Generic Drugs (Small Molecule)

RECENT NEWS
TheStreet.com  4 hrs ago  Comment 
NEW YORK (TheStreet) -- Teva Pharmaceuticals shares are down 2.57% to $63.24 in trading on Monday continuing the decline the drug maker's Tel Aviv shares experienced in trading on Sunday after the FDA approved a generic version of...
The Hindu Business Line  Apr 20  Comment 
Drug-maker Claris Lifesciences today said it has settled ‘litigation and licence agreement’ with US-based Fresenius Kabi to sell generic version of anesthesia drug, Diprivan, in the US.In a...
The Hindu Business Line  Apr 19  Comment 
The launch of Suprax’s generic version by Aurobindo will eat into Lupin’s revenue
Wall Street Journal  Apr 17  Comment 
Teva Pharmaceutical is considering a takeover bid for drug maker Mylan, a sign of the jockeying for dominance among generic drug makers.
New York Times  Apr 17  Comment 
About 10 drugs are now approved to treat multiple sclerosis, and their prices are rising sharply. The generic Copaxone could help keep prices of all the drugs in check.
The Hindu Business Line  Apr 17  Comment 
Generic prescription patterns, supply-chain management must for low-cost drug availability
FiercePharma  Apr 17  Comment 
No drugmaker wants a generic challenger for a product it relies on--and certainly not two generics challengers. But in the case of Vivus, which has sued Actavis and now Teva over patent infringement for weight-loss drug Qsymia, the generic...
Forbes  Apr 17  Comment 
The cloud has become far too generic a term these days and it has created a fair amount of confusion. As I have in the past, I will attribute this to marketers who prefer hype over reality.
The Economic Times  Apr 17  Comment 
Shares of Lupin extended losses for third straight session after the USFDA allowed Aurobindo Pharma to sell a generic antibiotic drug.
Wall Street Journal  Apr 16  Comment 
The FDA approved the first generic version of Teva’s blockbuster multiple-sclerosis drug Copaxone, which was developed by Novartis’s Sandoz business and Momenta, but it is unclear when it may come to market.




 
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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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