Cost Comparison: Authorized Generics vs First-to-File Generics in the U.S. Drug Market

When you fill a prescription for a generic drug, you might assume all generics are the same. But that’s not true. There are two very different kinds of generics on the market: authorized generics and first-to-file generics. And the difference between them can mean big savings-or big missed savings-on your prescription costs.

What’s the difference between authorized generics and first-to-file generics?

An authorized generic is the exact same drug as the brand-name version. It’s made by the same company that makes the brand, on the same生产线, with the same ingredients, and the same packaging-except it doesn’t have the brand name on it. Think of it like a store-brand soda made by Coca-Cola. It’s Coke, but sold under a different label.

A first-to-file generic is made by a different company that was the first to submit an application to the FDA to copy a brand-name drug. Under the Hatch-Waxman Act of 1984, this company gets 180 days of exclusive rights to sell the generic version before anyone else can enter the market. This exclusivity is meant to reward the company for taking the legal and financial risk of challenging the brand’s patent.

Here’s the twist: the brand-name company can launch its own authorized generic during that 180-day window. That means two versions of the same drug-both generics-are now on the market at the same time. And that’s when prices really start to drop.

How much cheaper are authorized generics compared to first-to-file generics?

The data from the Federal Trade Commission (FTC) shows clear patterns. In markets where only the first-to-file generic is available, the price of the generic is about 14% lower than the brand-name drug at the retail level. But when an authorized generic joins the market during that 180-day exclusivity period, the discount jumps to 18%-a 4 percentage point increase in savings.

At the wholesale level, the difference is even bigger. Pharmacies pay 20% less than the brand price when only the first-to-file generic is sold. But with an authorized generic in the mix, that discount climbs to 27%. That’s a 7-point swing-meaning pharmacies can buy the drug for nearly a third less than the brand.

One study found that when an authorized generic enters the market, retail prices for the generic drop by 4% to 8%, and wholesale prices fall by 7% to 14%. That might not sound like much, but for a drug that costs $200 a month, that’s $8 to $28 saved per prescription-every month.

Why does this matter for pharmacies and patients?

It’s not just about what you pay at the counter. Pharmacies make more profit when there’s more competition. When the first-to-file generic enters, pharmacy profits go up. But when an authorized generic joins in, those profits go up even more. That’s because the two generics undercut each other on price, and pharmacies can negotiate deeper discounts.

Patients benefit directly. In markets with both generics, you’re more likely to get the lowest possible price. Some insurers even require you to choose the cheapest generic available-and that’s often the authorized one.

Here’s the catch: if you’re handed a first-to-file generic without knowing an authorized version exists, you might be paying more than you need to. Pharmacists aren’t always required to tell you which version they’re dispensing. So if your copay feels higher than expected, ask: “Is there a cheaper generic available?”

What happens after the 180-day exclusivity ends?

Once the first-to-file company’s exclusivity expires, other generic makers can enter. And when more than one generic is on the market, prices plunge. The FDA found that when two generics compete, prices drop 54% below the brand price. With four generics, it’s 79%. With six or more, prices fall over 95%.

But here’s where it gets interesting: even after the 180 days, the presence of an authorized generic during that window has a lasting effect. The FTC found that the first-to-file company’s revenues stayed 40% to 52% lower for up to 30 months after their exclusivity ended. That’s because patients and pharmacies got used to the lower prices. Once you’ve paid $10 for a pill, you’re not going back to $20-even if the brand tries to re-enter the market.

Do authorized generics hurt innovation?

Some people worry that if brand companies can launch their own generics, they’ll discourage other companies from challenging patents. After all, why risk millions in legal fees if the brand might just flood the market with its own cheaper version?

But the FTC looked at this closely. Their analysis of hundreds of drugs showed no measurable drop in the number of patent challenges by generic companies. Even with authorized generics in the mix, companies kept filing ANDAs. Why? Because the 180-day exclusivity period is still worth hundreds of millions of dollars. That’s a powerful incentive.

Dr. Robin Feldman, a pharmaceutical policy expert, put it plainly: “The 180-day exclusivity period can be worth several hundred million dollars.” That’s not something a brand’s authorized generic easily wipes out. The market still rewards bold generic challengers.

What about the long-term? Are authorized generics here to stay?

Yes. And they’re becoming more common. About 20% of authorized generics launched between 2010 and 2014 had no sales in Medicare data after five years-but that doesn’t mean they failed. It means they did their job: they drove prices down fast, and then faded as cheaper, non-authorized generics took over.

The FDA’s Generic Drug User Fee Amendments (GDUFA), updated in 2022, have made it faster and cheaper for any company to get a generic approved. Approval times have dropped by 13 months on average. That means more competitors enter sooner. But authorized generics still play a key role in the early phase-when prices are highest and competition is lowest.

Brand companies use authorized generics strategically. Sometimes they launch them as part of a legal settlement to avoid a long court battle. Sometimes they do it to protect their market share. Either way, it’s not charity-it’s business. But for you, the patient, it’s a win.

What should you do as a patient?

Don’t assume your generic is the cheapest option. Ask your pharmacist: “Is this a first-to-file generic, or is there an authorized generic available?” If you’re paying more than $15 for a generic that’s been on the market for over a year, you’re probably overpaying.

Check your insurance formulary. Some plans list authorized generics separately-and they’re often the lowest tier. If your plan doesn’t distinguish them, ask for a price match. Many pharmacies will lower your copay if you show them a lower price elsewhere.

And if you’re on a chronic medication-like high blood pressure, cholesterol, or diabetes-consider switching to mail-order or bulk discounts. With generic prices this low, buying a 90-day supply often cuts your cost even further.

The bottom line: authorized generics aren’t just another type of drug. They’re a powerful tool that drives prices down faster. And if you know how to use them, you’ll pay less every month-without sacrificing quality or safety.