Understanding Generic Drugs

Generic drugs used to be simple, right? You had a brand name drug, and a handful of generic equivalents - all of which could be substituted for the brand name product. Simple.

Turns out it’s not so simple. As price competition heats up, along with rebate programs, politics, legal maneuvers, and clever manipulation of equivalence data – knowing which drugs can be substituted for other products has major implications for both pharmacies and patients. Even if you have a solid plan to manage therapeutic equivalents, things can still get confusing as new products enter the market.

One of the mechanisms that major pharmaceutical brands employ to retain patent exclusivity and stave off the fierce competition from generic entrants is the launching of authorized generics. Unlike typical generic drugs, authorized generics are simply the brand-name drug – marketed without the trademarked name. The drug inside the package is identical to the brand name reference product and is manufactured by the same entity that makes the brand name product (or one of their subsidiaries). The only difference is that the authorized generic medication does not use the trademarked (“brand”) name on the package.

Authorized generics do not need to go through the same FDA approval process as new market entrants or traditional generic drugs. Since the drug is already approved by the FDA, the manufacturer can simply launch the brand product in a generic package

While this certainly provides a financial benefit to the brand name manufacturer, it can be confusing and challenging for pharmacies to identify these authorized generics and make clinically and reimbursement-conscious decisions when it comes to substitutions.

According to the FDA, authorized generics can be substituted for the brand name reference product without obtaining approval from the prescriber - just like typical generic substitutions. However, this can be complicated by formulary exclusions, substitutions mandates, or otherwise higher co-pays for patients when authorized generics are substituted.

The term “authorized generics” only applies to non-biologic drugs. The reason for this is that biologic drugs cannot have true generics, as the size of the molecular structure is far too complex to replicate identically. Instead, biologic drugs are rated for equivalence in the FDA’s Purple Book. The biologic drug equivalent for authorized generics is called an “unbranded biologic.” These products have a biosimilar reference code of UB, designating the product an unbranded biologic. Just like authorized generics, unbranded biologics are equivalent to their reference product and may typically be substituted for the reference product without consulting the prescriber – however, many state pharmacy laws restrict biologic substitution to products that are rated as “interchangeable.” Unbranded biologics cannot obtain an “interchangeable” rating, as the FDA has already approved them. In other words, pharmaceutical manufacturers do not need to prove that their reference product in a non-branded package is equivalent to itself.   As such, this can create a conundrum when novel unbranded biologics enter the market.

This topic understandably causes confusion among prescribers, pharmacists, and patients.   According to the FDA, generic drugs can be substituted for the reference product without prescriber authorization. However, pharmacies will need to consider third-party formularies, facility contracts, pricing, reimbursement, and other factors to ensure that, in addition to being therapeutically and clinically appropriate, the substitution of an unbranded biologic does not create a financial consequence.

In summary, authorized generics and unbranded biologics can be substituted with confidence, at least in the context of clinical appropriateness and safety. However, the financial impact of these substitutions requires careful management and decision-making to ensure a healthy outcome for the pharmacy’s bottom line, as well as the patient.

For more information on authorized generics and unbranded biologics, check out this article for a terrific overview of generic drug terminology and substitution regulations.