What Investors Need to Know about Branded and Generic Drugs
Introduction to the prescription drug market
The prescription drug market is divided into two categories:
- Branded, or patented
- Generics, or off-patented
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What are branded drugs?
Branded drugs are patented drugs. When a pharmaceutical company discovers a new drug, it files for a patent. Then, the company is awarded a license for 20 years to exclusively sell the drug. Exclusivity is provided to recoup research and development expenses incurred during the development of a drug.
What are generics?
Generics are off-patented drugs. They’re bioequivalent—in terms of dosage, form, strength, quality, effect, intended use, side effects, and route of administration—to the branded drugs. A route of administration is a way the medication is introduced to a site in a patient. This could be oral, intravenous, intramuscular, nebulizer, and topical. A few of the leading generic drugs are:
- Acetaminophen, or Paracetamol
- Asprin, or Acetylsalicylic Acid
In the US, Teva (TEVA) markets generic products that include oral, injectable, and inhaled products. Mylan (MYL) had around 260 oral products in 2013. Perrigo’s (PRGO) portfolio encompasses a broad array of topical dosage forms like creams, ointments, lotions, and gels. Impax (IPXL) focuses on solid oral dosage products.
Patented, generics, and branded drugs demystified
A drug generally has two names:
- generic name – a molecular formula
- brand name – the company’s proprietary trademark used for marketing
For example, Paracetamol is the brand name for a pain reliever. Acetaminophen, or C8H9NO2, is the scientific name.
Patented drugs are patented by an innovator company. Generics are off-patented drugs with a generic name. Branded drugs are either patented or generics marketed under a company’s specific name. Patented and branded drugs are used interchangeably across the industry. In the US, patented drugs are called “branded drugs.” Generics with a specific name—proprietary to a company—are called “branded generics.”