Generic drugs (small molecule)

RECENT NEWS
Forbes  3 hrs ago  Comment 
While Walgreen's top line continues to grow, it faces ongoing pressure on gross margins. The company believes that the margin pressure will persist in the short-term. A cautious consumer, ongoing reimbursement pressure, generic drug inflation and...
Forbes  3 hrs ago  Comment 
The deal makes sense in light of Abbott’s recent efforts to expand its generic drug business in high-growth emerging markets such as China, India, Latin America and Russia because of sustained sluggishness in developed markets. Per the terms of...
FiercePharma  Dec 17  Comment 
Weeks after Belgium's UCB announced that it would sell its U.S. generic drug business for $1.53 billion, the company is calling off the sale in light of regulatory pushback over one of the unit's products.
FiercePharma  Dec 16  Comment 
The Federal Trade Commission is urging a Pennsylvania federal court to move forward with its pay-for-delay lawsuit against AbbVie, rejecting the company's arguments that it did not keep a generic version of its testosterone powerhouse AndroGel off...
The Hindu Business Line  Dec 15  Comment 
Minor tweaks by pharma cos prevent drugs from becoming generic: Atul Gawande
FiercePharma  Dec 15  Comment 
With a bounce-back in share price, Teva's in a position to do something it hasn't done much over the past few years: buy companies. And when it comes to getting back into the M&A game, CEO Erez Vigodman has a few types of targets at the top of his...
Benzinga  Dec 13  Comment 
A recent Morgan Stanley report presented analysts’ case for why they believe that generic drug prices will be on the rise in the near future. Reasons for generic drug price inflation include increased FDA regulatory obstacles, consolidation...
The Times of India  Dec 13  Comment 
In a move which will bring cheer to patients and generic companies pursuing affordable treatments, the Supreme Court on Friday dismissed Bayer’s appeal on the compulsory licence (CL) issued on kidney and cancer drug, Nexavar.
Reuters  Dec 12  Comment 
REUTERS - German drugmaker Bayer has failed in a last-ditch attempt to block the sale of a cheap generic version of its cancer drug Nexavar in India, after the Supreme Court ruled against it on Friday.




 
TOP CONTRIBUTORS

For information on generic biologics, see Generic Drugs (Biogenerics and Biosimilars).

Generic drugs are drugs manufactured and marketed without a brand name. In practice, generics are often marketed as equivalents to branded drugs. Generic drugs are generally much cheaper than their branded counterparts for a number of reasons. First, drug development is extremely time consuming and costly. On average, brand-name drug companies spend about $800 million to discover, develop, and produce a new drug. They then have to charge fairly high prices to recoup their investment and actually make a profit. Generic manufacturers, however, don't have to spend nearly as much on drug development. To gain FDA approval, all a company has to do is prove that its version of a drug is chemically equivalent to the original. If the chemical makeup is the same, it's assumed that the research and clinical trials are as applicable to the generic version as they were to the original. Also, generics manufacturers benefit from advertising for branded drugs, lowering their own marketing expenses.

In the U.S., pharmaceutical patents last for 17 years, during which time only the original developer can legally produce the drug covered by the patent. After the expiration of the patent, other drug companies can produce and sell generic versions of the drug. This often leads to price competition, which decreases profits for the manufacturers of branded drugs. Even before patent expiration, generic drug companies can challenge the patent's validity or argue that their version doesn't infringe on the existing drug's patent. The first company to apply for FDA approval for a generic, in spite of an existing patent, receives a 180-day period of exclusivity to produce and sell the generic version. Though a legal battle usually ensues, resulting in significant litigation expenses, the profits from selling the generic version are generally far more than enough to cover any legal costs.

Generic drugs are often brought up in debates about the U.S. health care system as a whole. Many claim that pharmaceutical companies overcharge for their prescription drugs, making quality healthcare too expensive for some to afford. Drug companies cite the high costs of drug development as the reason for high end-user prices. They also often decry the length of patent protection, saying that they have to recoup all the money spent on development within a relatively limited period of time, forcing them to charge higher prices. Nonetheless, there is growing political pressure to lower prescription drug prices and relax the restrictions on generic drug production, despite pharmaceutical companies' warnings that this could slow or hinder the development of life-saving drugs.

Who benefits from generic drugs?

Generic drug companies

Insurance companies

Pharmacies

  • Walgreen Company (WAG), CVS (CVS), Rite Aid (RAD), and Longs Drug Stores (LDG) are four of the largest pharmacy chains in the U.S. Generic drugs are much cheaper than their branded counterparts, so pharmacies are able to purchase their drugs at lower wholesale prices. While some of the cost savings is passed on to customers, the pharmacies are able to still make much higher profit margins on generic drugs. As the chart below demonstrates, the price difference between branded and generic drugs is often not as large as would be expected, considering the much lower costs involved with producing and developing generic drugs.
Brand name and generic drug prices, by retailer
Drug name, dosage, and quantity Costco Walgreens CVS
Zoloft 25mg (30) $85.99 $93.99 $90.59
Sertraline 25mg (30) $6.93 $69.99 $57.99
Prozac 20 mg (30) $147.62 $163.99 $163.99
Fluoxetine 20mg (30) $5.00 $21.99 $16.39
Zocor 20 mg (30) $141.48 $149.99 $154.99
Simvastatin 20mg (30) $5.00 $89.99 $61.59
Pravachol 40mg (30) $152.05 $160.99 $154.99
Pravastatin 40mg (30) $16.19 $71.99 unavailable

Source: Costco.com, Walgreens.com, and CVS.com.

Pharmaceutical Benefit Management Companies

PMBs, like Express Scripts, generally benefit from their clients switching from branded to generic drugs because they make higher profit margins on the sale of generic drugs.

Distributors

Who's hurt by generic drugs?

The companies most negatively impacted by generic drugs are the pharmaceutical companies who originally develop new drugs. When their patents expire, these companies are usually forced to lower their prices in order to compete with the cheaper generic versions of their products. Major pharmaceutical companies generally charge relatively high prices for their drugs while the patents are in effect, which allows them to recoup their R&D costs and make a profit before generics become available. Nonetheless, generics eventually lead to either lower profit margins or a loss of market share, both of which are less than ideal for drug companies.

Some major pharmaceutical companies and approaching patent expirations include:

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