By Healthcare Brew Staff
less than 3 min read
Definition:
A generic drug is an FDA-approved copy of a brand-name drug. A generic must have the same active pharmaceutical ingredients, work the same way, and meet equivalent quality standards, but can differ in inactive ingredients.
In demand
Generic drugs make up 90% of prescriptions in the US, but only a small share of spending. They typically cost less than their brand-name counterparts because they don’t have to repeat the studies that are necessary for drug approval, per the FDA.
Because of their low prices, though, generic drug manufacturers may have less of a financial buffer in the face of tariff hikes. Generic drug manufacturers also sometimes shut down. This, alongside quality issues at manufacturing plants, commonly leads to drug shortages.
Another vulnerability in the generic drug supply? Nearly 80% of generic tablets and capsules in the US are imported from other countries, according to data from nonprofit research organization Brookings.
How do brand-name manufacturers feel?
Generics become possible when patents expire on brand-name drugs.
After a generic version of a drug emerges, brand-name manufacturers may lower their prices to compete. They don’t go down without a fight, though—they object through legal measures like citizen petitions.
Meanwhile, billionaire Mark Cuban has advocated to make it easier and more affordable for US companies to manufacture off-brand medications. His direct-to-consumer company Cost Plus Drugs got its start by selling generic drugs for cheap prices, though it added branded drugs to its online store in 2023.
