The brand name pharmaceutical was originally identified via research and drug discovery functions and conducted through an extensive approval process and then marketed effectively to teach physicians when and how to use it to the best advantage. To recover these costs new drugs must usually be protected from competitors, usually with patents, and the price charged is often high. (Drugs that cannot be protected in this way are called orphan drugs. An example is lithium carbonate used to treat bi-polar disorder.)
When patents expire, competitors are allowed to make and sell generic equivalents of the brand name drug. The generic is approved by an Abbreviated New Drug Application. Often this results in a major decline in the market and pricing of the corresponding brand name drug. But this competition is justified in that it allows older drugs to be available to the public at lower cost. It also encourages drug companies to continue development of newer and better drugs.
Certain companies specialize in generic drugs. Increasingly they are made by companies in countries like India and imported throughout the globe. This is part of the globalization process going on in the pharmaceutical industry.
In July, 2015, the Wall Street Journal listed the leading global suppliers of generics as--
Teva agreed to buy Allergan's generic business, making it the leader by far. Teva will discontinue earlier efforts to acquire Mylan. Mylan continues its efforts to acquire Perrigo. Meanwhile, Allergan will buy Naurex.
Related Fool Articles
Recent Mentions on Fool.com
- 5 Stocks Under $10 Actually Worth Buying
- Healthcare's Trick or Treats: What We're Watching in October
- Sarepta's Less-Than-Perfect Data
- Ohio's Recreational Marijuana Initiative Faces a Major Challenge
- Forget Big Pharma: These Little Stocks Offer Far Richer Investing Opportunities
- Will 59 Million More Americans Get Access to Marijuana in 2016?