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

When you pick up a prescription at the pharmacy, you might not realize there are two kinds of generic drugs on the shelf-and they can cost very different amounts. One is made by the original brand-name company and sold under a generic label. The other is made by a rival company that was first to file paperwork with the FDA. These are called authorized generics and first-to-file generics. Understanding the difference isn’t just for pharmacists or insurers. It affects how much you pay out of pocket, how much your insurance covers, and even how quickly cheaper options become available after a brand drug loses patent protection.

What Exactly Is an Authorized Generic?

An authorized generic is the exact same drug as the brand-name version, made by the same company, in the same factory, with the same ingredients and packaging-except it doesn’t carry the brand name. It’s sold under a generic label, often at a lower price. For example, if you buy the authorized generic version of Lipitor (atorvastatin), it’s made by Pfizer, just like the brand version, but it’s labeled as "atorvastatin calcium tablets." These drugs enter the market under the original brand’s New Drug Application (NDA), so they don’t need to go through the full FDA approval process that traditional generics do. That means they can appear on shelves faster than regular generics. Sometimes, they show up even before the first traditional generic hits the market. Brand manufacturers often launch authorized generics as part of legal settlements with generic companies to avoid long court battles. It’s a way for them to keep some of the market share while letting competition lower prices.

What Is a First-to-File Generic?

A first-to-file generic is the first company to submit an Abbreviated New Drug Application (ANDA) to the FDA after a brand drug’s patent expires. Under the Hatch-Waxman Act of 1984, this company gets 180 days of exclusive rights to sell its generic version-no other generic can compete during that time. This exclusivity is a huge financial incentive. For blockbuster drugs, those 180 days can mean hundreds of millions in revenue.

During this window, the first-filer has no competition. That gives them pricing power. They can set the generic price at a discount to the brand, but not necessarily the deepest discount possible. The FTC found that in markets with only one generic (the first-filer), the average retail price is about 14% below the brand price. That’s a good deal, but not the best you can get.

Why Authorized Generics Change the Game

Here’s where things get interesting. The 180-day exclusivity for first-to-file generics doesn’t block authorized generics. So if the brand company launches its own generic version during that window, it creates a two-player market. And that’s when prices really drop.

According to the FTC’s 2013 report, when an authorized generic enters the market during the first-filer’s exclusivity period, retail prices for generics fall by 4% to 8% more than they would without it. Wholesale prices drop even more-by 7% to 14%. In one analysis of 95 drugs, pharmacies paid 27% less than the brand price when both types of generics were available. Without the authorized generic, that number was only 20%.

That difference might sound small, but multiply it by millions of prescriptions, and you’re talking about billions in savings for patients and insurers. For example, if a brand drug costs $100 per month, a single generic might cost $86. Add an authorized generic into the mix, and the price can drop to $78 or lower. That’s a $8 monthly saving per person. For someone on a chronic medication, that adds up to $96 a year-just from one extra competitor.

Who Benefits the Most?

The biggest winners are patients and payers like Medicare, Medicaid, and private insurers. Lower prices mean lower out-of-pocket costs and smaller claims bills. Pharmacists also benefit. Gross profit per prescription goes up when two generics compete. Even though each pill sells for less, the volume increases, and the margin per unit stays strong-or even improves.

The first-to-file generic doesn’t win as much. Their revenue drops by 40% to 52% during the 180-day window when an authorized generic enters. That’s a massive hit. But here’s the twist: that doesn’t stop companies from filing first. The FTC studied this for years and found no evidence that authorized generics discourage generic manufacturers from challenging patents. In fact, the incentive to be first remains huge because of the potential for massive profits during exclusivity.

Brand manufacturers also benefit. They get to keep some control over the market, collect revenue from their own generic, and avoid being completely pushed out. Plus, they can use the launch of an authorized generic as a tool in patent litigation settlements. It’s a strategic move that lowers legal risk while still letting competition happen.

Price Differences by Market Size

The number of competitors has a direct effect on how low prices go. The FDA analyzed data from 2015 to 2017 and found a clear pattern:

• One generic (first-to-file only): 39% lower than brand price
• Two generics (first-to-file + authorized generic): 54% lower
• Four generics: 79% lower
• Six or more generics: over 95% lower

This shows how quickly prices collapse as more players enter. Authorized generics accelerate that process. They don’t just add another option-they trigger a chain reaction. Other generic companies see the price drop and rush to enter. That’s why the market moves from 39% off to 54% off so fast when an authorized generic shows up.

Are Authorized Generics Slowing Down Generic Competition?

Some critics worry that if brand companies can just launch their own generics, they might discourage other companies from filing ANDAs. The idea is: why risk a costly lawsuit if the brand will undercut you anyway?

But the data doesn’t back that up. The FTC’s long-term analysis found no measurable drop in the number of patent challenges by generic companies. Even with authorized generics in play, firms still file ANDAs. Why? Because the 180-day exclusivity is still worth it. If you’re first, you get to be the only one selling for half a year. That’s a huge reward.

Also, authorized generics aren’t always launched. They’re a tool, not a rule. Brand companies use them strategically-often only when they’re settling lawsuits or when they want to protect their market share without triggering a full-price war.

What About the Long Term?

Some authorized generics disappear after a few months. Health Affairs research from 2023 found that about 20% of authorized generics launched between 2010 and 2014 had no sales in Medicare data after five years. That means they were temporary. They served their purpose: drive down prices during the critical early window, then fade out.

Meanwhile, traditional generics keep coming. With the FDA’s Generic Drug User Fee Amendments (GDUFA), approval times have dropped by about 13 months since 2012. That means more generics enter faster overall. The combination of faster approvals and authorized generic competition has made the market more dynamic than ever.

What This Means for You

If you’re paying cash for a prescription, ask your pharmacist: "Is there an authorized generic available?" Sometimes, it’s the cheapest option-even cheaper than the first-to-file generic. You might not even know you’re getting it, because it’s labeled just as "atorvastatin" or "metformin." But if you ask, they can tell you.

If you’re on insurance, your plan might already be using authorized generics to keep costs down. You might not see the difference on your receipt, but the savings are there.

The bottom line? More competition = lower prices. Authorized generics don’t replace first-to-file generics-they make them compete harder. And that’s good news for anyone who needs medication.

How to Spot an Authorized Generic

There’s no universal label, but here are ways to identify one:

• Ask your pharmacist: "Is this made by the brand company?"
• Check the manufacturer name on the bottle. If it’s the same as the brand (e.g., Pfizer, AbbVie, Novartis), it’s likely an authorized generic.
• Look up the drug on the FDA’s Orange Book. It lists which companies make authorized generics.
• Compare prices. If the generic is significantly cheaper than others on the shelf, it might be an authorized version.

Don’t assume all generics are the same. Sometimes, the cheapest one is the one made by the brand.