The major difference between brand name and generic drug is the research process required for the brand name company to discover, design, and develop the new drug. This process includes preclinical testing of a new drug in laboratories, several phases of clinical studies in volunteers and people who have the disorder being studied and finally FDA review and approval. The whole process usually takes about 10 years and on average can cost a drug company about $500 million.

The FDA grants the innovator company a patent that gives the company an exclusive right to a drug for 20 years. Additional patents can sometimes be filed to extend the patent life. After a patent has expired, other companies are allowed to manufacture and sell a generic version of the drug.

For the healthcare industry, generic drugs offer significant savings to consumers. According to the Congressional Budget Office, generic drugs save consumers an estimated $8 to $10 billion a year at retail pharmacies. Potential savings are even greater. American consumers could have saved $20 billion in 2004, and even more could be saved in 2005 and future years, says a report released by Express Scripts Inc.

Generic drugs are less expensive because generic manufacturers donТt have the investment costs of the developer of a new drug and so they can sell their product at substantial discounts. Also, when multiple companies begin producing and selling generic versions of the same brand name drug, the competition among them also drives the price down even further. Today, almost half of all prescriptions are filled with generic drugs.

Before generic drugs can be marketed, they must be approved by the FDA. To start approval process, generic company has to submit Abbreviated New Drug Application (ANDA) to the FDA.

The main stages of the generic drug review process are the following:

Bioequivalence Review - this process establishes that the proposed generic drug is bioequivalent (within a few percentage points) to the brand name drug. Generic drug is bioequivalent to brand name drug if both the rate and extent of absorption of the active ingredient of the generic drug fall within established parameters when compared to that of the brand name drug. Bioequivalence of different versions of a drug can vary by up to 20%, because for most drugs, such variations do not noticeably alter effectiveness or safety. However, actual differences between FDA approved generics and brand name drugs are typically only about 3.5% on average and rarely exceed 10%.

Chemistry/Microbiology review - this process provides assurance that the generic drug will be manufactured in a reproducible manner under controlled conditions. Among areas that are subject to check are manufacturing procedures, raw material specifications and controls, sterilization process, container and closure systems.

Request for Plant Inspection - Upon filing an ANDA an establishment evaluation request is forwarded to the Office of Compliance to determine whether or not every link in the drug production chain is operating in compliance with current Good Manufacturing Practice regulations. Each facility listed on the evaluation request is evaluated individually and the Office of Compliance makes an overall evaluation for the entire application.

Labeling review - this process ensures that the proposed generic drug labeling (package insert, container, package label and patient information) is identical to that of the brand name drug except for differences due to changes in the manufacturer, distributor, pending exclusivity issues, or other characteristics inherent to the generic drug.

Based on the results of bioequivalence review generic drug receives a two-letter therapeutic equivalence evaluations code. The coding system for therapeutic equivalence evaluations is constructed to allow users to determine whether the FDA has evaluated a particular approved product as therapeutically equivalent to other products (first letter) and to provide additional information on the basis of evaluations (second letter).

Drugs are considered to be therapeutically equivalents only if they contain the same active ingredients, are of the same route of administration and are identical in strength or concentration, and if they can be expected to have the same clinical effect and safety profile.

The two basic categories into which drugs have been placed are indicated by the first letter as follows:

A - drug that FDA considers to be therapeutically equivalent to other drugs.If there are no known or suspected bioequivalence problems, the generic drug receives one of the following codes:

AA - Products in conventional dosage forms not presenting bioequivalence problems

AN - Solutions and powders for aerosolization

AO - Injectable oil solutions

AP - Injectable aqueous solutions

AT - Topical products (creams, gels, lotions, oils, ointments, pastes, solutions, sprays and suppositories)

AB - if actual or potential bioequivalence problems have been resolved with adequate evidence supporting bioequivalence

B - drug that FDA, at this time, considers not to be therapeutically equivalent other pharmaceutically equivalent products:

BC - Extended-release dosage forms (capsules, injectables and tablets)

BD - Active ingredients and dosage forms with documented bioequivalence problems

BE - Delayed-release oral dosage forms

BN - Products in aerosol-nebulizer drug delivery systems

BP - Active ingredients and dosage forms with potential bioequivalence problems

BR - Suppositories or enemas that deliver drugs for systemic absorption

BS - Products having drug standard deficiencies

BT - Topical products with bioequivalence issues

BX - Drugs for which the data are insufficient to determine therapeutic equivalence

B* - Drugs requiring further FDA investigation and review to determine therapeutic equivalence

If the generic drug is placed into B category this does not mean that it is not good or is of lower quality. It simply means that if you started using that generic, you should not switch to the brand name or vice versa especially if that drug has a narrow therapeutic range (some antidepressants, corticosteroid tablets, antihypertensive drugs).

To ensure the quality of generic drugs, FDA inspects facilities where drugs are manufactured about 3,500 times a year. Both brand name and generic drug facilities must meet the same standards of good manufacturing practices. FDA does not permit drugs to be made in substandard facilities. Manufacturers of generic drugs have facilities comparable to those of manufacturers of brand name drugs. In fact, with the potential to lose millions of dollars to a generic companies, some brand name firms have either bought smaller generic companies or created their own. FDA estimates that 50% of generic drugs are produced is by brand name companies. They frequently make copies of their own drugs but sell them under the generic name (e.g. GlaxoSmithKline and Pfizer produce generic versions of their own drugs Paxil and Neurontin).

Not all brand name drugs have generic versions. Sometimes a drug is too hard to duplicate, or there are no adequate tests to prove that the generic drug acts the same as the brand name drug. Sometimes the market for the drug is too small and there is no business sense to create another version of a drug. You can search for all generic equivalents of brand name drugs by using the "FDA Electronic Orange Book".