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What is the Generic Drugs Market?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 02 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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The generic drugs market is the market for medications produced after patent protections expire, and any manufacturer can legally make a pharmaceutical product without the need to apply for a license from the original developer. When medications go off patent, they usually enter the generic drugs market very quickly, as pharmaceutical companies want to take advantage of the demand for them. Typically, prices fall and more patients can access the drug as a result.

When pharmaceutical companies identify new bioactive compounds, they apply for a patent to protect the active ingredients and then start moving the drug through clinical trials to learn about what it does, determine appropriate doses, and make sure it is safe for use. With the results of the trial, the company can apply for permission to sell the drug. Because drug development can be a lengthy process, drugs may only be protected under patent for between seven and 12 years by the time they reach the open market. When the patent expires, the formerly protected medication enters the generic drugs market.

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An immediate consequence of generic availability is a drop in price. Rival companies can produce the drug at low cost, offering it cheaply to members of the public. This forces prices for the band name medication down because the original company wants to be able to compete. For pharmacies, the generic drugs market can create a sizable profit margin, as they buy the drugs at low cost and can mark them up significantly when they sell them to customers. Brand name drugs tend to be so expensive that pharmacies cannot afford a high markup, thus creating a smaller profit.

Prospects in the generic drugs market can vary from year to year. In a year when a number of drugs are coming off patent, the market can experience a boom as drug companies rush to produce the drug. In years when fewer patents are expiring, the market can be less active and may see slower increases in profits. People can use current information about patent filings to make projections about what the market will look like in 10 to 20 years.

When people purchase drugs on the generic drugs market, they receive a medication that should be pharmacologically identical to the brand name drug. The active ingredient and dose are the same, although the drug may use different fillers and binders. Careful testing is necessary to make sure changes in inactive ingredients do not affect the performance of the drug. People with allergy concerns should discuss them with a pharmacist, as it is possible to experience a reaction to a generic when the brand name does not cause any problems, due to changes in the composition of the inactive ingredients like pill coatings.

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