Glossary Term

Generic Drugs

A generic drug is an FDA-approved medication with an expired patent that permits companies other than the drug’s original patent holder to produce the drug. Multiple companies may manufacturer the same generic drug, including the original patent holder if the company wishes to sell the drug under its generic name as well as its brand name. According to the Food and Drug Administration, 91 percent of drug prescriptions filled in the United States are for generic drugs.

Generic drugs are normally less expensive than brand name drugs in the same therapeutic category because multiple pharmaceutical companies can legally manufacturer the medication and compete with one another on price. This cost advantage results in generic drugs often being assigned to the least expensive tiers of a health plan formulary.

Generic drugs must have the same active ingredients as the brand name version of the drug and exhibit the same clinical effectiveness (among other requirements). A generic can have differences with its brand name version, such as different inactive ingredients, but dosage, delivery method, and other key characteristics must remain the same. Generic drugs may not use the proprietary brand name owned by the patent holder for the medication. Instead, generics use the official name given to it by the U.S. government during the drug approval process.

Closely related to the concept of generic drugs are biosimilars. Like generic drugs, biosimilars are drugs with expired patents made by companies other than the original patent holder. Likewise, biosimilars can provide significant cost-savings as compared to their brand-name counterparts. However, unlike generics, biosimilars are based on biologic drugs which use living organisms as part of the drug manufacturing process. 

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