Authorized Generic Pricing: Why They Cost Less Than Brand-Name Drugs

When you walk into a pharmacy to pick up a prescription, you might see two versions of the same medicine: one with a well-known brand name and another labeled as an authorized generic. They look identical. They work the same way. But the authorized generic often costs 4% to 8% less. Why? And why does it matter to you?

What Exactly Is an Authorized Generic?

An authorized generic is not a copy. It’s the exact same drug made by the same company that makes the brand-name version. The brand-name manufacturer licenses its own product to be sold under a different label-usually at a lower price. The FDA requires these products to match the brand in every way: same active ingredient, same pills, same factory, same quality controls. There’s no difference in how they work in your body.

That’s different from regular generics. Regular generics are made by other companies after the brand’s patent expires. They have to prove they’re equivalent through an FDA process called an ANDA. Authorized generics skip that step because they’re made under the original brand’s approval, known as an NDA. They’re the real thing, just without the brand name on the box.

Why Do They Cost Less?

The reason authorized generics are cheaper comes down to one thing: competition. When a brand-name drug loses its patent, the first generic company to file gets 180 days of exclusive rights to sell the generic version. That’s a big deal. Without competition, that first generic can set a high price-sometimes close to the brand’s price.

But if the brand company launches its own authorized generic at the same time, everything changes. Now there are two versions of the generic on the shelf from day one. The first generic can’t charge premium prices anymore. It has to drop its price to compete with the brand’s own version. And that forces everyone else to lower prices too.

Studies from the Federal Trade Commission show that when an authorized generic enters the market at the same time as a regular generic, pharmacy prices drop 8.4% to 10.3% compared to when no authorized generic is present. For pharmacies buying in bulk, the discount can be even bigger-13% to 18% lower than if only one generic were available.

How This Affects Your Pocket

You might think, “If it’s the same drug, why not just buy the brand?” The answer is cost. Even a small price difference adds up. If your brand-name medication costs $100 a month, switching to the authorized generic could save you $4 to $8 every month. That’s $48 to $96 a year. For people on multiple medications, those savings become significant.

But here’s the catch: your insurance plan might not make it easy. Pharmacy Benefit Managers (PBMs) control which drugs go on which tier in your plan. Sometimes, the brand-name drug and the authorized generic are placed on the same tier. That means you pay the same copay for both. But if the PBM puts the authorized generic on a lower tier, your copay drops. You need to ask your pharmacist: “Is the authorized generic covered at a lower cost than the brand?”

A 2022 analysis of 1.2 million Medicare Part D patients found that when authorized generics were placed on the same tier as regular generics, medication adherence improved by 8.2 percentage points. People took their meds more consistently because they could afford them.

Real-World Examples

One of the most talked-about cases was the EpiPen. In 2016, Mylan raised the price of the brand-name EpiPen to $600 for a two-pack. Public outrage followed. Then Mylan released an authorized generic-same device, same epinephrine-for $300. The price didn’t drop because of charity. It dropped because competition forced it.

Another example is Gilead’s hepatitis C drugs, Harvoni and Epclusa. Before their patents expired, Gilead launched authorized generics to keep market share as cheaper alternatives loomed. The strategy worked. Patients got access to the same medicine at a lower price, and Gilead still made money.

These aren’t rare cases. Since 2010, 67% of brand-name drugmakers have used authorized generics for at least one product. The pharmaceutical industry spends about $1.8 billion a year on marketing and distributing them.

Why Aren’t They Always Cheaper?

You might wonder: if they’re the same drug, why aren’t they always the cheapest option? The answer lies in how insurance plans are structured. Some PBMs still favor the brand-name version because they get rebates from the manufacturer. Even if the authorized generic is cheaper, the plan might not pass the savings to you.

Also, some pharmacies don’t stock authorized generics because they’re not always profitable for them. If the pharmacy gets the same reimbursement for the brand and the authorized generic, they might just keep the brand on the shelf-it’s easier to manage.

That’s why it’s important to ask. Don’t assume the generic you’re given is the cheapest. Ask your pharmacist: “Is there an authorized generic for this? And is it covered at a lower cost?”

What About the Future?

Authorized generics are here to stay. With the Inflation Reduction Act capping out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year, manufacturers have more incentive than ever to offer lower-cost versions. Authorized generics help them keep customers loyal while still making a profit.

Regulators are watching too. The FTC has raised concerns that sometimes, brand companies use authorized generics as a way to delay broader generic competition. For example, if a brand company pays a generic manufacturer to hold off on launching their version, and instead launches its own authorized generic, that’s a problem. The FTC calls these “pay-for-delay” deals. Courts and lawmakers are cracking down.

Still, when used fairly, authorized generics are a win for patients. They bring down prices faster. They increase access. And they give you a better option than paying full price for a drug that’s no longer under patent.

What You Can Do

Here’s how to make sure you’re getting the best deal:

1. Ask your doctor if an authorized generic is available for your prescription.
2. Call your pharmacy and ask: “Do you carry the authorized generic for this drug?”
3. Check your insurance formulary. Is the authorized generic on a lower tier than the brand?
4. If your copay is the same for both, ask if you can switch to the authorized generic for a lower price.
5. Use tools like GoodRx or SingleCare to compare prices between brand, authorized generic, and regular generic versions.

You don’t need to be a pharmacy expert to save money. You just need to ask the right questions. The drug in your hand might be the same as the brand-but the price doesn’t have to be.