Generic drug
A generic drug is a drug
A pharmaceutical drug, also referred to as medicine, medication or medicament, can be loosely defined as any chemical substance intended for use in the medical diagnosis, cure, treatment, or prevention of disease.- Classification :...

 defined as "a drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use." It has also been defined as a term referring to any drug marketed under its chemical name without advertising.

Although they may not be associated with a particular company, generic drugs are subject to the regulations of the governments of countries where they are dispensed. Generic drugs are labelled with the name of the manufacturer and the adopted name
United States Adopted Name
United States Adopted Names are unique nonproprietary names assigned to pharmaceuticals marketed in the United States. Each name is assigned by the USAN Council, which is co-sponsored by the American Medical Association , the United States Pharmacopeial Convention , and the American Pharmacists...

 (nonproprietary name) of the drug.

A generic drug must contain the same active ingredients as the original formulation. According to the U.S. Food and Drug Administration (FDA), generic drugs are identical or within an acceptable bioequivalent
Bioequivalence is a term in pharmacokinetics used to assess the expected in vivo biological equivalence of two proprietary preparations of a drug...

 range to the brand
The American Marketing Association defines a brand as a "Name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers."...

-name counterpart with respect to pharmacokinetic
Pharmacokinetics, sometimes abbreviated as PK, is a branch of pharmacology dedicated to the determination of the fate of substances administered externally to a living organism...

 and pharmacodynamic
Pharmacodynamics is the study of the biochemical and physiological effects of drugs on the body or on microorganisms or parasites within or on the body and the mechanisms of drug action and the relationship between drug concentration and effect...

 properties. By extension, therefore, generics are considered (by the FDA) identical in dose, strength, route of administration, safety, efficacy, and intended use. The FDA's use of the word "identical" is very much a legal interpretation
Statutory interpretation
Statutory interpretation is the process by which courts interpret and apply legislation. Some amount of interpretation is always necessary when a case involves a statute. Sometimes the words of a statute have a plain and straightforward meaning. But in many cases, there is some ambiguity or...

, and is not literal. In most cases, generic products are available once the patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

 protections afforded to the original developer have expired. When generic products become available, the market competition often leads to substantially lower prices for both the original brand name product and the generic forms. The time it takes a generic drug to appear on the market varies. In the US, drug patents give 20 years of protection, but they are applied for before clinical trials begin, so the "effective" life of a drug patent tends to be between seven and 12 years.

Medical prescription
A prescription is a health-care program implemented by a physician or other medical practitioner in the form of instructions that govern the plan of care for an individual patient. Prescriptions may include orders to be performed by a patient, caretaker, nurse, pharmacist or other therapist....

 may be issued for drugs specifying only the chemical name, rather than a manufacturer's name; such a prescription can be filled with a drug of any brand meeting the specification. For example, a prescription for lansoprazole
Lansoprazole is a proton-pump inhibitor which prevents the stomach from producing gastric acid. It is manufactured by a number of companies worldwide under several brand names . It was first approved by the U.S...

 can be filled with generic lansoprazole, Prevacid, Helicid, Zoton, Inhibitol, or Monolitum.


Generic drugs are usually sold for significantly lower prices than their branded equivalents. One reason for the relatively low price of generic medicines is that competition increases among producers when drugs no longer are protected by patents. Companies incur fewer costs in creating generic drugs (only the cost to manufacture, rather than the entire cost of development and testing) and are therefore able to maintain profitability at a lower price. The prices are low enough for users in many less-prosperous countries to afford them. For example, Thailand has imported millions of doses of a generic version of the blood-thinning drug Plavix (used to help prevent heart attacks), at a cost of 3 US cents per dose, from India, the leading manufacturer of generic drugs.

In the UK, generic drug pricing is controlled only by the reimbursement price. Beneath this, the price paid by chemists and doctors is determined mainly by the number of licence holders, the sales value of the originator brand and the ease of manufacture. A typical price decay graph will show a 'scalloped' curve, which usually starts out on the day of generic launch at the brand price, and then falls as competition intensifies. After some years, the graph typically flattens out at approximately 20% of the originator brand price. In about 20% of cases, the price 'bounces', which means some licence holders withdraw from the market when the selling price dips below their cost of goods. The price then rises for a while until they re-enter the market with new stock.

Generic manufacturers do not incur the cost of drug discovery
Drug discovery
In the fields of medicine, biotechnology and pharmacology, drug discovery is the process by which drugs are discovered or designed.In the past most drugs have been discovered either by identifying the active ingredient from traditional remedies or by serendipitous discovery...

. Sometimes, reverse-engineering is used to develop bioequivalent
Bioequivalence is a term in pharmacokinetics used to assess the expected in vivo biological equivalence of two proprietary preparations of a drug...

 versions to existing drugs. Generic manufacturers also do not bear the burden of proving the safety and efficacy
Efficacy is the capacity to produce an effect. It has different specific meanings in different fields. In medicine, it is the ability of an intervention or drug to reproduce a desired effect in expert hands and under ideal circumstances.- Healthcare :...

 of the drugs through clinical trial
Clinical trial
Clinical trials are a set of procedures in medical research and drug development that are conducted to allow safety and efficacy data to be collected for health interventions...

s, since these trials have already been conducted by the brand name company. (See the Approval and regulation section, below, for more information about the approval process.) The average cost to brand-name drug companies of discovering and testing a new innovative drug (with a new chemical entity) has been estimated to be as much as $800 million. Merril Goozner estimates the true cost is closer to $100–$200 million.

Generic drug companies may also receive the benefit of the previous marketing efforts of the brand-name drug company, including media advertising, presentations by drug representatives, and distribution of free samples. Many drugs introduced by generic manufacturers have already been on the market for a decade or more, and may already be well known to patients and providers (although often under their branded name).

For as long as a drug patent lasts, a brand name company enjoys a period of “market exclusivity” or monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

, in which the company is able to set the price of the drug at a level which maximizes profitability
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...

. The profit often greatly exceeds the development and production costs of the drug. (This is partially offset by research and development of other drugs which do not make a profit.) The advantage of generic drugs to consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...

s comes in the introduction of competition
Competition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...

, which prevents any single company from dictating the overall market price of the drug. Competition is also seen between generic and name-brand drugs with similar therapeutic uses when physicians or health plans adopt policies of preferentially prescribing generic drugs as in step therapy
Step therapy
In managed medical care step therapy is an approach to prescription intended to control the costs and risks posed by prescription drugs. The practice begins medication for a medical condition with the most cost-effective and safest drug therapy and progresses to other more costly or risky therapies...

. With multiple firms producing the generic version of a drug, the profit-maximizing price generally falls to the ongoing cost of producing the drug, which is usually much lower than the monopoly price.

When a generic drug can be produced

When a pharmaceutical company first markets a drug, it is usually under a patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

 that, until it expires, allows only the pharmaceutical company that developed the drug (or its licensees) to sell it. Generic drugs can be produced without patent infringement for drugs where: 1) the patent has expired, 2) the generic company certifies the brand company's patents are either invalid, unenforceable or will not be infringed, 3) for drugs which have never held patents, or 4) in countries where the drug does not have current patent protection. Patent lifetime differs from country to country; typically an expired patent cannot be renewed. In the U.S., patent extensions may be granted if changes are made; some pharmaceutical companies have sought extensions on things as minor as changes to the shape and color of the pill; generic makers are excluded while the adjudication of the extension is considered. A new version of the drug with significant changes to the compound could be patented, but this requires new clinical trials. In addition, a patent on a changed compound does not prevent sales of the generic versions of the original drug unless regulators take the original drug off the market, as happened in the case of terfenadine
Terfenadine is an antihistamine formerly used for the treatment of allergic conditions. It was brought to market by Hoechst Marion Roussel and marketed under various brand names including Seldane in the United States, Triludan in the United Kingdom, and Teldane in Australia...


This allows the company to recoup the cost of developing that particular drug. After the patent on a drug expires, any pharmaceutical company can manufacture and sell it; only manufacturing cost will be incurred, which is a small fraction of the cost of original testing and development the drug.

In the U.S., the Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...

, which President Obama signed on March 23, 2010, authorized the Food and Drug Administration to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed.

Challenging patents

Brand-name drug companies have used a number of strategies to extend the period of market exclusivity on their drugs, and prevent generic competition. This may involve aggressive litigation to preserve or extend patent protection on their medicines, a process referred to by critics as “evergreening
Evergreening refers to a variety of legal and business strategies by which technology producers with patents over products that are about to expire, retain rent from them by either taking out new patents or by buying out or frustrating competitors, for longer periods of time than would normally be...

”. Patents are typically issued on novel pharmacological compounds quite early in the drug development
Drug development
Drug development is a blanket term used to define the process of bringing a new drug to the market once a lead compound has been identified through the process of drug discovery...

 process, at which time the ‘clock’ to patent expiration begins ticking. Later in the process, drug companies may seek new patents on the production of specific forms of these compounds, such as single enantiomer
In chemistry, an enantiomer is one of two stereoisomers that are mirror images of each other that are non-superposable , much as one's left and right hands are the same except for opposite orientation. It can be clearly understood if you try to place your hands one over the other without...

s of drugs which can exist in both “left-handed” and “right-handed” forms, different inactive components in a drug salt, or a specific hydrate
Hydrate is a term used in inorganic chemistry and organic chemistry to indicate that a substance contains water. The chemical state of the water varies widely between hydrates, some of which were so labeled before their chemical structure was understood....

 form of the drug salt. If granted, these patents ‘reset the clock’ on patent expiration. These sorts of patents may later be targeted for invalidation (“paragraph IV certification”) by generic drug manufacturers.

Generic drug exclusivity in the US

The U.S. FDA offers a 180-day exclusivity period to generic drug manufacturers in specific cases. During this period, only one (or sometimes a few) generic manufacturers can produce the generic version of a drug. This exclusivity period is only used when a generic manufacturer argues that a patent is invalid or is not violated in the generic production of a drug, and the period acts as a reward for the generic manufacturer who is willing to risk liability in court and the cost of patent court litigation. There is often contention around these 180-day exclusivity periods because a generic producer does not have to produce the drug during this period and can file an application first to prevent other generic producers from selling the drug.

Recently, the purpose of the exclusivity "bonus" provided for by the Hatch-Waxman amendments
Drug Price Competition and Patent Term Restoration Act
-Overview:The Drug Price Competition and Patent Term Restoration Act, informally known as the "Hatch-Waxman Act" [Public Law 98-417], is a 1984 United States federal law which established the modern system of generic drugs...

 was turned on its head when the original patent holder, Cephalon
Cephalon, Inc. is a U.S. biopharmaceutical company co-founded in 1987 by Dr. Frank Baldino, Jr., a pharmacologist and former scientist with the DuPont Company, who served as the company's chairman and chief executive officer until his death in December 2010...

, instituted patent infringement suits against all companies holding generic exclusivity rights to manufacture modafinil
Modafinil is an analeptic drug manufactured by Cephalon, and is approved by the U.S. Food and Drug Administration for the treatment of narcolepsy, shift work sleep disorder, and excessive daytime sleepiness associated with obstructive sleep apnea...

, the generic name for Cephalon's still-profitable stimulant
Stimulants are psychoactive drugs which induce temporary improvements in either mental or physical function or both. Examples of these kinds of effects may include enhanced alertness, wakefulness, and locomotion, among others...

 drug, Provigil. "Settlement" of this suit with Cephalon was hardly a risky endeavor for the generic manufacturers, as it was Cephalon which agreed to pay Provigil's alleged infringers in excess of a billion dollars – if they agreed not to market generics for Provigil during their period of exclusivity. In effect, Cephalon was able to extend its exclusive right to manufacture Provigil even though Cephalon's patent for it had already run out.

Large pharmaceutical companies often spend millions of dollars protecting their patents from generic competition. Apart from litigation, companies use other methods, such as reformulation or licensing a subsidiary (or another company), to sell generics under the original patent. Generics sold under license from the patent holder are known as authorized generics
Authorized generics
Authorized generics are prescription drugs produced by brand pharmaceutical companies and marketed under a private label, at generic prices. Authorized generics compete with generic products in that they are identical to their brand counterpart in both active and inactive ingredients; whereas...

; they are not affected by the 180-day exclusivity period, as they fall under the patent holder's original drug application.

A prime example of how this works is simvastatin
Simvastatin is a hypolipidemic drug used to control elevated cholesterol, or hypercholesterolemia. Simvastatin is a member of the statin class of pharmaceuticals, is a synthetic derivate of a fermentation product of Aspergillus terreus.-Medical uses:The primary uses of simvastatin is for the...

 (Zocor), a popular drug created and manufactured by US-based Merck & Co.
Merck & Co.
Merck & Co., Inc. , also known as Merck Sharp & Dohme or MSD outside the United States and Canada, is one of the largest pharmaceutical companies in the world. The Merck headquarters is located in Whitehouse Station, New Jersey, an unincorporated area in Readington Township...

, which lost its US patent protection on June 23, 2006. India-based Ranbaxy Laboratories
Ranbaxy Laboratories
Ranbaxy Laboratories Limited is a pharmaceutical company that was incorporated in India in 1961. The company went public in 1973 and Japanese pharmaceutical company Daiichi Sankyo gained majority control in 2008...

 (at the 80 mg strength) and Israel-based Teva Pharmaceutical Industries
Teva Pharmaceutical Industries
Teva Pharmaceutical Industries Ltd. , is an international pharmaceutical company headquartered in Petah Tikva, Israel. It specializes in generic and proprietary pharmaceuticals and active pharmaceutical ingredients...

 (at all other strengths) received 180-day exclusivity periods for simvastatin; due to Zocor's popularity, both companies began marketing their products immediately after the patent expired. However, Dr. Reddy's Laboratories
Dr. Reddy's Laboratories
Dr. Reddy's Laboratories Ltd. is an integrated pharmaceutical company focused on providing medicines through its three business segments: Global Generics segment, Pharmaceutical Services and Active Ingredients segment and Proprietary Products segment. The company was founded by Dr...

 also markets an authorized generic version of simvastatin under license from Zocor's manufacturer, Merck & Co.; some packages of Dr. Reddy's simvastatin even show Merck as the actual manufacturer and have Merck's logo on the bottom.

Ensuring bioequivalence

Most nations require generic drug manufacturers to prove their formulation exhibits bioequivalence
Bioequivalence is a term in pharmacokinetics used to assess the expected in vivo biological equivalence of two proprietary preparations of a drug...

 to the innovator product. In the U.S., the FDA must approve generic drugs just as innovator drugs must be approved. The FDA requires the bioequivalence of the generic product to be between 80% and 125% of that of the innovator product.

This value range is part of a statistical calculation, and does not mean the FDA allows generic drugs to differ from the brand name counterpart by up to 25 percent. FDA recently evaluated 2,070 human studies conducted between 1996 and 2007, which compared the absorption of brand name and generic drugs into a person’s body; they were submitted to the FDA to support approval of generics. The average difference in absorption into the body between the generic and the brand name was 3.5 percent, comparable to differences between two different batches of a brand name drug.

Bioequivalence, however, does not mean generic drugs must be exactly the same (“pharmaceutical equivalent”) as their innovator product counterparts, as chemical differences may exist (different salt or ester
Esters are chemical compounds derived by reacting an oxoacid with a hydroxyl compound such as an alcohol or phenol. Esters are usually derived from an inorganic acid or organic acid in which at least one -OH group is replaced by an -O-alkyl group, and most commonly from carboxylic acids and...

 – a “pharmaceutical alternative”).

A physician survey in the US found only 17% of prescribing physicians correctly identified the USFDA's standards for bioequivalency of generic drugs. A latest development to address this issue enables interested doctors and consumers to check generic drug interactions and outcomes detail to the specific drug and drug company.

The generic equivalent of warfarin
Warfarin is an anticoagulant. It is most likely to be the drug popularly referred to as a "blood thinner," yet this is a misnomer, since it does not affect the thickness or viscosity of blood...

 has only been available under the brand name Coumadin
*For the rodenticide class of anticoagulant poisons sometimes loosely referred to as coumadins or coumarins, see 4-hydroxycoumarins.*For the pharmaceutical with the trade name Coumadin, see warfarin....

 in North America until recently. Warfarin (either under the trade name or the generic equivalent) has a narrow therapeutic window and requires frequent blood tests to make sure patients do not have a subtherapeutic or a toxic level. A study performed in the Canadian
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 province of Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....

 showed that replacing Coumadin with generic warfarin was safe. In spite of the study, many physicians are not comfortable with their patients taking the branded generic equivalents. In some countries (for example, Australia) where a drug is prescribed under more than one brand name, doctors may choose not to allow the pharmacist to substitute a brand different from prescribed unless the consumer requests a generic brand.

U.S. generics approval process

Enacted in 1984, the U.S. Drug Price Competition and Patent Term Restoration Act
Drug Price Competition and Patent Term Restoration Act
-Overview:The Drug Price Competition and Patent Term Restoration Act, informally known as the "Hatch-Waxman Act" [Public Law 98-417], is a 1984 United States federal law which established the modern system of generic drugs...

, informally known as the Hatch-Waxman Act, standardized U.S. procedures for recognition of generic drugs. An applicant files an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration
Food and Drug Administration
The Food and Drug Administration is an agency of the United States Department of Health and Human Services, one of the United States federal executive departments...

 (FDA), and seeks to demonstrate therapeutic equivalence to a specified, previously approved “reference listed drug”. When an ANDA is approved, the FDA adds the drug to its Approved Drug Products list, also known as the Orange Book, and annotates the list to show equivalence between the reference listed drug and the approved generic. The FDA also recognizes drugs using the same ingredients with different bioavailability, and divides them into therapeutic equivalence groups. For example, as of 2006, diltiazem hydrochloride had four equivalence groups, all using the same active ingredient, but considered equivalent only within a group.

On October 4, 2007, FDA launched the Generic Initiative for Value and Efficiency, or GIVE. GIVE will use existing resources to help FDA modernize and streamline the generic drug approval process. It also aims to increase the number and variety of generic drug products available. Having more generic-drug options means more cost-savings to consumers, as generic drugs cost about 30 percent to 80 percent less than brand name drugs.

In the United States, generic drug substances are named through review and recommendation of the United States Adopted Names (USAN) Council.

Litigation and U.S. Supreme Court ruling

Two women who say they suffered severe medical complications from a generic drug lost their Supreme Court appeal on Thursday, June 23, 2011, essentially ending their separate lawsuits against pharmaceutical manufacturers.

The justices in a 5-4 ruling said generic drug companies do not share the same level of responsibility as makers of brand-name equivalents, to update their warning labels when significant new risks emerge.

The financial and safety implications from the court's ruling could prove enormous.


See also

  • Chemical and pharmaceutical patents
  • Clinical monitoring
    Clinical monitoring
    Clinical monitoring - Oversight and administrative efforts that monitor a participant's health during a clinical trial. The government and other clinical trial funding agencies require data and safety monitoring boards to oversee clinical trials...

  • Clinical protocol
  • Clinical research
    Clinical research
    Clinical research is a branch of medical science that determines the safety and effectiveness of medications, devices, diagnostic products and treatment regimens intended for human use...

  • Clinical trial management
    Clinical trial management
    A clinical trial is the application of the scientific method to human health. Since such trials require the use of human test subjects and can severely impact the well-being of the subjects, as well as treatments of other people and large amounts of capital for those performing the trial, the...

  • Evergreening
    Evergreening refers to a variety of legal and business strategies by which technology producers with patents over products that are about to expire, retain rent from them by either taking out new patents or by buying out or frustrating competitors, for longer periods of time than would normally be...

  • Generic-brand
  • Inverse benefit law
    Inverse benefit law
    The Inverse Benefit Law states that the ratio of benefits to harms among patients taking new drugs tends to vary inversely with how extensively a drug is marketed...

  • Research exemption
    Research exemption
    In patent law, the research exemption or safe harbour exemption is an exemption to the rights conferred by patents, which is especially relevant to drugs...

     (in patent law)
  • Prescription costs
    Prescription costs
    Prescription costs are a common health care cost for many people and also the source of considerable economic hardship for some. These costs are sometimes referred to as out-of-pocket prescription costs, since for those with insurance, the total cost of their prescriptions may include expenses...

External links

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