When you pick up a prescription, you probably don’t think about who made it or how it got to the shelf. But the difference between an authorized generic and a first-to-file generic can mean big savings - or surprisingly little. If you’re paying out of pocket or your insurance has a high copay, knowing this stuff matters.
What’s 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 - just without the brand name on it. For example, if you take Lipitor (atorvastatin), the authorized generic is made by Pfizer, the original maker, but sold under a different label. It’s not a copy. It’s the real thing, stripped of marketing. These drugs enter the market at any time, often as part of a deal between the brand company and a generic manufacturer. They don’t need to go through the usual FDA approval process for generics because they’re covered under the original brand’s New Drug Application (NDA). That means they can hit shelves faster than traditional generics.What’s 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, that company gets 180 days of exclusive rights to sell the generic version - no other generic can compete during that time. This exclusivity is a huge financial incentive. The first-filer can charge a lot more than later entrants because they’re the only game in town. In some cases, that 180-day window can bring in hundreds of millions in revenue. But here’s the twist: the brand company can still launch an authorized generic during that same period.Price difference: authorized generic vs first-to-file
Here’s where it gets real. When only the first-to-file generic is on the market, prices drop - but not as much as you’d hope. According to the Federal Trade Commission (FTC), retail prices for generics in this scenario are about 14% lower than the brand name. That sounds good, but it’s not a massive discount. Now, add an authorized generic into the mix. Suddenly, prices plunge further. The FTC found that when both the first-filer and an authorized generic are selling the same drug, retail prices drop to 18% below brand prices. That’s a 4 percentage point jump in savings - and it’s not just at the pharmacy counter. Pharmacy acquisition costs (what pharmacies pay wholesalers) drop from 20% below brand to 27% below brand when both types are competing. Let’s put that in dollar terms. If a brand drug costs $100 per month:- With only the first-to-file generic: you pay around $86.
- With an authorized generic also available: you pay around $82.
Why does this happen?
It’s simple economics: more competition = lower prices. When two companies sell the same drug, they undercut each other. The first-filer doesn’t want to lose market share. The authorized generic, backed by the brand company’s distribution network, can move fast and cheap. The FTC’s 2013 report showed that when an authorized generic enters during the 180-day exclusivity window, it slashes the first-filer’s revenue by 40% to 52%. That’s not a small hit. It forces the first-filer to lower prices just to stay in the game. And here’s something counterintuitive: pharmacies actually make more profit when both generics are on the shelf. Gross profit per prescription goes up because they’re buying the drugs cheaper and selling them at similar prices to consumers. More savings for you, more margin for the pharmacy.What about long-term prices?
The real win comes later. Once the 180-day exclusivity ends, more generics flood the market. The FDA found that when four competitors enter, prices drop to 79% below brand prices. By the time six or more companies are selling the same drug, prices fall over 95%. But here’s the catch: if an authorized generic is already there during the exclusivity period, it sets the tone. It keeps prices low from the start. Without it, the first-filer might hold prices high for longer, delaying the downward spiral. Research from Health Affairs in 2023 showed that generic drugs average about 70% cheaper than brand names within five years of entry. But that average hides the gap between markets with and without authorized generics. In markets where authorized generics entered early, the drop was steeper and faster.Are authorized generics less effective?
No. They’re not “inferior.” They’re identical. The FDA requires authorized generics to meet the same standards as brand drugs - same active ingredient, same dosage, same quality control. The only difference is the label. Some people worry that because authorized generics are made by the brand company, they might be priced higher than traditional generics. But the FTC found no evidence of that. In fact, authorized generics are often priced lower than the first-filer’s version during the exclusivity window.