Schering Puts on a Marketing Clinic
By Amy Tsao
If you haven't seen the ads already, you will soon enough. With the overture to the Who's classic rock opera Tommy playing in the background and a giant blue pill swirling in the sky, the latest campaign from Schering-Plough (SGP ) hammers the nation's sneezing multitudes with the message that they absolutely must try a new allergy medication called Clarinex. The theme: "Billions of Allergens, One Tiny Blue Pill."
For Schering-Plough, the ad effort is a multimillion dollar test. It's out to convince people that Clarinex is a breakthrough product -- better than its predecessor, Claritin, the most widely prescribed allergy pill in the U.S.
Shifting patients to the new drug is key for the Kenilworth (N.J.) company because Claritin's patent is expiring. That drug had $3.1 billion in worldwide sales -- and was responsible for more than 30% of Schering's sales in the fiscal year ended March, 2001. Much of those revenues will be lost when Claritin becomes an over-the-counter product, which could happen in late 2002. So getting customers to switch to Clarinex is crucial.
Schering's rivals will be watching to see how well it does. In response to generic competition in the wake of patent expirations on key products, Astra-Zeneca (AZ ) and Bristol-Myers Squibb (BMY ) have introduced their own follow-ups to blockbuster anti-ulcer drug Prilosec and diabetes treatment Glocophage, respectively. As with Claritin and Clarinex, the new drugs tend to be quite similar to their predecessors.
Schering's campaign for Clarinex, which was approved by the Food & Drug Administration in January, 2002, will go a long way toward demonstrating whether marketing strategies can keep customers from flocking to cheaper generics or OTC alternatives. "Schering has to create some brand equity on Clarinex and get consumers to demand the new product," says Richard Evans, an analyst with Sanford R. Bernstein Research.
Investors don't seem very confident of the new drug's prospects. Since March, when Schering announced plans to sell Claritin OTC, its stock has fallen 11%, to around $32 per share on Mar. 20, near the 52-week low of $30. The shares traded over $43 as recently as last summer.
If any company can succeed with Clarinex, though, it's probably Schering, which pioneered direct-to-consumer drug advertising. Its once-ubiquitous Claritin ad campaign -- featuring people happily ambling through meadows, unaffected by numerous allergens all around them -- was one of the industry's biggest marketing successes after federal regulators relaxed rules on pharmaceutical marketing in 1997.
Still, rival Eli Lilly (LLY ) has shown how easy it is to fail. Lilly has been unable to stem the loss of revenues from Prozac with its once-weekly follow-up to that drug. Doctors are simply prescribing Barr Laboratories' (BARR ) generic version of Prozac instead. Prozac sales fell 23% in 2001, and are expected to keep sliding over the next several years.
The difficulty for Schering is that Clarinex may be no more effective than its predecessor. The drugmaker is trying to exploit the main difference between them -- that Claritin is approved only for seasonal, outdoor allergies while Clarinex is O.K.'d for both indoor and outdoor maladies. The new ads plug "the proven ability of Clarinex to provide 24-hour relief from the symptoms of indoor and outdoor allergies."
"I'M NOT SWITCHING."
However, some doctors think the practical differences between the two are marginal. They have almost identical and generally minor side effects, such as dry mouth, fatigue, and drowsiness. The main difference is that patients in the Clarinex trials also complained of sore throat, something that usually wasn't a problem with Claritin. "I'm not switching [patients] to Clarinex," says Dr. Mitchell Grayson, instructor of medicine at Washington University School of Medicine in St. Louis, Mo. He says Claritin is a relatively weak antihistamine, but he doesn't think Clarinex will work any better.
Schering's challenge is to play up whatever advantages the new drug has while reminding consumers of its popular predecessor. Indeed, the new drug's ads capitalize on the familiarity of Claritin in all sorts of ways -- without actually mentioning its name. "From a pure advertising standpoint, I would say there are a tremendous [number of common] brand elements in the campaign," says Gil Bashe, president and CEO of Catalyst Communications, an independent health-care marketing agency.
The typography of the new drug's brand resembles Claritin's, for instance. And the familiar blue-sky background used in the Claritin ads has also made its way into pitches for its successor. The giant blue Clarinex pill in the sky also gives the new ads a dreamlike quality similar to the earlier spots. "This has been a very careful blend of the foundation brand and the next-generation brand," Bashe says.
How many doctors will be persuaded? The ad and education campaigns to get them to write prescriptions for Clarinex are just getting under way, so it's hard to know for sure. Some physicians think Clarinex may last slightly longer than Claritin. But even Schering admits that there's no clinical proof that the drug is superior to Claritin in fighting seasonal rhinitis, or outdoor allergies -- the biggest market for both drugs.
Claritin also had one built-in advantage the new drug lacks. It was one of the first in a class of antihistamines that didn't cause the severe drowsiness associated with previous allergy drugs. But nonsedating antihistamines are common these days. "You won't see people jumping up and down and saying [Clarinex] is the answer to life," says Dr. Robert Naclerio, professor and chief of otolaryngology, head, and neck surgery at the University of Chicago.
Pricing for OTC Claritin hasn't been set. In the meantime, Schering has seen solid sales of Clarinex since its approval. The company has already reached agreements with several health plans to cover the drug, says Schering spokesman Bill O'Donnell. Going head to head with strong rivals such as Pfizer's Zyrtec and Aventis' Allegra, Claritin and Clarinex together had 45.2% of the total antihistamine pill market as of the week ended Mar. 2, according to IMS Health, which tracks prescription-trends data.
"The transition to Clarinex is going well," says Viren Mehta, drug-industry analyst at Mehta Partners. "About 30% of the Claritin base is now at least trying Clarinex. That's a respectable number, since the full-blown allergy season is not upon us."
However, Mehta cautions that the transition could take a nasty turn. Once Claritin becomes available OTC, most managed-care plans will probably still partially pay for Clarinex, but at a higher co-pay cost to the patient.
Of course, if Schering's ads prompt patients to demand Clarinex, and they get good results, the new drug will almost certainly find a place in the battalion of treatments available. With allergies, says Mike Montagne, professor of social pharmacy at Massachusetts College of Pharmacy & Health Sciences in Boston, the more options the better. "You can't know which will work. You start a process of trying different ones until you find one that really works."
Trouble is, it may be hard to tell the difference between Schering's old drug and its replacement. That's where smart marketing could be crucial.
Tsao covers biotechnology issues for BusinessWeek Online. Follow The Biotech Beat every week, only on BusinessWeek Online
Edited by Thane Peterson