29 Generics

J.D. Gabriel LopezandJ.D. Thomas Hoxie

Generic drugs are drugs that are sold under their
generic name rather than a particular brand
name. Generic drugs are usually approvedvia
an abbreviated approval process using a branded
drug as a reference product. Rather than going
through the long and expensive process of
demonstrating safety and efficacy of the product
in animal and human trials, the generic company
simply needs to show that its product is iden-
tical or bioequivalent to the previously approved
reference product. Generic approval and launch,
however, are subject to patents and various reg-
ulatory exclusivity periods that provide incen-
tives for innovator companies to develop new
drugs.
Generic drugs have been with us for a long time.
Aspirin is an example of a century-old compound
for which basic patent protection has long expired
and that has been sold generically ever since.
The generics business rivals in size that of the
branded drug business. Currently in the United
States, sales of generic drugs are about 40% that
of the market. In some countries the numbers are
much larger.

29.1 The great compromise –

history of generics

versus big pharma

in the United States

Excluding sales of botanicals, ‘traditional medi-

cine’ and so on, the pharmaceutical industry can

broadly be divided into ‘Big Pharma’ and Gener-

ics. The business model for Big Pharma is the

discovery of new medicines, the sales of which

are protected by patents. During the life of the

protective patents, the sale prices of these new

medicines arewell in excess of their manufacturing

costs, which is justified by Big Pharma because of

the need to reinvest these profits in the Research

and Development needed to find the next new

medicines. The business model for generics is to

sell only medicines which are ‘off-patent’. As the

manufacturing costs for these medicines can be

quitelow, as themarkethas already beendeveloped

by the Big Pharma company which has been selling

the medicine for years and as there are virtually no

advertising costs, the off-patent medicines can be

Principles and Practice of Pharmaceutical Medicine, 2nd Edition Edited by L. D. Edwards, A. J. Fletcher, A. W. Fox and P. D. Stonier
#2007 John Wiley & Sons, Ltd ISBN: 978-0-470-09313-9