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What Are Generic Drugs?

Generic drugs are affordable but what are they?

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In a very broad sense, there are two classes of drugs in the U.S.: branded drugs and generic drugs.

Branded drugs come from the big drug companies—also known as Big Pharma—such as Pfizer, Johnson & Johnson and GlaxoSmithKline. The drugs they manufacture have patented names such as Valium, Lipitor and Viagra. Generic drugs are different.

Generic drugs are also known as copycat drugs. They are exact replicas of the branded drugs and typically go by their chemical name—Lipitor’s generic is called atorvastatin, for example. They do not have a patent.

Generic drugs are released to the market and are available to consumers many years after branded drugs. Once the Food and Drug Administration (FDA) has approved a branded drug, it is given 20 years of patent life, although typically, a drug’s patent is granted before the drug is approved so the drug tends to have an average of 12 years and 3 months’ market exclusivity in the U.S. Once those years have ended, generic drugs can be released.

The first generic drug to be approved by the FDA is given 180 days of market exclusivity.

There are a number of companies developing and manufacturing generic drugs including Teva Pharmaceuticals, Mylan, Sandoz Pharmaceuticals and Watson. These companies must prove to the FDA that their drug’s active ingredients are a perfect replica of the branded drug’s.

Things are looking good for generic drug manufacturers. Generic drugs accounted for 76% of all of the prescription drugs dispensed last year. But looking only at drugs for which there’s a generic equivalent available, 92% of the drugs dispensed were generic.

This a far cry from just 11 years ago, in 2011, when only 50% of all drugs dispensed were generic and 80% to 85% of those with generic equivalents were generically dispensed.

This increase in generic drugs is largely due to cost, of course but also to the expiration of the patents for several branded drugs, and also to consumers’ increasing education—more people are now aware that a generic drug is every bit as good as its branded counterpart.

The first generic on the market typically costs more for its 180 days of exclusivity, until the market is flooded by more approvals.

Generic drug manufacturers are able to produce the drugs so cheaply because they simply copy the branded drug’s “recipe,” and need not spend vast sums of money on years of R&D or on proving the safety of the drugs. They also usually don’t even need to market the drug since they dovetail onto the branded drug’s earlier marketing campaigns.

The generic drug industry is growing, but it still faces a number of hurdles, all of which are moving towards resolution at incredibly slow speed. These include:

• Biogenerics.

Biogenerics are generic versions of biologic drugs. There still exists no pathway to approve these drugs in the United States because, say opponents, they cannot be an exact match of a biotech drug.

• Authorized generics

Authorized generics are branded drugs disguised as generics. Branded companies supply their drug to a generic firm, or to their own generic subsidiary, to market the product as a generic in return for royalties. Many people say these are nothing but bad news for the generic drug industry because they cut into the 180-day exclusivity period that is granted to the first generic (or generics, if several are approved on the same day) on the market—and they are increasing. In the opposing camp, however, are the generics companies who contract with the brand companies to make their authorized generic products—and reap the financial rewards.

• Citizen’s Petitions

Long a bane in the side of generic pharmaceutical companies, citizen’s petitions, which are typically launched by a brand company in an attempt to delay the launch of a generic, have been proliferating for years now.

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