When a brand-name drug loses its patent, the race to bring the first generic version to market isnât just about speed-itâs about survival. But hereâs the twist: the company that wins that race might not be the one that ends up making the most money. Why? Because the brand-name drugmaker might already have a plan ready to undercut them before they even get started. That plan is called an authorized generic.
Whatâs the difference between a first generic and an authorized generic?
A first generic is the first company to successfully challenge a brand-name drugâs patent and get FDA approval to sell a generic version. This is a big deal. Under the Hatch-Waxman Act of 1984, that company gets 180 days of exclusive rights to sell the generic before anyone else can join. During that window, they usually capture 70-90% of the market. Prices drop fast. Patients save money. And the generic company makes a killing-sometimes hundreds of millions of dollars.
An authorized generic, on the other hand, isnât a challenger at all. Itâs made by the brand-name company-or by a company theyâve partnered with-and sold under a generic label. Itâs the exact same pill, made in the same factory, with the same ingredients. But itâs priced like a generic. And hereâs the key: it doesnât need to go through the FDAâs full approval process. It can launch the moment the brand company decides to.
So while the first generic is fighting through years of legal battles and FDA reviews, the authorized generic is just waiting in the wings. And when that first generic finally hits shelves, the brand company flips the switch-and suddenly, there are two identical products on the market. One from the challenger. One from the original maker.
Why does timing matter more than anything else?
Timing is everything. The whole point of the 180-day exclusivity period was to reward the first generic company for taking the risk. Patent challenges cost $5-10 million and can take 2-3 years. The payoff? A monopoly on the generic market.
But in practice, that monopoly rarely lasts.
According to research from Health Affairs covering 2010-2019, 73% of authorized generics launched within 90 days of the first genericâs approval. Over 40% launched on the exact same day. Thatâs not coincidence. Thatâs strategy.
Take Lyrica (pregabalin), a $2 billion-a-year drug from Pfizer. When Teva launched the first generic in July 2019, Pfizer immediately rolled out its own authorized generic through Greenstone LLC. Within weeks, Tevaâs market share dropped from 80% to under 50%. Pfizerâs version grabbed about 30% of sales. Teva didnât lose the race-they just lost the prize.
Thatâs the pattern now. Itâs happened with Lipitor, Neurontin, Prilosec, and dozens more. The brand companies arenât waiting for the generic to erode their profits. Theyâre launching their own version before the generic even has time to build momentum.
What happens to prices when both enter at once?
Without an authorized generic, a first generic usually drives prices down by 80-90%. Thatâs the whole point of generics.
But when the brand company jumps in with an authorized version, the drop is only 65-75%. That might sound small, but itâs billions of dollars in lost savings for patients and insurers.
Why? Because now thereâs competition-but not the kind the law was designed to encourage. Instead of one low-price generic taking over, youâve got two: one from the challenger, one from the brand. They split the market. Neither has to drop prices as low to stay competitive. And the brand company still makes money, just under a different label.
The RAND Corporation found that this tactic alone cost the U.S. healthcare system an extra $1.5 billion in avoided savings between 2010 and 2019.
How do authorized generics bypass the rules?
Hereâs the loophole: authorized generics donât need an Abbreviated New Drug Application (ANDA). They piggyback on the original brandâs New Drug Application (NDA). That means no bioequivalence studies. No lengthy FDA review. No waiting 10 months-or even 3 years-like first generics do.
The FDAâs own data shows that brand-name drugs get approved in under 10 months on average. First generics? They wait an average of 10 months just for the first review cycle. And if thereâs a backlog, it can stretch to 3+ years. Thatâs why the first generic is always behind.
Meanwhile, the brand company has been preparing their authorized generic for years. The pills are already made. The packaging is ready. The distribution network is in place. All they need is the green light from the patent expiration-and theyâre in the market before the first generic even gets a chance to celebrate.
Who wins? Who loses?
Itâs not a fair fight.
The brand company wins. They keep a chunk of the market. They maintain pricing control. They turn a potential threat into a revenue stream.
The first generic loses. They spent millions. They waited years. And then theyâre undercut before they can even build a customer base. Many mid-sized generic manufacturers now say their profitable window has shrunk from 180 days to just 45-60 days because of this tactic.
Patients? They still get lower prices than before the generic entered-but not as low as they should. Insurers pay more. Medicare pays more. The system pays more.
Even the FDA acknowledges the problem. In 2022, the Inflation Reduction Act explicitly said authorized generics donât count as true generic competitors when calculating Medicare drug prices. Thatâs a rare admission: the government knows these arenât the same as independent generics.
Whatâs changing now?
Generic manufacturers arenât sitting still. Companies like Teva, Mylan, and Sandoz are adapting. Some are building faster ANDA submission systems. Others are partnering with multiple suppliers to spread risk. A few are even investing in their own authorized generic deals-turning the tables by licensing their own generics to brand companies.
But the biggest shift is in strategy. Instead of betting everything on one first-generic launch, companies are now building portfolios. Theyâre chasing multiple drugs at once. Theyâre targeting less competitive markets where brand companies donât bother fighting back.
And theyâre watching closely. If a brand company has a history of launching authorized generics, theyâll skip it. No point in spending $8 million to get undercut.
Meanwhile, authorized generics are growing. In 2022, they made up 18% of all generic prescriptions. By 2027, Evaluate Pharma predicts that number will hit 25-30%. Thatâs not a trend. Thatâs a new normal.
What does this mean for the future of drug pricing?
The Hatch-Waxman Act was meant to break monopolies. Instead, it created a system where monopolies learned to fake competition.
Authorized generics arenât bad by themselves. They can help get lower-priced drugs to market faster. But when theyâre used as weapons to crush the very companies the law was designed to protect, they undermine the entire system.
Patients still benefit from lower prices-but not as much as they should. The savings are real, but theyâre smaller. The competition is real, but itâs rigged.
The question now isnât whether authorized generics will keep happening. They will. The question is: will regulators step in to protect the integrity of the generic market? Or will the first generic become a relic of a system that no longer works the way it was supposed to?
For now, the race isnât about who gets there first. Itâs about who can survive the moment after.
Jennifer Taylor
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