Drugs sold as a cheaper alternative to brand named products are called generic drugs. Usually, generic drug companies cannot patent their active ingredients, but they can patent their own unique formulation.
The Food and Drug Administration of the United States of America governs all medications and according to them the generic drug is identical to the brand named drug, legally. Therefore, the same laws apply to these drugs as their branded counterparts where strength, administration and safety are concerned. They must contain the same active ingredient as the branded product and be within acceptable bioequivalent ranges.
Once the patent expires on a branded drug, generic drugs can be introduced into the market. This leads to competition on the market which brings down the price of both the generic and the branded drug.
Whilst patents are valid for 20 years on drugs in the USA, it is only really active for about a decade as developers have to apply for a patent before they begin with clinical trials.
Once a patent no longer protects a drug, drug companies can develop a similar product for a lot cheaper. This saves a lot of money for the generic company and enables them to market the product for a lot cheaper, hence the savings are passed onto health insurers and patients. Generic meds can be distributed within developing countries for a lot cheaper than the named brands.
India is the world leader in generic drug manufacturing and are distributed from there to many developing countries. Generics are created by applying reverse engineering to brand named formulations to create bioequivalent generics thereof. Generics don't need to undergo clinical trials proving safety and effectiveness, which also saves time and money.
Generic drug companies leverage off the marketing efforts of the brand name drug, which after a number of years on the market has become well-known to healthcare professionals. These same professional can now easily switch over their patients from the branded product to the generic medication.
Branded products monopolize the industry while the patent applies and this allows them to price the product as they wish to maximize profits. In doing this, they produce funds to research and create additional drugs, which generic med companies lack the funds for.
It is legal for generic developers to create a new generic version when either the patent for the branded product expires, when they can certify the invalidity of the original patent or in a country where the patent is not valid. Not all patents are valid in all countries.
Market monopoly is removed when a patent expires and they are generally not renewable. If a brand name company changes their formulation drastically, they have to apply for a new patent. New clinical trials will have to be performed. While this happens, the generic drug can still be sold unless it is removed from the shelves by regulators of the FDA.
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