Procter & Gamble Wages That the Medium and its Message Can Save Prilosec OTC

Last Updated Jan 24, 2010 1:05 PM EST


Procter & Gamble has launched a new online social media site for Prilosec OTC focused on winning new customers by talking up the lifestyle difficulties of heartburn sufferers. In an increasingly crowded market for over-the-counter heartburn medicines, is it worth spending millions more on an advertising campaign for a mature product with declining sales volumes?

The message of this new Everything You Do Without Heartburn campaign is "no one should have to miss out on what they love to do best because of heartburn." Winning contestants can land sponsorship deals, with awards worth around $1,000, to pursue their passions in a variety of interests, from community service and the performing arts to sports and travel.

For years Procter & Gamble (NYSE:PG) has reminded customers that its Prilosec OTC remedy effectively reduced heartburn-causing acid by shutting down active acid-producing "proton pumps." Supported by online marketing and sponsorship of popular events, from NFL and NASCAR tie-ins to Prilosec-branded cooking contests and the dice game Bunco, this proton-pump inhibitor (PPI) quickly became the best selling OTC heartburn medicine, with annual sales topping $300 million.

Recent research, from the Consumer Healthcare Products Association and The Nielsen Company, estimates that the availability of OTC remedies saves each consumer an average total of $174 annually in prescription and office visits. Given the convenience and cost-savings of shopping at the local store for GI antidotes, consumers are increasingly more willing to self-medicate. However, private-label brands have successfully muscled in on this growth in demand. To wit: sales for Prilosec OTC peaked at about $387 million back in 2006.

Additionally, Prilosec has now lost market exclusivity (held since 2003) -- the FDA has approved for OTC purchase two other branded PPIs:

  • Novartis will be looking to win heartburn sufferers over to its Prevacid 24HR (lansoprazole). Annual sales of the prescription product were approximately $513 million in the United States last year, according to IMS sales data.
  • Merck is readying a mid-year launch for Zegerid OTC, which contains a patented dual-ingredient formulation that combines the prescription acid reducing medicine found in Prilosec (omeprazole) with sodium bicarbonate, which protects the omeprazole from acid in the stomach.
Another problem soon to cause indigestion for Prilosec OTC is that the other PPIs have similar "proven strength for 24 hour heartburn relief" stories to tell too. For example, Prevacid 24HR touts in its own message, "Not just another over-the-counter heartburn medication," that the drug has a clinically proven record in controlling heartburn for a full 24 hours. This message will prove most successful, in my opinion, in converting branded Prevacid users -- who would be otherwise lost to generic RX alternatives now on the market.

Canadian educator Marshall McLuhan presciently warned more than 40 years ago, "Control over change would seem to consist in moving not with it but ahead of it." There is scant evidence proving that any one nonprescription PPI works better than another. Ergo, if Procter & Gamble wants to stay ahead of the new competition, the company had better come up with better media campaigns than just another contest or more free sample coupons. It's "innovate or die" time for Prilosec OTC.

  • David Phillips

    David Phillips has more than 25 years' experience on Wall Street, first as a financial consultant and then as an equity analyst for several investment banking firms. He sifts through SEC filings for his blog The 10Q Detective, looking for financial statement soft spots, such as depreciation policies, warranty reserves and restructuring charges. He has been widely quoted in outlets such as BusinessWeek, The International Herald Tribune, Investor's Business Daily, Kiplinger's Personal Finance, and The Wall Street Journal.