Generic Drugs (Small Molecule)

RECENT NEWS
Clusterstock  Aug 17  Comment 
The FDA on Thursday approved Teva Pharmaceuticals' generic version of the drug, dealing a blow to branded EpiPen-maker Mylan. Mylan saw an approximately 63% drop in EpiPen sales between 2017 and 2016, according to calculations made by Wells...
The Hindu Business Line  Aug 17  Comment 
The US Food and Drug Administration has approved the first generic version of EpiPen and EpiPen Jr (epinephrine) auto-injector for the emergency treat
Clusterstock  Aug 17  Comment 
In 2016, the EpiPen became a symbol of the drug-pricing problem in the US. Over a decade, the price for a two-pack has gone up from $93.88 to $608.61, an increase of more than 500%. On Thursday, the FDA approved Teva's generic version of the...
MarketWatch  Aug 16  Comment 
Shares of the U.S.-listed Teva Pharmaceutical Industries Ltd. surged 6.2% in extremely heavy Thursday afternoon trade after the company's generic version of the EpiPen allergic reaction treatment was approved by the Food and Drug Administration,...
FiercePharma  Aug 16  Comment 
Analysts may have their concerns about Teva’s growth prospects, but Warren Buffett apparently still likes what he sees at the Israeli drugmaker. The billionaire’s holding company, Berkshire Hathaway, upped its stake in the generics giant in...
FiercePharma  Aug 16  Comment 
After whistleblowers reached their "put up or shut up" moment for producing solid evidence of kickbacks—and didn't, Teva says—the generics giant has urged a judge to toss the case.
Yahoo  Aug 16  Comment 
Berkshire Hathaway often stays away from healthcare stocks, but that's not the case with this stock.
Financial Times  Aug 15  Comment 
Generic drugmaker has benefited from popular new products and rival Pfizer’s outage
MedPage Today  Aug 10  Comment 
(MedPage Today) -- Valsartan recall prompts a look by Anthony Pearson, MD




 
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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