Authorized generics are made by the pharmaceutical companies that produce the brand-name originator drug products. They are exact copies of brand-name products without the associated brand labelling. Importantly, unlike traditional generic drugs which must meet bioequivalence testing standards through an abbreviated new drug application (ANDA), authorized generics do not need to undergo additional testing or approval processes. Instead, the new drug application holder must notify the US Food and Drug Administration (FDA) if it intends to market an authorized generic drug.

The three strategies that underlie authorized generics market entry
Strategy 1: Launching during generics exclusivity period
To encourage rapid generics entry, the Hatch-Waxman Act provides a 180-day exclusivity period to the first company that files an ANDA that successfully challenges the patent of a brand-name drug. During this period, the company can gain market share while keeping the generic drug’s price high. However, brand-name drug manufacturers can introduce an authorized generic when a traditional generic drug is first marketed or later. If they choose to launch during the 180-day exclusivity period, they can limit the market share to the first traditional generic drug product’s market share.

Strategy 2: Reverse payment agreements
In some cases, ‘reverse payment’ agreements are made in which the brand-name drug manufacturer compensates the generics manufacturer for not marketing the drug. Such strategies are tied to ‘pay-for-delay’ agreements.

Strategy 3: Authorized generics launch when substantial brand-name patent life remains
Finally, manufacturers can market authorized generics when substantial patient life remains on the brand-name drugs. This strategy enables manufacturers to use authorized generics entry, with large list price reductions, reduce pressure to decrease the price of prescription drugs.

The authors conclude that authorized generics should meaningfully reduce spending on prescription drugs. However, through their strategies, they can become a distraction from more effective measures to decrease drug prices and improve access to medicines.

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Reference
1. Dusetzina SB, Keating NL, Huskamp HA. Authorized generics and their evolving role in prescription drug pricing and access. Jama Intern Med. 2021 Jan 25.

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