Pepcid Case Study

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Background
As self-medication is more widely adopted and healthcare payers seek to contain costs, the OTC market seems set for significant future growth. Most pharmaceutical companies anticipated rapid growth in the over-the-counter market as consumers increasingly sought to diagnose and self-medicate their common ailments. Many pharmaceutical companies are looking towards the OTC market for revenue protection and lifecycle extension for their major products. Although certain sectors of the OTC market are maturing, growth opportunities do exist in emerging markets and the leading antacids such as Mylanta, Maalox and Tums, those products' market share dominance will be challenged. Currently, many firms sought to overcome their lack of experience in marketing consumer products through alliances of various forms—mergers, joint ventures, or licensing agreements. Pepcid, Tagamet and Zantac are among the most successful prescription drugs ever marketed. Pepcid is ranked in the top 15 largest-selling prescription products with 18 million U.S. prescriptions written since its prescription debut in 1986. However, those numbers pale in comparison to Tagamet and Zantac, which are practically household names. Since Tagamet went on the market in 1977, 236 million U.S. prescriptions have been written, and since Zantac became available in 1983, 188 million U.S. prescriptions have been written. The popularity of Tagamet and Zantac made it important for Pepcid AC to get to the OTC market first and also differentiate itself from its competitors, SmithKline Beecham may have preferred to get to OTC market first, but that timing consideration is not seen as being as critical to the long term success of Tagamet HB as it is to Pepcid AC.

Internal Factor Evaluation

Internal Factors Evaluation Matrix
Critical Success factorsWeightRating Weighted Score
Strengths
The joint venture (the world’s largest diversified healthcare company Johnson & Johnson and Merck)0.2541
Research and development expertise 0.0230.06
Recognizable Brand Name0.130.3
Consumer marketing and sales expertise0.240.8
Global reach0.0140.04
Product differentiation: Pepcid’s prevention claim0.341.2
Strong retail distribution channel0.0530.15
Weaknesses
lack of experience of switch from prescription drug to OTC0.0210.02
lack of experience of corporation between the two companies' representatives0.0120.02
Brand recognition in its category0.0310.03
lack of experience of the joint venture0.0120.02

Total1 3.64

3.64 > 2.5

The joint venture Johnson & Johnson/Merck Consumer Pharmaceuticals Company

exhibit internal strengths.

Taking advantage of strengths from both companies from Joint ventures is critical for marketing success. •Pepcid’s prevention claim differentiate itself from its competitors •Having recognized brand names from both parties are very important.

External Factor Evolution

External Factors Evaluation Matrix
Critical Success factorsWeightRating Weighted Score
Opportunities
Rapid growth in the over-the-counter market 0.1240.48
Consumers increasingly sought to diagnose and self-medicate their common ailments0.140.4 Increasing online shopping of the OTC drugs0.0530.15
No prevention claim in other OTC drugs in the current market0.2541 Currently No H2 receptor OTC drugs available0.130.3
Threads
Advisers to the FDA had recommended against allowing JJM to sell Pepcid AC0.1530.45 Approval process behind its competitor0.1520.3
Over-the-counter sales would affect the sales
of the prescription drug0.0320.06
Long FDA approval process0.0330.09
Existing Over-the-Counter Antacid brands0.0220.04

Total1 3.27

3.27 > 2.5 The joint venture Johnson & Johnson/Merck Consumer Pharmaceuticals Company

is responding well to threats and opportunities in its industry....
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