Case Analysis Pepcid Ac Racing to the Otc Market free essay sample

The first option would be to pursue both claims of treatment and prevention, which would help differentiate their drug from other competitors OTC drugs that are also pending FDA approval. The first option could require up to 9 months of additional studies and investments to provide further evidence to the advisory committee and FDA. Conversely, they could choose the second option, to bypass the recommendations of the advisory committee and take their case directly to the FDA with the goal of being the first to enter the market. If they choose the second option, they would also need to decide whether to request approval for both claims or just the treatment claim. Option two is the best course of action based on the evidence and data presented in the case. They should only seek approval of the treatment claim and work to get the required additional evidence for the prevention claim approval in the near future to differentiate as more drugs enter the OTC market. We will write a custom essay sample on Case Analysis Pepcid Ac Racing to the Otc Market or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page All marketing claims regarding â€Å"the uses, benefit, or efficacy of any drug† (King, et al. 2003) require approval by the FDA. JJM progress toward approval for Pepcid AC as an OTC heartburn remedy was stalled in late July of 1994. The advisory committees requested additional evidence to support JJM’s claims that Pepcid AC prevented and/or provided relief from heartburn. JJM’s largest competition for first-to-market was SmithKline Beecham’s drug Tagamet, which had also been stalled by the advisory committee for the FDA. At one time JJM had conceded the first-to-market slot SmithKline Beecham due to the recent decisions of the advisory board they had an opportunity to be first-to-market. This is the optimal time for JJM to enter the highly competitive market ahead of their three main competitors. JJM has a number of considerations when regarding competition in the growing (~15% increase per year) ulcer medication market. The importance of being first to enter the OTC ulcer/heartburn medication market and capitalization on the remaining six years of patent protection hould not be overlooked by the managers of JJM. The drug market is highly competitive, for example; Tagamet’s US prescription sales dropped by over 37% in 1993 when generic manufacturers entered the market. The FDA’s historical record generally follows the recommendations of the advisory committee, but they had made exceptions in the past. JJM needs to attempt to persuade the FDA of the validity of their current research to gain approval without the advisory board’s recommendation. Prescription Pepcid’s safety had already been approved by the FDA so JJM needs to prove the efficacy with current research of the lower dosage and consumers’ willingness to use the product safely for their OTC version. Another reason to move forward with the treatment only claim is because the FDA has been critical of all prevention claims, choosing to rely more on education for prevention. The final reason is the prevention claim was more of a strategic consideration for differentiation from Tagamet when it originally appeared to have secured the first-to-market slot. The most important position in the OTC market is the first to enter. With Tagamet stalled, JJM could now secure the position and continue to get additional clinical support of their prevention claim to differentiate Pepcid AC when the market is more saturated. Differentiation is an important consideration in the OTC market which could be classified as a â€Å"red ocean where companies try to grab bigger slices of existing demand and as time passes the water turns bloodier due to new entrants and increased competition. † (Kim and Mauborgne 2004). However, in the short run being first is more important than differentiation and JJM is fully aware of the intense OTC market from previous experience. Based on historical experience, JJM’s management â€Å"believed that the battle for market share would be over quickly, within a year of the first products entry. † (King, et al. 2003) JJM research (consumer usage behavior, concept testing, Bases I and II analysis, etc. ) indicated that the distinct difference between antacid users and prescription drug users was that antacid users took their product in â€Å"treatment† mode, yet another reason JJM should try to secure FDA approval for the treatment claim. Their concept testing resulted in value placement on long lasting benefits, 8 hours verses 4 hours of the average antacid. JJM believed its largest competitor, SmithKline Beecham, would focus on loyalty and patronage of their prescription counterpart. If JJM could secure the FDA approval faster with the treatment only claim they could focus their marketing campaign on Pepcid AC’s outperformance/long lasting benefits and added convenience over the current antacid competition. JJM’s follow-on campaign could then focus on the additional benefit of prevention, pending FDA approval. Their pricing strategy should stay $2. 95, which was competitive with the current OTC market. At this price the estimated 60% gross margin should help to offset costs during the first year and consistently for the foreseeable future even as more competitors enter the market. The BASES II testing by JJM provided evidence that first year sales would amount to $72. 7 million, after advertising, which AC Nielsen estimated to be within 9% of actual sales. There was concern of inherent cannibalization of both prescription Pepcid and the antacid Mylanta, also owned by JJM. BASES II’s research indicated ~30% of users intended to replace their prescription product with Pepcid AC, and 28%-34% would use it as a substitute for nonprescription antacids. BASES II also estimated cannibalization at 8% from prescription Pepcid and 11% from Mylanta antacid which is considerable. However, the better numbers to focus on are the percentages Pepcid AC is projected to take from its competitors, 55% OTC and 26% prescription (from Table E). Research from the BASES II testing further indicated it may be in JJM’s best interest to recruit pharmacists. In the OTC market, pharmacists should be considered as â€Å"influencers† that help customers make purchasing decisions. If JJM can gain the support of pharmacists they should help to persuade customers to use Pepcid AC over competitors and traditional antacids. SmithKline Beecham was the first to the market with Tagamet in 1977 and enjoyed 100% market share for six years. Later three drugs entered the market, including Pepcid, which now account for 95% of the prescription market for ulcer medications. JJM knows it will have the same three main competitors for the OTC version of Pepcid. It is essential for them to be the first into the OTC market so they can capitalize on the protection of their patents for as long as possible and capitalize on market share, simultaneously conducting the required research to get the prevention claim at a later date. The future prevention claim will help to further differentiate Pepcid AC when the market is filled with the other leading competitors and looming generic brands. Finally, JJM will need to work consistently on strategic advertising to both consumers and influencers (namely pharmacists) to get buy-in and support of their product against the competitors today and into the future.