Pharmaceutical Manufacturers Commit to Natural Products Development

WYNDMOOR, PA—After years of watching from the sidelines, pharmaceutical companies are jumping into the natural products market. In the past six months or so, the following moves have been made:

• SmithKline Beecham is test-marketing a line of herbal products.

• Johnson & Johnson has acquired the North American marketing rights to Raiso’s cholesterol-reducing stanol ester.

• American Home Products has agreed to market a line of herbal supplements developed by PharmaPrint.

• Warner-Lambert has launched Celestial Seasonings Herbal Comfort Lozenges with Echinacea and has added a zinc variant to the venerable Halls cough drop line.

• Novartis is developing a cholesterol-reducing dietary supplement, and has reformulated Ex-Lax with senna.

• Chattem has purchased Sunsource.

• Thompson Medical has introduced a line of herbal products.

• Procter & Gamble has licensed its calcium citrate maleate compound to General Nutrition Centers and continues to pursue the FDA’s approval for a cholesterol reduction claim for psyllium, the active ingredient in Metamucil.

These companies share a key component—a significant OTC drug operation. In fact, they represent the cream of the crop in the self-medication segment of the pharmaceutical industry.

Of course, many pharmaceutical companies offer more traditional vitamins and minerals, so this is not their first foray into the supplements market. SmithKline Beecham focuses on calcium with the leading mass-marketed calcium supplement brand, Os-Cal, as well as positioning Tums antacid for calcium supplementation. American Home Products has the leading multivitamin, Centrum, and the second-ranked calcium brand, Caltrate. Johnson & Johnson offers Sesame Street Children’s Multivitamins, and in Canada, it markets Tanacet, an herbal product for migraine headache.

As these and other pharmaceutical companies venture into the natural products market, they will challenge manufacturers that are well-established in health food and other alternative outlets but have not yet created brand names in the mass market. The pharmaceutical companies have established distribution channels to huge retail chains nationwide. They have the clout that may be denied to smaller players to get their products on the shelves. And they have expertise in mass marketing and advertising to consumers. In the 12 months to July 1997, American Home Products spent more than $30 million on advertising for Centrum. The brand controlled more than one-third of the $556 million adult multivitamins category turnover in food, drug and mass-merchandise outlets in 1996. The next best-supported brand was Pharmavite’s Nature Made with $13 million spent on its entire product line.

However, more traditional suppliers of natural products will continue to dominate the various niche distribution outlets, including health food stores, mail order and multi-level marketing. They will continue to enjoy the benefits of being innovators, while retaining liability for the risks of new-product launches. While OTC pharmaceutical marketers will invest heavily in marketing their natural products entries, it’s highly unlikely that they will be pioneers in a substantive way, compared to their predecessors that have been educating consumers, funding scientific research and fighting FDA for the right to make health claims.

Elizabeth A. Beezer is the editor of OTC Update, a monthly journal published by Nicholas Hall & Co., that focuses on the marketing of OTC drugs. For more information, call 215.402.0344, email ebeezer@aol.com.