A Generic Drug is that kind of drug, that has been manufactured and distributed without any patent protection (drug policy). Though this kind of drug could possibly have a patent on its formula, the patent would not exist on the active ingredient in it. For the drug to be a generic one, it needs to contain the same active ingredients as are present in the original formulation.
Brand name drugs are much more costly than generic drugs for the following reasons:
All these exorbitant costs have to be compensated by the manufacturer of these brand name drugs. And this is precisely why patented drugs are so expensive.
When any generic drug hits the market, because of the competition in the market, both the generic drug, as well as its brand name counterpart, becomes available at a lesser price.
But, the time at which a generic drug becomes available in the market, varies. For instance, in the USA, protection for as much as 20 years, is given to drug patents. But, the truth is that these patents are applied for, much before clinical trials even start. As such, the effective life of these patents is only between around 7 – 12 years.
According to estimates that have been made by various sources, the average cost involved for a brand-name drug company, to discover and test a new drug, one that contains a new chemical entity, could be as high as US $800 million. But in a book by Merrill Goozner, titled ‘The $800 Million Dollar Pill’, the actual costs involved for the production of a brand new drug are estimated to be at around US $100 – $200 million.
To prevent competition from generic drugs and so as to extend their exclusivity in the market, over the years, big brands have used and are continuing to use many strategies. These include the likes of:
Aggressive litigation, so as to extend or preserve their patent protection for their drugs. Critics call this process ‘evergreening.’
Novel pharmacological compounds have patents issued very early on in the development process of the drug. And because of this, by the time the drug is actually released into the market, the patent for the drug has almost expired. So, these big brand drug companies, at some time later on in the process of the life of the drug, seek new patents and these are sought on the manufacture of very specific forms of the drugs. Such as the likes of single enantiomers of drugs, which have the capability to exist in both ‘right handed’ as well as ‘left handed’ forms, a definitive hydrate form of the salt of the drug or various inactive constituents of the salt of the drug. If these patents are granted, the patent clock is reset on these drugs. It is these kinds of patents that later on target the invalidation of the generic drug.
This is the reason why generic pills are far cheaper and extremely popular, than their counterparts manufactured by big name drug companies. The truth is that generic drugs save millions of patients, as well as insurance companies, a great deal of money.