Bringing a drug to market requires collaboration between pharmaceutical manufacturers and the U.S Food and Drug Administration (FDA). Whether it’s a new chemical entity, a generic equivalent, or a biologic, the regulatory pathway determines the approval type, but there may be more to consider when determining the difference between a brand and generic. We’ll review various elements used in defining “Brand” and “Generic” drugs, as these classifications can influence product marketing, pharmacy reimbursement, patient copays, and clinical use.

Approval Type

When a new chemical entity is approved through a New Drug Application (NDA), it is referred to as a brand drug based on the assignment of a brand or trade name by the manufacturer.  An NDA requires extensive research and reporting during the approval process, including preclinical and clinical data, pharmacology and toxicology reports, manufacturing and packaging information, explicit labeling details, and patent and exclusivity information. If FDA approval is obtained, the drug can be exclusively brought to the market for a certain period. Manufacturers may also use the NDA approval to market an unbranded version of the product, known as an Authorized Generic.

When the brand drug loses exclusivity, other manufacturers submit applications for generic equivalents through the Abbreviated New Drug Application (ANDA) pathway. Unlike NDAs, ANDA applications do not require the same extensive clinical testing but must prove bioequivalence to the brand. Additionally, while some generic exclusivity may be available, it is typically limited to 180 days, or about six months.

Branded generics land in the middle between traditional generics and brand name drugs. While they contain the same active ingredients and meet the same bioequivalence standards as generics, manufacturers market them under proprietary brand names. This allows manufacturers to leverage lower costs with generic production while building brand loyalty. Branded generics are often seen in the specialty space and with more niche products.

Biologics are medications that consist of large complex molecules that are made from living organisms. These include products such as monoclonal antibodies, vaccines, and gene or cell therapies. Biologics undergo a similar approval process as branded medications; however, they require the submission of a Biologics License Application (BLA) instead of an NDA. Following several phases of clinical trials and manufacturing, labeling, and facility reviews, a newly approved biologic becomes a reference product for future biosimilars. Biologics are commonly assigned a brand name in the same fashion as a traditional, small molecule branded drug, though unbranded biologics also exist.

Biosimilars serve as lower-cost equivalents to biologics, and are designed to be highly similar in structure, function, and efficacy.  Pharmaceutical companies submit biosimilar approvals under Section 351(k) of the Public Health Service Act to determine safety, efficacy, and structural and functional similarity. Biosimilars may be assigned a brand name (like a branded generic) or a generic name. The complex nature of biologics being derived from living organisms prevents homogeny; consequently, they fail to fulfill the definition of a generic to a branded biologic. However, additional studies can be conducted to show that the biosimilar can be classified as an interchangeable biosimilar. If the interchangeable biosimilar complies with the terms and state laws, it may be substituted at the pharmacy level, without healthcare provider intervention, comparable to generic drugs being substituted for brand name drugs, which is commonly seen in practice.  Biosimilars typically offer cost savings compared to biologics.

Brand vs. Generic

The approval pathway of a drug is not the only factor that shapes clinical use, substitution practices, pharmacy reimbursement, and patient copays. While the FDA defines brand and generic based on approval type, PBMs and payers may use a different set of criteria to determine brand or generic coverage, patient out-of-pocket costs (copays), and pharmacy reimbursement. Payers may rely on CMS and FDA indicators or drug pricing compendia data and factor in multiple elements to designate “Brand” or “Generic” status. Data used to distinguish brands and generics can include:

• Single Source vs. Multiple Source Indicators
• Brand Name Codes
• Manufacturer Type
• FDA Approval Type
• Orange Book Codes
• Reference Listed Drug Designation
• Marketing Category
• Proprietary Compendia Fields, such as MONY codes

For example, the designation of a branded, NDA-approved product as a Brand drug is likely straightforward. However, an ANDA-approved drug being the sole product of its active ingredient on the market may act as a “de facto” brand. This may occur if a brand is withdrawn from the market or other generics exit the market, and a single ANDA is the only remaining product. As a single-source product, it can command higher drug prices due to overall lack of competition and obtain brand-like pricing power while still appearing as a generic product based on its ANDA approval type. The FDA does not reclassify these drugs, but it is expected that PBMs and payers will treat them differently when making formulary decisions and calculating reimbursement rates.

The classification of products as brand or generic is not a clear determination and is influenced by several factors, yet the distinction impacts prescribing, reimbursement, patient copays, and drug utilization. Evaluating contract terms for what constitutes a brand vs. generic is imperative for all health plans, pharmacies, and PBMs. Contact PHSL with your specific questions about brand and generic designations or for assistance in reviewing contract terms and conditions.