October 2011
Defining generic drugs may seem simple, but in reality this is where a lot of profit games are played by drug makers, and even some PBMs. In order to maximize generic savings, it is important to understand the way these drugs are identified, launched and priced.
On average, generic drugs cost about 80 percent less than brand-name drugs. If members consistently choose generic alternatives over brand-name drugs, this can add up to big savings. However, when, and how much you save with generics can be complicated by many factors:
FDA Abbreviated New Drug Application process (ANDA)
To obtain FDA approval to market a generic version of a drug, the generic manufacturer submits an ANDA. Once the drug is ANDA approved, the manufacturer may launch the generic drug. These true generic drugs can be discounted 70 percent or more off the brand drug cost.
At risk generic launch
An at risk generic launch occurs when the generic manufacturer chooses to launch a generic product in the marketplace despite on-going legal disputes with the brand manufacturer. This leaves the generic manufacturer at risk to pay the brand manufacturer all lost revenues if the court determines the generic
manufacturer is violating the patent.
Authorized generic
An authorized generic occurs when a brand manufacturer authorizes another distributor to repackage their brand drug as a generic. Unlike true generics, authorized generics are not approved for marketing under an ANDA. While less expensive than a brand-name drug, an authorized generic often costs more than a true generic drug.
Marketing exclusivity
The more manufacturers that are allowed to market the generic drug, the greater the competition and resulting discount. However, if a manufacturer is given marketing exclusivity, they are allowed to market their generic product for 180 days with minimal or no competition. Typically, when a manufacturer has marketing exclusivity, it limits the generic discount to only 20 to 40 percent until
the exclusivity expires.
Prime's aligned approach and consistent classification of generic drugs guarantee a clear picture of generic opportunities and savings. Our contract negotiations are ongoing, so when lower priced drugs are launched—regardless of the process used—the savings are immediately passed on to clients without delay.
© Prime Therapeutics LLC October 2011