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Schering Decides to Take Claritin Over-the-Counter

Schering-Plough (SGP) said Friday that it would turn its blockbuster allergy drug Claritin into an over-the-counter medicine.

Until now, the Kennilworth, N.J.-based drug maker has been resisting outside efforts to make Claritin available without a doctor's prescription. But in recent weeks, it's become clear that key government officials, most notably Health and Human Services Secretary Tommy Thompson, were amenable to such a switch. And Schering-Plough faces imminent generic competition when Claritin's patent expires in December.

By voluntarily pushing Claritin over the counter, Schering-Plough will make lemonade from lemons. It will be able to keep generic copies of the drug off the market for another three years. And while Claritin will no longer command prices that enabled sales to reach $2.7 billion last year, a larger consumer base for a cheaper, over-the-counter version should still bring upward of $400 million annually, analysts say.

Schering-Plough said Friday it filed a supplemental new drug application with the Food and Drug Administration seeking permission to make the Claritin switch. The company expects the agency to approve the application by the end of November. Details about new pricing were not disclosed.

King of the Hill

Of course, Schering-Plough's decision could have a wider impact on the $5 billion-plus antihistamine market. With Claritin available on drugstore shelves everywhere, consumers may no longer be as eager to seek prescriptions for Pfizer's (PFE - Get Report) Zrytec or Aventis' (AVE) Allegra, which racked up $990 million and $1.5 billion in sales last year, respectively.

And there's also a potential problem with Schering-Plough's own Clarinex, the newer version of Claritin that was recently granted FDA approval. Early Clarinex sales have been strong, an indication that the drug giant has been effective in getting Claritin users to switch over to the new drug. But this effort may slow considerably when Clarinex becomes an over-the-counter medicine, especially because there is little or no difference between the drugs' efficacy.

Richard Zahn, president of Schering Laboratories, said in a statement that the company believes it can use Clarinex to stay atop the prescription allergy drug market, while at the same time establishing Claritin as the leading non-prescription allergy medicine.

Pushed to Decide

Last May, an advisory panel to the FDA voted to recommend an over-the-counter switch for Claritin, Allegra and Zyrtec. The panel's decision was unprecedented because the petitioners seeking to make the change were advocates of lower drug prices, led by health maintenance organization WellPoint Health Networks. The drug companies, naturally, opposed the decision and vowed to take the fight to court if the FDA went along with the decision.

But since then, HHS Secretary Thompson has expressed support for the over-the-counter switch, and Schering-Plough rivals American Home Products (AHP - Get Report) and Johnson & Johnson (JNJ - Get Report) announced plans to make generic forms of Claritin once the drug's patent expired.

In other words, Schering-Plough had little choice but to push Claritin over the counter by itself.

Shares of Schering-Plough closed Thursday at $35.96.

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