Chronic Disease Management:  Opportunities for growth in the sector will increasingly be driven by management of chronic disease not acute problems.  In 2010 these will be gastric reflux/heartburn, allergic rhinitis, and arthritis.  Other chronic conditions include plaque/gingivitis, diabetes, irritable bowel/irregularity, chronic sinusitis, and nail fungus.

Rx-to-OTC Switching:  The primary source of blockbuster OTC products will continue to be from the prescription drug formulary.  The primary category to be dislocated will be gastric acid relievers such as Prevacid, Zegerid and others who compete against Prilosec, store brands, and H2-blockers.  Allergic rhinitis competition will heat up between Claritin, Zyrtec, and store brands while Allegra remains in the wings.

Mergers & Acquisitions:  Consolidation will continue after the acquisition of Chattem by Sanofi and Alcon by Novartis.  The ranks of the freewheeling, OTC-only, mid-cap companies will thin.  Candidates to be acquired might include:  Combe, Alberto-Culver, Helen of Troy, or Church & Dwight.  Reckitt-Benkiser may wish to ramp up its US presence through acquisition or become a target of a larger predator. The Sanofi acquisition points to the continuing globalization of the US OTC market.

Retailer Pressures:  Three trends will continue in 2010: 1) promotional spending pressure on manufacturers; 2) co-promotion of the retailer's brand; and, 3) sku rationalization, supply chain management, and destocking as shelf real estate favors high turnover sku's.  FSI's dropped will surpass the +8% rise in 2009 as manufacturers seek a win-win with retailers.

Store Brand Presence:   The food category saw the relaunch of store brands such as Walmart's Great Value.  Perrigo had a good year in 2009.  One harbinger of 2010 is the recent introduction of generic-looking store brands into the sunscreen category.  Another is the fast follower introduction of store brands on the heels of any Rx-to-OTC switch.  In a recession prone economy, especially if it double dips in late 2010, store brands should increase their shelf presence/share in 2010.  Price/value will pressure premium priced brands that offer parity performance at higher price points.

Monograph Closures:  The FDA has increased its attention to and staffing of OTC monograph closures.  The most important of these final monographs in 2010 will be the one that controls external analgesics.  It appears that topical pain patches will be the subject of a monograph amendment and/or NDA treatment allowing them to remain in the market for the time being.  Certain other ingredients (brands) may be removed from the market as a result, for example trolamine salicylate (Aspercreme).  Monograph closures have a paradoxical effect on the retail shelf as on the one hand they lessen the diversity of ingredients in commerce, giving consumer fewer choices, while on the other hand they force manufacturers to diversify and differentiate their offerings.  Regulatory or retailer deletions essentially act to accelerate Alice's Red Queen [Red Queen Marketing: A Business Model in Won...].

[Donald Kay Riker, Ph.D. is President & Founder, On Point Advisors, LLC a consumer healthcare consultancy founded in 2007 and Editor-in-Chief, OTC Product News.  Dr. Riker spent 25 as a senior manager in the consumer drug industry.  He was Chattem's last Vice President of R&D & Chief Scientific Officer]