When a pharmaceutical company first markets a drug, it is usually under a
patent that, until it expires, the company can use to exclude competitors by suing them for
patent infringement. Pharmaceutical companies that develop new drugs generally only invest in drug candidates with strong patent protection as a strategy to recoup their costs of
drug development (including the costs of the drug candidates that fail) and to make a profit. The average cost to a brand-name company of discovering, testing, and obtaining regulatory approval for a new drug, with a
new chemical entity, was estimated to be as much as US$800 million in 2003 and US$2.6
billion in 2014. Drug companies that bring new products have several
product line extension strategies they use to extend their exclusivity, some of which are seen as gaming the system and labeled "
evergreening" by critics, but at some point there is no patent protection available. Large pharmaceutical companies often spend millions protecting their patents from generic competition. Generic drugs are usually sold for significantly lower prices than their branded equivalents and at lower
profit margins. One reason for this is that competition increases among producers when a drug is no longer protected by patents. The prices are often low enough for users in less-prosperous countries to afford them. Generic drug companies may also receive the benefit of the previous marketing efforts of the brand-name company, including 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. India is a leading country in the world's generic drugs market, exporting US$20.0 billion worth of drugs in the 2019–20 (April–March) year. India exports generic drugs to the United States and the European Union. Also according to the market research community the Global Generic Drugs Market was evaluated US$465.96 million in 2021 and is expected to rise with a CAGR of 5.5% from 2022–2028 during the forecast period. In the United Kingdom, generic drug pricing is controlled by the government's reimbursement rate. The price paid by pharmacists and doctors is determined mainly by the number of license holders, the sales value of the original brand, and the ease of manufacture. A typical price decay graph will show a "scalloped" curve, which usually starts at the brand-name price on the day of generic launch and then falls as competition intensifies. After some years, the graph typically flattens out at approximately 20% of the original brand price. In about 20% of cases, the price "bounces": Some license holders withdraw from the market when the selling price dips below their cost of goods, and the price then rises for a while until the license holders re-enter the market with new stock. The NHS spent about £4.3 billion on generic medicines in 2016–17. In 2012, 84 percent of prescriptions in the US were filled with generic drugs, and in 2014, the use of generic drugs in the United States led to US$254 billion in health care savings. Most developed nations require generic drug manufacturers to prove that their formulations are bioequivalent to their brand-name counterparts. Bioequivalence does not mean generic drugs must be exactly the same as the brand-name product ("pharmaceutical equivalent"). Chemical differences may exist; a different
salt or
ester may be used, for instance. Different inactive ingredients means that the generic may look different from the originator brand; however, the therapeutic effect of the drug must be the same ("pharmaceutical alternative"). Most small molecule drugs are accepted as bioequivalent if their
pharmacokinetic parameters of
area under the curve (AUC) and
maximum concentration (Cmax) are within a 90%
confidence interval of 80–125%; most approved generics in the US are well within this limit. For more complex products—such as
inhalers,
patch delivery systems,
liposomal preparations, or biosimilar drugs—demonstrating pharmacodynamic or clinical equivalence is more challenging.
United States Enacted in 1984, the
Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch–Waxman Act, standardized procedures for recognition of generic drugs. In 2007, the FDA launched the Generic Initiative for Value and Efficiency (GIVE): an effort to modernize and streamline the generic drug approval process, and to increase the number and variety of generic products available. Before a company can market a generic drug, it needs to file an
Abbreviated New Drug Application (ANDA) with the Food and Drug Administration, seeking to demonstrate therapeutic equivalence to a previously approved "reference-listed drug" and proving that it can manufacture the drug safely and consistently. (This range is part of a statistical calculation, and does not mean that generic drugs are allowed to differ from their brand-name counterparts by up to 25 percent.) The FDA evaluated 2,070 studies conducted between 1996 and 2007 that compared the absorption of brand-name and generic drugs into a person's body. The average difference in absorption between the generic and the brand-name drug was 3.5 percent, comparable to the difference between two batches of a brand-name drug. Non-innovator versions of biologic drugs, or biosimilars, require clinical trials for
immunogenicity in addition to tests establishing bioequivalency. These products cannot be entirely identical because of batch-to-batch variability and their biological nature, and they are subject to extra rules. When an application is approved, the FDA adds the generic drug to its
Approved Drug Products with Therapeutic Equivalence Evaluations list and annotates the list to show the equivalence between the reference-listed drug and the generic. The FDA also recognizes drugs that use 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 each group. In order to start selling a drug promptly after the patent on innovator drug expires, a generic company has to file its ANDA well before the patent expires. This puts the generic company at risk of being sued for patent infringement, since the act of filing the ANDA is considered "constructive infringement" of the patent. When faced with patent litigation from the drug innovator or patent holder, generic companies will often counter-sue, challenging the validity of the patent. Like any litigation between private parties, the innovator and generic companies may choose to settle the litigation. Some of these settlement agreements have been struck down by courts when they took the form of
reverse payment patent settlement agreements, in which the generic company basically accepts a payment to drop the litigation, delaying the introduction of the generic product and frustrating the purpose of the Hatch–Waxman Act. Innovator companies sometimes try to maintain some of the revenue from their drug after patents expire by allowing another company to sell an
authorized generic; a 2011 FTC report found that consumers benefitted from lower costs when an authorized generic was introduced during the 180 day exclusivity period, as it created competition. Innovator companies may also present arguments to the FDA that the ANDA should not be accepted by filing an
FDA citizen petition. The right of individuals or organizations to petition the federal government is guaranteed by the First Amendment to the United States Constitution. For this reason, the FDA has promulgated regulations that provide, among other things, that at any time, any "interested person" can request that the FDA "issue, amend, or revoke a regulation or order," and set forth a procedure for doing so.
Acceptance Some generic drugs are viewed with suspicion by doctors. For example,
warfarin (Coumadin) 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
Ontario showed that replacing Coumadin with generic warfarin was safe, but many physicians are not comfortable with their patients taking 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 pharmacists to substitute a brand different from the one prescribed unless the consumer requests it.
Fraud A series of scandals around the approval of generic drugs in the late 1980s shook public confidence in generic drugs; there were several instances in which companies obtained bioequivalence data fraudulently, by using the branded drug in their tests instead of their own product, and a congressional investigation found corruption at the FDA, where employees were accepting bribes to approve some generic companies' applications and delaying or denying others. In 2007,
North Carolina Public Radio's ''The People's Pharmacy'' began reporting on consumers' complaints that generic versions of
bupropion (Wellbutrin) were yielding unexpected effects. Subsequently,
Impax Laboratories's 300 mg extended-release tablets, marketed by
Teva Pharmaceutical Industries, were withdrawn from the US market after the FDA determined in 2012 that they were not bioequivalent. Problems with the quality of generic drugs – especially those produced outside the United States – are widespread as of 2019. The FDA does infrequent – less than annual – inspections of production sites outside the United States. The FDA normally gives advance notice of inspections, which can lead to cover-ups of problems before inspectors arrive; inspections performed with little or no advance notice have produced evidence of serious problems at a majority of generic drug manufacturing sites in India and China. the court held that generic companies cannot be held liable for information, or the lack of information, on the originator's label.
India The
Indian government began encouraging more drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970. The Patents Act removed composition patents for foods and drugs, and though it kept
process patents, these were shortened to a period of five to seven years. The resulting lack of patent protection created a niche in both the Indian and global markets that Indian companies filled by reverse-engineering new processes for manufacturing low-cost drugs. The code of ethics issued by the
Medical Council of India in 2002 calls for physicians to prescribe drugs by their generic names only. India is a leading country in the world's generic drugs market, with
Sun Pharmaceuticals being the largest pharmaceutical company in India. Indian generics companies exported US$17.3 billion worth of drugs in the 2017–18 (April–March) year. In 1945–2017, bioequivalence studies were only required for generics of drugs that are less than four years old. Since 2017, all generic drugs of certain classes, irrespective of age, require bioequivalence to be approved.
China Generic drug production is a large part of the pharmaceutical industry in China. Western observers have said that China lacks administrative protection for patents. However, entry to the
World Trade Organization has brought a stronger patent system. China remains the largest exporter of
active pharmaceutical ingredients, accounting for 40% of the world market per a 2017 estimate. Bioequivalence studies are required for new generic drugs starting from 2016, with older drugs planned as well. In addition,
in vitro dissolution behavior is required to match. Since 2018, 44 classes of drugs are exempt from testing (requiring only a dissolution check), and 13 classes only require simplified testing. == Industry ==