A Branded drug company invests a lot of money on the research and development of a new drug. After the discovery of a lead compound and before conducting the clinical trials, the company can apply for a patent. Once the patent is obtained, the company gets exclusive rights to manufacture the drug and to exclude other companies from manufacturing the drug. The branded drug company enjoys the monopoly of manufacturing and marketing the drug until the patent expires. The cost of a branded drug is very high as the company tries to recover the money invested in the research, development and marketing of the drug. Once the patent has expired., generic drugs enter in to the market. Are these generic drugs as safe and effective as the branded drugs? Yes they are. Then why are they so much cheaper than the branded drug? Because, unlike the branded drug company, generic drug companies need not invest a lot of money on research and development and their overall investment in bringing the drug in to market is very less compared to the branded drug. As generic drugs are as safe and effective as the branded drug and relatively cheaper than the branded drug, patients prefer them. This leads to a fall in the branded drug market which ultimately leads to a fall in its price because, market conditions such as, number of sellers, barriers to entry etc. determine the level of competition in a market. Some companies try to avoid this by various methods. One of such methods is “Evergreening of patent”.

INTRODUCTION:

There is a long standing debate on whether generic drugs are as effective and safe as the branded drug. A brand name drug is a medicine that is discovered, developed, and marketed by a pharmaceutical company and is protected by a patent. A generic drug is said to be a bioequivalent of the branded drug and does not have a patent by it self and is manufactured and marketed only after the expiration of the branded drugs patent. Brand name drugs are well known and trusted but are expensive. Generic drugs are less expensive than the brand name drugs but drugs are not always trusted by the people. How ever, the final decision to choose a brand name drug or a generic drug involves both the patient and the health care team.