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Generic Drug

A medication that contains the same active ingredient, dosage, and form as a brand-name drug, approved after the original's patent expires, typically costing 80-95% less.

How It Works

Generic drugs enter the market through the Abbreviated New Drug Application (ANDA) pathway created by Hatch-Waxman in 1984. FDA requires pharmaceutical equivalence (same active ingredient, dosage form, strength, route of administration) and bioequivalence (same rate and extent of absorption within 80-125% confidence intervals on Cmax and AUC). Inactive ingredients (excipients) may differ, which is why generic pills often look different from the brand. FDA's 2024 "Generic Drugs" fact sheet reports generics fill 91% of U.S. prescriptions but account for only 18% of total drug spending. The Association for Accessible Medicines estimated generics saved the U.S. healthcare system $408 billion in 2022 alone. Typical price trajectory after generic entry: first generic priced at ~75-80% of brand, falls to 50% within 6 months as multiple generics enter, reaches 10-15% of brand WAC by 24 months, and can drop to 3-5% for commodity generics with many manufacturers. Atorvastatin (generic Lipitor) launched November 2011 at about $2.50/tablet; by 2024 pharmacy acquisition costs through Cost Plus Drugs ran roughly $0.04-0.08/tablet. Some sterile-injectable and low-margin oral generics have faced chronic shortages due to limited manufacturer incentives; FDA maintains an active Drug Shortages list and has implemented policies to prioritize ANDA review for shortage products. Generic quality has occasionally been challenged (Ranbaxy 2013 consent decree, Aurobindo recalls) but FDA inspections and the 2018 FDA Quality Metrics program address manufacturing oversight systematically.

Related Terms

  • Abbreviated New Drug Application (ANDA), The FDA application pathway for generic drugs, which requires proving bioequivalence to the brand-name drug rather than repeating full clinical trials.
  • Bioequivalence, A regulatory standard proving that a generic drug delivers the same amount of active ingredient to the bloodstream at the same rate as the brand-name drug.
  • Patent Expiration, The date when a drug's patent protection ends, allowing generic or biosimilar manufacturers to produce competing versions.
  • National Average Drug Acquisition Cost (NADAC), A CMS-published benchmark reflecting the actual average price retail pharmacies pay to acquire drugs from wholesalers, updated weekly.

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About This Definition

This definition is part of the DrugPrice Drug Pricing Glossary, 49 terms explaining how prescription drug pricing works in the United States. All definitions are written in plain language for patients, caregivers, journalists, and healthcare professionals.

this entity is one of the U.S. Medicare prescription-drug pricing concepts that recurs across this site. The definition above is the technical answer; the paragraphs below add the practical context for how the concept connects to the CMS Medicare Part D Drug Spending data data behind every per-entity page on the site.

In the CMS Medicare Part D Drug Spending data data, this concept shapes one or more of the fields that drive the per-entity grades and rankings on this site. The methodology page describes which fields feed into which output; this glossary entry documents the underlying term.

Source: CMS Medicare Part D Spending, 2026.