company
to buy, it is a strategy that can make sense if the
pharmaceutical company has a pipeline of viable
switch candidates.
In 2009, Sanofi paid $1.9 billion to acquire
the consumer healthcare company Chattem,50
which provided capabilities to switch Sanofi’s
portfolio of upper respiratory assets: Allegra,
Nasacort, and Xyzal. Subsequently renamed
Sanofi Consumer Healthcare, the company has
now demonstrated its capabilities to successfully
switch and commercialize prescription assets,
resulting in deals to switch Tamiflu and Cialis, as
noted above.
Pharmaceutical companies seeking to assess
the capabilities of potential consumer healthcare
partners should consider not only the deal terms,
but also the potential partner’s ability to get the
drug switched and the competency to maximize
the drug’s OTC sales. Currently, only three
consumer healthcare companies have dedicated
Rx-to-OTC switch teams that have successfully
switched prescription products in the last 10
years (GlaxoSmithKline, Sanofi, and Bayer).
Rx-to-OTC switches do not occur that
often, and there are dramatic differences between
prescription and consumer healthcare capabili-
ties. Identifying appropriate switch assets, finding
the right partner, and securing OTC approval
are time-consuming for the right asset with
the right partner, Rx-to-OTC switch programs
enable significant public health benefits and
produce brands that can live into perpetuity.
Conclusion
Not all Rx-to-OTC switches have been com-
mercially successful. An assessment of the switch
product’s value must be carefully considered
before expending organizational resources and
external costs on the switch program. There are
several factors that must be considered when
evaluating the potential commercial value of
an Rx-to-OTC switch some of these factors
are inherent in the drug itself (i.e., lack of side
effects, benefits versus existing OTC therapies)
and some of these factors are within the con-
trol of the company conducting the switch (i.e.,
media spend, ability to execute with excellence).