Branded drugs are drugs made by big pharmaceutical companies such as Pfizer, Johnson & Johnson and GlaxoSmithKline, and are available either by prescription or over-the-counter.
These massive companies—known collectively as Big Pharma—spend many years and millions of dollars to research and develop drugs to treat everything from migraines to high blood pressure and erectile dysfunction. Each drug has a patented name such as Lyrica or Viagra. These products drive innovation in the drug industry.
Once the company has developed and produced a drug, it must be tested on human subjects. Each drug must be tested for safety and efficacy through clinical trials
Finally, once this process has been completed, and the drug has been proven efficacious, it is submitted to the Food and Drug Administration (FDA) for approval.
Once the FDA has approved a drug—a process that can take several years—it is granted 20 years of exclusivity. This means that no other product can be released onto the market to compete with it during this time.
However, because these are applied for before the clinical trials begin, often by the time a drug is available for consumers, several years of this have already been eaten up. In fact, the average branded drug only typically gets between seven and 12 years of market exclusivity.
The big pharmaceutical companies then have another financial outlay once their product has been approved—marketing. This is also a huge cost that they hope to recoup through the price of their drugs.
Because an exclusive drug has no competitors it is generally expensive until competition—in the form of other branded drugs or a generic version of the drug—is released. This expense is intended to cover the pharmaceutical company’s extensive R&D and marketing costs as well as contribute to future drugs it wants to develop.
Big Pharma often attempts to extend the market exclusivity of its drugs. This is regularly done by slightly changing the formulation of the drug and thus receiving a new patent, which re-starts the exclusivity period again. The companies also aggressively fight competition with harsh litigation.
Every so often a blockbuster drug comes along. These are drugs that generate more than $1 billion in sales each year. Examples of these drugs are Pfizer’s Lipitor (which treats high cholesterol ), Bristol-Myers Squibb and Sanofi-Aventis’ Plavix (to prevent the risk of heart attacks and strokes) and AstraZeneca’s Prilosec (for gastroesophageal reflux disease, or GERD).