What is the Generic Drugs Market?

Mary McMahon
Mary McMahon

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.

Generic drug markets usually sell generic versions of common prescription medications.
Generic drug markets usually sell generic versions of common prescription medications.

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.

For pharmacies, the generic drugs market can create a sizable profit margin, as they buy the drugs at low cost and mark them up before selling them to customers.
For pharmacies, the generic drugs market can create a sizable profit margin, as they buy the drugs at low cost and mark them up before selling them to customers.

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.

Generic drugs can typically be purchased without a prescription.
Generic drugs can typically be purchased without a prescription.

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.

Someone who takes medication on a regular basis typically purchase generic brands as a way to save money.
Someone who takes medication on a regular basis typically purchase generic brands as a way to save money.

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.

Generic drugs should be pharmacologically identical to the brand name based on factors including active ingredients.
Generic drugs should be pharmacologically identical to the brand name based on factors including active ingredients.
Therapeutic interchange for a generic equivilant may be especially important for people who do not have insurance that covers prescription drugs.
Therapeutic interchange for a generic equivilant may be especially important for people who do not have insurance that covers prescription drugs.
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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