Generic Drug

Key facts

Approval pathway

Abbreviated New Drug Application (ANDA), FD&C Act Section 505(j)

Created by

Drug Price Competition and Patent Term Restoration Act of 1984

Compared against

Reference listed drug (RLD) identified in the Orange Book

Equivalence ratings

Therapeutic equivalence codes in the Orange Book, such as AB

User fees

Generic Drug User Fee Amendments (GDUFA), first enacted in 2012

What is a generic drug?

A generic drug contains the same active ingredient as a brand-name drug and works the same way in the body. Instead of repeating the brand's clinical efficacy trials, the generic sponsor relies on the FDA's earlier finding that the brand, called the reference listed drug (RLD), is safe and effective, and shows that its own product performs the same way.

Generics are sold under the nonproprietary name of the active ingredient and usually cost far less than the brand once several manufacturers compete. Inactive ingredients, color and shape may differ, although some dosage forms, such as injectables, must closely match the brand's inactive ingredients.

The pathway was created by the Drug Price Competition and Patent Term Restoration Act of 1984, commonly called the Hatch-Waxman Act.

How generic approval works

Before approval, the applicant must certify against each patent listed for the RLD in the Orange Book. A Paragraph IV certification, which asserts that a patent is invalid or not infringed, can trigger patent litigation and a 30-month stay of approval, and the first applicant to file one may earn 180 days of generic exclusivity.

On the scientific side, an Abbreviated New Drug Application (ANDA) must show, among other things:

• Pharmaceutical equivalence: same active ingredient, strength, dosage form and route of administration as the RLD.
• Bioequivalence: the rate and extent of absorption do not differ significantly from the RLD, usually shown in pharmacokinetic studies.
• Labeling: the same as the RLD, apart from permitted differences such as omitting an indication still protected by patent or exclusivity.
• Manufacturing quality: facilities must meet current good manufacturing practice (CGMP) requirements.

Why generic drugs matter

Generic entry reshapes a market quickly, and the signals are visible in public data:

• Price erosion: the number of approved and marketed generic manufacturers for a molecule is a major driver of price declines seen in NADAC and Medicaid pricing data.
• Substitution: state pharmacy laws generally allow pharmacists to substitute a therapeutically equivalent generic for the brand, so volume can shift soon after launch.
• Supply risk: many drug shortages involve older, low-margin generics, especially sterile injectables.
• Data joins: an ANDA application number in the NDC Directory or Orange Book marks a product as generic, while NDA numbers mark innovator products and authorized generics.

Common misconceptions about generics

Generic does not mean lower quality: the FDA applies the same manufacturing standards to generic and brand facilities. A generic also does not always come from a different company, because an authorized generic is the brand's own product sold without the trade name. Biologics do not have generics in the legal sense; their follow-on versions are biosimilars approved through a separate pathway.