The History of Generic Pharmaceuticals in the U.S.

Generic Pharmaceutical Defined:

A drug product that is comparable to a Brand/Reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use.

Source: Center for Drug Evaluation and Research (CDER)

The generic industry has had quite a dynamic history, characterized by many positive developments, yet the triumphs have been tamped down by some distinct challenges. The generic industry got its inauspicious start in the 1920’s when Bayer Aspirin lost a court fight against generic aspirin rivals. Fast forward to 1962 when a revision by the Food and Drug Administration revamped the Federal Food, Drug, and Cosmetic Act. While strengthening the legality of generic drugs, it also required generic drug makers to subject their generic products to similar testing methods as the brand. Not only did this lengthen the time frame to bring it to market but also added a great deal of cost. The generic industry saw a major negative slide in bringing products to market from 1962 until 1984.

The key triumph was a legislative one, taking place in 1984 with President Ronald Reagan signing the Drug Price Competition and Patent Term Restoration Act (aka Hatch-Waxman Act). It amended the Food, Drug, and Cosmetic Act, essentially by compromises required by both the generic and branded sides. The key point was the establishment of the ANDA which was an abbreviated process, characterized by the generic, rather than having to prove safety and efficacy directly by scientific testing methods, had (only) to prove itself bioequivalent to the brand. Basically, companies had to prove their drug had the same active ingredients and performed in the body the same way as the exclusive patented drugs. Although they still had to wait to market a generic until the patent expired, they were allowed to begin the application process prior to.

It would not be an understatement to say this dramatically changed the way people would receive their medicines. In 1984 generic drugs as a percentage of scripts dispensed accounted for less than 20% of the market; today, generics drugs account for close to 9 of every 10 pharmaceutical products dispensed. While the amount of savings per year (or since 1984) has been debated, there is little doubt the number is significant. The Generic Pharmaceutical Association (GPhA) claims savings of $734 Billion for the decade 1999-2008.

But, the story was not always one whose positive outcomes grew in a linear fashion. For example, not too long after the meteoric rise based on Hatch-Waxman, the industry was marked by fraud and some personal behavior that almost destroyed this burgeoning industry. While the new generic drug industry’s success was quite evident, it attracted those who might want to profit illegally. The attraction of the newly launched products and the other nuances that helped drive business (Paragraph IV opportunities) also attracted those who sought to take advantage of the system which rewarded such things as getting to market before the competition. It was not until a rival company began to voice issues with some of the inequities of the review and approval process (and also providing analytical data), were the schemes uncovered.

The fall-out was swift; not only did some perpetrators end up in prison and companies disbanded, but more importantly, the public’s perception was altered.

The 1990’s was a transformative decade, as the industry fought to change the public’s perception. The loss of faith in a regulated industry (>50% of the public feared generics were not subject to the same scrutiny as brands) is not an easy hurdle to overcome. Although the US FDA rooted out fraud, they knew, too, it must create a more regulated industry in order to overcome the negative perceptions while re-building trust in the generic industry at the same time.

Major legislation was enacted to protect against nefarious methods; they instituted actions to control access to the testing and its subsequent data, and also ensured the review process was unbiased and random. The OGD (Office of Generic Drugs) was established; its functionality kept it apart from other scientific bodies. Suffice it to say, generic industry leaders were aligned with the continual passage of new regulations. Slowly the tide turned; most of the faith was restored. The fact that generics save enormous sums of money cannot be discounted. It appeared the new regulations restored confidence and the financial incentive proved to be difficult to dispute and seeds of doubt were replaced by a more regulated, more scrutinized generic processes. Moreover, there were rules put in place to decrease the windfall profits; in essence, the temptation to skirt the regulations was less attractive.

Since 2000 the industry has seen an influx of ex-US companies; initially many European companies came in, but over the last 15 years the industry has seen the proliferation of Asia based companies, particularly India, and, to a lesser extent, China. If one were to review the FDA website where it lists the ANDA’s by month, one would see the rapid increase in ex-U.S. filings, probably approaching 60% of the ANDA approvals since 2010.

The industry’s success is well documented. Despite early hurdles, there are some benefits resulting from good fortune. A series of positive, outside influences (below) has kept the wind at their back for the last 30 years. During this time, a once fledgling industry with a majority of unsophisticated management teams, has grown up and become a very professional, vibrant, and well respected industry.


  • Positive demographics, an aging population needing increased medications
  • Increased market acceptance; a positive perception of generic companies emerges
  • Increased consumer access
  • Cost control by third party payers
  • Political pressure to make healthcare more affordable
  • Commercial entities promote cost savings to their patients/cutomers
  • Third party plans and other middlemen seek lower cost opportunities
  • Pressure from public and private spend to lower cost and increase access
  • Blockbuster Brands patent expirations
  • Political pressure as Congress supported many generic initiatives
  • Societal changes and economic circumstances create more informed consumers