Authorized generic is a pharmaceutical product that is exactly identical to a brand name drug but marketed as a generic version without the label of brand on it.
They are marketed mainly by the brand name company or other subsidiary companies with the permission of Brand Name Company.
They are sold with different labeling and packaging at lower prices than the brand name drugs. They contain the same active and inactive ingredients like their branded counterparts and are manufactured according to the specifications of innovator companies.
There are many factors which are likely to drive the authorized generics in the market:
1) patent expiration of branded drugs
2) rapid increase in the cost of branded drugs
3) health care plans by government.
Pros
1. They are less costly than brand name drugs and have been produced by the same manufacturer of brand name drugs.
2. They increase competition by encouraging the sale of low price authorized generics during the 180 day exclusivity period in which generics are often sold at higher prices.
3. They also provide benefits to the brand name firms by providing them additional revenues or royalties made on sales done by their contacting partners. This additional revenue can be employed in support of pharmaceutical innovation.
4. Authorized generics also helps in smooth settlement of patent infringement suits between brand-name firms and independent generic firms. By settling patent litigation and by allowing an ANDA applicant to produce an authorized generic, the brand-name firms will not only be able to manage risk but can also provide a more stable revenue system. The generic company manufacturing an authorized generic will also be benefited by acquiring manufacturing experience as well as 180 day exclusivity period. Now they don’t have to spend their capital on litigation with an unclear result.
5. Authorized generics launched before the expiry of patent can help the customers to gain access to lower cost versions of brand name drugs.
6. Help the innovator companies to better control sales when more generic versions come into the market.
7. Authorized generics can be launched into the market more quickly than the other generics.
8. There are many consumers who have serious allergic reactions to many drugs which limits their choice to certain branded drugs. In this case, authorized generics can be helpful to them since they have same quality of brand-name drugs but are cheaper than brand-name drugs.
Cons
1. During 180 day exclusivity period, the launch of Authorized generic can reduce the profits gained by generic manufacturers.
2. To prevent loss of revenue, many generic manufacturers make an agreement with the innovator companies that they will delay the launch of generic in return for the brand drug manufacturer’s agreement to not launch their authorized generics during exclusivity period. The consumers have to face the consequences of this agreement as they are only left with the option of buying costly drugs.
