The price of this "authorized copy" is ordinarily lower than that of the brand-name drug. They have nonetheless proven controversial. Some observers argue that such products may possibly discourage independent generic firms both from challenging drug patents and from selling their own generic products. 741 and S. 373 , proposed to prevent pharmaceutical firms from selling authorized generics. Marketing Approval and Patent Issues for Generic Drugs

The practice of authorized generics has arisen within a complex statutory framework established by the Drug Price Competition and Patent Term Restoration Act of 1984, legislation more commonly known as the Hatch-Waxman Act. The reward consists of a 180-day generic drug exclusivity period awarded to the first ANDA applicant to file a paragraph IV certification. As originally enacted, the Hatch-Waxman Act allowed the brand-name firm and the first independent generic applicant to share the market for the first 180 days of generic competition. At the close of this period, other independent generic competitors could receive FDA marketing approval. The Concept of Authorized Generics

		Authorized Generics Practice

As noted previously, an "authorized generic" is a pharmaceutical that is marketed by or on behalf of a brand-name drug company, but is sold under a generic name. Without an independent generic patent challenger in the first instance, brand-name firms may themselves make diminished, or delayed, use of the authorized generic strategy. As the FDA opined in a statement issued in July 2004:
Marketing of authorized generics increases competition, promoting lower prices for pharmaceuticals, particularly during the 180-day exclusivity period in which the prices for generic drugs are often substantially higher than after other generic products are able to enter the market. Authorized generics may also facilitate settlement of patent infringement suits between brand-name and independent generic firms. By settling patent litigation, and allowing an ANDA applicant to produce an authorized generic, brand-name firms may potentially better manage risk. During the 180-day exclusivity period, the presence of an authorized generic competitor on average reduces the first-filing generic's revenues by 40% to 52%. However, the reduced revenues resulting from authorized generic competition during the 180-day exclusivity period have not substantially reduced the number of challenges to branded drug patents by generic firms. Two notable judicial opinions have upheld the FDA's position favoring authorized generics. As a result, the term "exclusivity" may be considered to have a particular meaning in the Hatch-Waxman Act—one that does not necessarily mean that independent generic firms will not face competition during the 180-day period even in the absence of authorized generics. Unenacted bills introduced in the 112 th Congress, H.R. In turn, the 180-day generic exclusivity period would then apply against the authorized generic. Some observers stress that authorized generics benefit consumers by providing enhanced access to lower-cost alternatives to branded drugs, while others express concerns that authorized generics will defeat the incentives that independent generic firms possess to challenge pharmaceutical patents.
The practice of "authorized generics" has recently been the subject of considerable attention by the pharmaceutical industry, regulators, and members of Congress alike. An "authorized generic" (sometimes termed a "branded," "flanking," or "pseudo" generic) is a pharmaceutical that is marketed by or on behalf of a brand-name drug company, but is sold under a generic name. Although the availability of an additional competitor in the generic drug market would appear to be favorable to consumers, authorized generics have nonetheless proven controversial. Some observers believe that authorized generics potentially discourage independent generic firms both from challenging drug patents and from selling their own products.
These perceived disincentives result from the provisions of the Drug Price Competition and Patent Term Restoration Act of 1984. Better known as the Hatch-Waxman Act, this legislation provides independent generic firms with a reward for challenging patents held by brand-name firms. That "bounty" consists of a 180-day generic drug exclusivity period awarded to the first patent challenger. During the 180-day period, the brand-name company and the first generic applicant are the only firms that receive authorization to sell that pharmaceutical. At the close of this period, other independent generic competitors may obtain marketing approval and enter the market, ordinarily resulting in lower prices for generic medicines.
Some commentators view the 180-day exclusivity period as a crucial incentive for generic firms to challenge patents held by brand-name firms. Under this view, the launch of an authorized generic during the 180-day exclusivity period makes the recovery of litigation expenses more difficult. In turn, the possibility that a brand-name firm will sell an authorized generic during the 180-day exclusivity period may decrease the incentives of generic firms to challenge patents in the first instance.
Other observers believe that authorized generics benefit consumers by increasing competition in the generic market. Because the authorized generic is manufactured by the brand-name firm and identical to its own product, consumers may be encouraged to switch to the lower-cost authorized generic alternative. Authorized generics may also facilitate the settlement of patent litigation between brand-name and independent generic firms. As an historical matter, certain of these settlement agreements have allowed authorized generics to enter the market, and therefore promoted competition, prior to the expiration of the relevant patent term.
Recent judicial opinions have upheld FDA practices allowing authorized generics. If authorized generic practice is deemed appropriate, then no action need be taken. The approach taken by legislation introduced in the 112th Congress, H.R. 741 and S. 373, presented another option. Under these bills, authorized generics may not be sold during the term of the 180-day generic exclusivity. This legislation was not enacted.