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P&G aims to give its rivals heartburn

Published Sep. 1, 2005

Procter & Gamble Co. has identified the ideal customer for its latest product. Her name is Joanne. She is a mother over 35. She shops for her entire household. And she has heartburn.

P&G is gearing up for what it hopes will be crowds of Joannes to rush to stores Monday and snap up purple packages of Prilosec OTC, its over-the-counter version of AstraZeneca PLC's blockbuster prescription heartburn drug. P&G says Prilosec OTC will sell for well under $1 a pill.

P&G will bring its compulsive consumer research _ and a $100-million marketing campaign, including a former soap opera star _ to one of its most important product launches ever. The company has stumbled in the drug business before, including a failed attempt in 2000 to make a big pharmaceutical acquisition. Since then, P&G has pursued less risky pharmaceutical strategies.

Despite some successes _ P&G led the over-the-counter launch of the pain reliever Aleve, and its osteoporosis drug Actonel is a solid seller _ the company has been unable to come up with blockbuster drugs. Now, it is making a big push to establish marketing partnerships with big drug companies as they take prescription drugs over-the-counter.

Prilosec OTC will test this ambition. P&G is hoping the product will generate $200-million to $400-million in retail sales in its first year. For P&G, which already sells Metamucil, Vicks and Pepto-Bismol, Prilosec OTC is its biggest drug launch by far. The results will say much about whether pharmaceutical products can be sold like detergent and diapers.

The market for "proton-pump inhibitors," or PPIs _ which stop the acid-producing pumps that cause heartburn _ stands at $13-billion. But the field is as crowded as a pepperoni-and-sausage pizza. Prilosec was once the best-selling drug in the world, with sales that peaked in 2000 at $6.3-billion. Last year, AstraZeneca's patent ran out and sales dropped to $4.6-billion amid competition from cheaper generic versions. AstraZeneca tried switching people to a similar prescription drug, marketed under the new name Nexium, while continuing to produce the original Prilosec for over-the-counter use with P&G as the marketer.

Prilosec OTC will encounter some formidable OTC rivals, including Pepcid, sold by a joint venture of Johnson & Johnson and Merck & Co. Already, Pepcid is running ads saying Pepcid gets rid of heartburn immediately. The implication is that Prilosec OTC _ which must be taken before symptoms start and is most effective if taken for 14 days _ doesn't act as quickly.

The Johnson & Johnson-Merck joint venture sued P&G last week over its advertising for Prilosec OTC, saying P&G was claiming that its drug eliminates heartburn in 24 hours with a single pill, when in fact the treatment requires "14 pills _ not one." But Greg Allgood, associate director of Proctor & Gamble's Health Sciences Institute, said, "Our advertising is absolutely true. Every day, including the first day, there's a significant relief of heartburn."

P&G's challenge will be to win back defectors from Prilosec who switched to other heartburn drugs. The product will be the first PPI available in an over-the-counter format. P&G believes the convenience of picking up Prilosec OTC with the rest of the groceries will be a meaningful point for consumers.

The product will get another edge from Aetna Inc. and other big insurers eager to reduce a major source of drug outlays. As of next week, Aetna will stop covering Prilosec (and any other prescription omeprazole sold in a 20-milligram dose, as Prilosec OTC is) for the majority of members in its drug plans, steering them instead to Prilosec OTC. Patients filling prescriptions for competing PPIs will pay a co-payment ranging from $20 to $35, making Prilosec OTC a good deal. In part because of the insurance advantage, many doctors anticipate that about 25 percent of PPI users will switch to Prilosec OTC.

Wellpoint Health Networks, a big insurer that helped Claritin make the OTC switch, is going further. It is sending many of its PPI users one coupon for a free 14-pill box of Prilosec OTC and two coupons for $10 discounts. Dr. Robert Seidman, Wellpoint's chief pharmacy officer, said the goal is to sway more than half of PPI users to switch to Prilosec OTC. Roughly 8 percent of Wellpoint's annual $1.5-billion prescription drug costs are for PPIs.

P&G has created a 24-hour "command center." A fleet of 1,200 trucks is delivering Prilosec OTC to retailers so that the product hits many shelves at one minute past midnight Monday. P&G drove a purple van through 24 cities in a "Burntown Challenge" to help promote Prilosec OTC directly to consumers. The company has made an unprecedented effort with retailers like Wal-Mart Stores Inc. to teach pharmacists how to push Prilosec on shoppers. Commercials are already running on TV and in stores, featuring a male former star of Guiding Light and As the World Turns. The slogan: "One pill, 24 hours, zero heartburn. It's possible with Prilosec OTC."

Guiding the campaign is P&G's vaunted research. "We know Joanne," said Joseph A. Arcuri, the executive heading up the Prilosec initiative. "We know what she feels. We know what she eats. We know what else she likes to buy in the store." Joanne, a composite of the army of consumers P&G interviewed, isn't like the stereotypical heartburn sufferer, a late-night, pizza-eating, beer-guzzling guy. Joanne's heartburn can be triggered by something as seemingly innocuous as a cup of coffee, said Arcuri.

In other words: you don't have to stuff yourself on chili dogs to have heartburn.

_ Information from Bloomberg News was used in this report.