Markets

Why P&G, Best Known for Tide and Bounty, Is Now Selling Sleeping Pills

By Jim Edwards

Updated on: September 29, 2010 / 1:06 PM EDT / MoneyWatch

Procter & Gamble (PG) is launching a new sleeping pill, Silenor, despite the fact that there are already a dozen or so insomnia medicines on the market, many of them in cheap generic form. The Cincinnati giant -- better known for detergents like Tide and Bounty paper towels -- is doing this because it has signed a deal with Somaxon (SOMX), the company that developed the drug, that has cost P&G almost nothing and gives it risk-free first dibs on any non-prescription version.

Here's an incomplete list of the ridiculously crowded market that Silenor is about to enter: Lunesta, Rozerem, and Sonata are still on-patent prescription sleep aids. Generics include Ambien, Ambien CR, Klonopin, Halcion, and Restoril. Over-the-counter products include Tylenol PM, Advil PM, Benadryl and Unisom. And all these guys compete with booze and pot in many households.

There are still two more Rx brands coming down the pipe: Merck (MRK)'s MK-4305 which improves "sleep efficiency" and GlaxoSmithKline (GSK)'s almorexant, currently in the final phase of testing.

Clearly, if you're looking for a crowded, commodified drug business with low barriers to entry then sleeping pills is it. So why is P&G bothering? As Adam Feuerstein of TheStreet points out, P&G is paying nothing for the rights to market the drug. It already has a salesforce in place for Prilosec OTC, so it will cost them close to nothing to promote Silenor as well. Somaxon is paying P&G 15 percent of revenues just to tag along.

Furthermore, the deal gives P&G the right to negotiate for rights to the OTC version of Silenor. The drug's main advantage is that unlike Lunesta or Ambien is not a "scheduled" substance subject to DEA control. That makes it a good candidate to go non-prescription.

As most people do not regard insomnia as an illness -- and therefore don't go to the doctor for it -- non-prescription Silenor may be a (pun intended) sleeper hit when it finally arrives, years from now.

Related:

Image by Flickr user kujira, CC.