Pepcid AC: Racing to OTC Market Harvard Case Solution & Analysis


Most pharmaceutical companies anticipated growth in the over-the counter market as many consumers sought to diagnose and self-medicate their common ailments. OTC market seems to have a future growth because self-medication is widely adopted and convenient for health care payer. Many companies initiated an approach to introduce the OTC market to increase the revenue.Sectors of the OTC market growth opportunities are emerging, markets are maturing, leading competitors, in antacids such as Mylanta, Tum and Maalox have significant market share and difficult to compete them.

Pepcid AC is the prescription treatment for heartburn, which is commercialized and developed by Merck. The company has no experience in bringing the prescription drugs in the OTC market. Merck joined hands with the Johnson & Johnson a leading brand and have years of experience in selling consumer products. The result to become a mutual beneficial alliance known as JJM.

Many pharmaceutical companies enjoyed financial growth when switching their product from prescription drugs to OTC market. JJM after thorough research on the basis of clinical and OTC procedure, decided to switch Pepcid in the OTC market. But the main challenge is to get approval from an FDA advisory committee. In July 1994, an FDA advisory committee went against to sell the Pepcid AC due to lack of strength as an OTC market.


In March 1989, Johnson & Johnson and Merck joined hands to form a joint venture known as Johnson & Johnson/Merck Pharmaceutical Co. (JJM). The company produces the Pepcid AC which is the drug H2 receptor antagonists. This drug helps to reduce stomach secretion and relief from ulcers and heartburn. Pepcid has a stable market position, but market dominance is not more than Tagamet and Zantac. It was a critical for Pepcid to lead the competitors and hoped to gain market share in the OTC market.

The problem statement arises in the case that JJM wants to introduce Pepcid AC and reducing lower dosage prescription drugs and market the product in Over-the-counter medicine. Based on its efficacy in heartburn treatment and prevention, an application to market the Pepcid AC was rejected by the advisory committee of the FDA. The management of JJM has presented an alternate solution and developed strategy to prove efficacy of Pepcid as an OTC product. The aim and objective of the JJM have been to enter Pepcid AC into the market before the SmithKline Beecham’s Tagamet and other competitors in the same category.\

Pepcid AC Racing to OTC Market Case Solution

It is important for Pepcid to gain market share and enter the market as a first mover advantage. The Pepcid must have a price advantage over competitors. Since Tagamet and Zantac established more credibility and market share in the prescription drugs domain that can adversely affect the sales revenue and profits of the Pepcid. OTC offers huge opportunity for the pharmaceutical companies to switch prescriptions drugs. Especially, with the patent protection who are nearly to expire, big pharmaceutical companies try to extend the patent life or introduce in the OTC market in order to continue sales and revenue.

Recently, the possibility of developing lower dosage of Pepcid in OTC market has been a huge challenge and became an effective business preposition. All major competitors in H2 receptor antagonists entered in a race to get approval from the FDA as a lower prescription drug. In order to get approval, the drug producer company should prove the efficacy of medication. FDA approval for switching prescription drugs into Over-to-counter involves less time and cost. FDA did not approve the Pepcid because the product needs to go for more clinical research. Sense of urgency and product differentiation leads the Taga met in the FDA’s approval for OTC market.

Over 97% of the antacid users and 91% frequent users are satisfied with the current product such as Tums, Pepto-Bismol and Maalox, these companies have great market share in the antacid. In order to compete these companies the Pepcid has to develop strategies and involves talented employees in decision making task. It should encourage employees in the future, listen to their innovative ideas, and include employee’s ideas in developing the strategies for better outcomes. The Tagamet has well developed confidence among users.  The price of the Tagamet is lower than the Pepcid due to additional license fees.............

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