Before a company can make a generic drug, its bioequivalent brand-name counterpart must have been created, approved and distributed. While a pharmaceutical company is making a new brand-name drug, a patent ensures that company may develop, manufacture and sell the drug for a certain amount of time. Patent time frames vary, and in most situations, a patent cannot be renewed after it expires. In the United States, an average drug patent lasts for 17 years.
Once the patent expires, other companies can produce generic versions. To start the process, drug manufacturers file an Abbreviated New Drug Application (ANDA) with the FDA. But before the FDA approves the application, the generic drug must meet the same standards that the original brand-name drug met. According to the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act), bioequivalence is the main basis for approval of generic drugs. The generic drug must contain the same active ingredients, have identical strength and form and have a similar route of administration as the brand-name drug. The generic drug must also be used for the same ailments that the brand-name drug is used.
The FDA may also perform a plant inspection to make sure that the company is safely producing the generic form of the drug. A labeling review then ensures that the information sent out with the generic equivalent includes all necessary information for the consumer. When and if the company meets all these standards, the ANDA is approved and the FDA adds the generic drug to its Approved Drug Products list, which is referred to as the "Orange Book."
For more information on generic drugs, check out the links below.
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FDA: Office of Generic Drugs. http://www.fda.gov/cder/ogd/
FDA: Saving Money on Prescription Drugs. http://www.fda.gov/fdac/features/2005/505_save.html
FDA: Generic Drug Review Process (ANDA). http://www.fda.gov/cder/handbook/anda.htm