Report: 'Authorized generics' contribute to market distortion

A new report from the Federal Trade Commission has said "authorized generics" lead to pharmaceutical companies striking deals at the expense of patients.

An authorized generic exists when a pharmaceutical manufacturer sells a drug under both a brand-name and generic label, and the commission says it has become increasingly common for brand-name drug makers to begin marketing authorized generics at the same time the generic firm is beginning its 180-day marketing exclusivity period.

Authorized Generics: An Interim Report has found that drug prices are on average 4.2 percent lower when authorized generics are marketed against a generic drug.

Their introduction also substantially reduces the revenues of a first-filer generic firm, with declines ranging from 47 to 51 percent. As a result, some generic firms are willing to agree to defer their market entry in return for a brand’s promise not to launch an authorized generic during the marketing exclusivity period.

The report concludes that such deals can harm consumers by making the drugs available in the branded-only version for longer.

Consumers may also lose the benefit of price discounts from authorized generic competition during the 180-day marketing exclusivity period, because the brand has agreed not to compete against the generic drug during that time.