Pharma majors turn attention to OTC drugs in post-pandemic wellness shift

As a category of drugs, over-the-counter (OTC) medicines do not have a legal definition in India. For all practical purposes, medicines are considered OTC unless it is specifically stated that they are prescription-only drugs. So, consumers can buy OTC drugs from any pharmacy (physical or online), retail store or supermarket without a doctor’s prescription. About two weeks ago, joint drugs controller A K Pradhan said that discussions and deliberations were on to bring in guidelines for OTC medicines.
 

Since the pandemic, when people suddenly found themselves alone and in a situation where they had to fend for themselves, OTC medicines have reached an inflection point. People’s awareness about their health needs and willingness to spend more on wellness has made India’s Rs 340 billion OTC drugs market even more robust. By the financial year 2026-27, it is expected to touch Rs 545 billion, growing at 11.5-12 per cent. 
 

It’s no surprise then that major pharmaceutical companies are focusing on this segment, where, once a brand is built, it ensures steady and stable revenues. Several firms now have prescription (Rx), OTX (where products are sold both on prescription and over the counter) and OTC brands in their portfolio.
 

Building a healthy OTC brand, however, is not an easy task. OTC brands need time to grow and build a recall value once they have established some credibility.
 

Rajeev Juneja, vice chairman and MD of Mankind Pharma, which has strong OTC names such as Manforce (condoms), Prega News (pregnancy detection kit) and Gas-O-Fast (antacid) in its mix, says the failure rate for newly launched brands is around 90 per cent in the OTC segment. “Hardly 8-9 per cent are successful. At Mankind, we have had a success rate of 18 per cent or so,” he says.
 

In its September quarter earnings call, Mankind Pharma has indicated that it is launching a new OTC division for its multivitamin brand, Health OK, which has gone from Rx to OTX to OTC.
 

The Nandini Piramal-led Piramal Pharma has also built a strong OTC franchise with brands like Polycrol, Lacto Calamine, i-Pill and Little’s. Around 42 per cent of Piramal’s India business came from these power brands, and the future looks promising.

“This (financial) year, we should touch Rs 1,000 crore from the OTC business, and now we want to focus on profitability,” Piramal says. Piramal Pharma launched 100 new products in the last three years. About 16 per cent of its sales are from new products. E-commerce sales also account for about that much.
 

OTC’s online dynamics
 

Along with quick-commerce, e-commerce has changed the OTC game.
 

In its report in November, Kotak Institutional Equities, which expects a 15 per cent compound annual growth rate (CAGR) for Mankind Pharma’s OTC business through FY23 to FY26, highlighted that the company had recently entered e-commerce and quick-commerce channels and had seen robust growth. These channels, however, are not captured by healthcare market research firms like IQVIA.
 

“Mankind is also working on premiumisation of products to increase margins and expects single digit-growth in domestic OTC in FY2024,” the brokerage said.
 

Covid-19, says Piramal, saw people switching to e-commerce. “We did a lot of work to launch our products on e-commerce, achieve a certain scale and then take it offline. The feedback loop is faster in e-commerce,” she adds.
 

Focusing on OTC is not just a strategic move; it’s imperative for any forward-looking pharma company operating in India, says Rajeev Sibal, president-India Region Formulations, Lupin.
 

“By concentrating on OTC, we establish a direct connection with consumers, understanding their needs and preferences intimately,” he says. “This direct engagement fosters brand loyalty and allows for personalised offerings, creating a sustainable customer base.”
 

Lupin’s focus on OTC has been paying off.
 

Over the last five years, its CAGR has grown twice that of the Indian OTC industry’s, Sibal says. He gives the example of Lupin’s flagship product, Softovac, an isabgol-based bowel regulator. “It has grown consistently at a double-digit rate (year-on-year) since its transition from Rx to OTC in 2018.”
 

Companies like Torrent Pharmaceuticals, which have resilient brands such as Shelcal (a calcium supplement), forayed into OTC earlier this year. With this, Shelcal is poised to become the largest calcium supplement brand in India, Torrent Pharmaceuticals Director Aman Mehta had said in a statement in February.
 

All players agree that the pandemic has been a game changer for the category, with people’s focus shifting from illness to wellness.
 

“We have observed a profound shift in consumer mindset towards wellness, driven by heightened healthcare awareness, increased disposable incomes, and the availability of a diverse range of OTC products,” says Umang Vohra, managing director and global chief executive officer, Cipla.
 

“In H1FY24, our consumer health arm contributed approximately 8 per cent to the global consumer franchise's overall revenues,” he says. Cipla has five consumer health brands with revenues of over Rs 100 crore.
 

Regulatory clarity
 

The stringent price control regime, too, has turned the spotlight on the OTC segment.
 

A senior executive from an Ahmedabad-based drug firm, who does not want to be named, says it has pushed companies to scout for better margins through OTC launches since most of these drugs are out of the price control ambit. “For a large-sized pharma firm, spending on marketing campaigns (for OTC) is not a major challenge,” he says. The addressable market is huge, and, therefore, the per unit marketing cost is not that high, he explains.
 

The high gestation period, though, is a deterrent.
 

Krishnakumar V, chief operating officer of Eris Lifesciences, a chronic therapy-focused company, says that OTC is a different ball game altogether and calls for a fast moving consumer goods (FMCG) kind of approach. 
 

Building a direct-to-consumer brand requires marketing and the first 4-5 years see operational losses, he says. Eris, he adds, does not plan to enter the OTC space anytime soon.
 

“Also, guidelines and regulations are key to the growth of this space,” Krishnakumar says. “One needs clarity around quality and marketing practices, especially in the age of sales through digital channels.”
 

There is consensus in the pharma industry that guidelines defining the dos and don’ts would help. They would provide much-needed clarity around packaging, labelling, marketing and on whether a retailer would need a drugs licence to sell an OTC product. Since these drugs allow faster and cheaper access to healthcare, their misuse and adverse health effects are a matter of concern — especially since the problem of self-medication is rampant in India.
 

Even as it waits for the government to prescribe the guidelines, India’s pharma industry is bullish on the OTC play.