Cost Comparison: Authorized Generics vs First-to-File Generics - Which Saves More Money?

When you pick up a prescription, you might not realize there are two very different kinds of generic drugs on the shelf - and they can cost you very different amounts. One is made by the original brand company but sold under a generic label. The other is made by a rival company that raced to be first to file for approval. These are called authorized generics and first-to-file generics. And the difference between them can mean the difference between paying $10 or $30 for the same pill.

What Exactly Is an Authorized Generic?

An authorized generic isn’t a knockoff. It’s the exact same drug, made in the same factory, with the same ingredients, and the same packaging - just without the brand name. The brand-name company licenses it to a generic distributor or sells it directly under a different label. For example, if you buy the authorized generic version of Lipitor, it’s made by Pfizer, the same company that makes the brand-name version. It’s not a copy. It’s the real thing, repackaged.

These drugs can enter the market at any time. They don’t need to wait for patent expiration or go through the full FDA approval process because they’re covered under the original brand’s New Drug Application (NDA). That means they can show up even before the first traditional generic hits the shelves.

What Is a First-to-File Generic?

A first-to-file generic is the opposite. It’s made by a separate company that submitted the first Abbreviated New Drug Application (ANDA) to the FDA after a brand drug’s patent expired. 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 deal. It’s worth hundreds of millions of dollars to the generic manufacturer. During those 180 days, they’re the only game in town. That gives them pricing power. They can set prices high - sometimes close to the brand price - and still make massive profits because no one else is selling the same drug.

Price Differences: The Real Numbers

Here’s where it gets interesting. The Federal Trade Commission (FTC) tracked over 95 drugs and found clear patterns:

• In markets with only a first-to-file generic (no authorized generic), the average retail price is about 14% lower than the brand-name drug.
• When an authorized generic enters the market at the same time, the price drops to 18% below the brand - a 4 percentage point jump in savings.

The savings get even bigger for pharmacies buying in bulk:

• Without authorized generic competition, pharmacies pay 20% less than the brand price.
• With an authorized generic in the mix, that jumps to 27% less - a 7-point difference.

That means if a brand drug costs $100, you might pay $86 for a first-to-file generic alone. But if an authorized generic joins the market, your price drops to $82. That’s $4 saved per prescription. Multiply that by millions of prescriptions, and you’re talking about billions in annual savings for the healthcare system.

Why Does the Authorized Generic Drop Prices So Fast?

It’s simple economics: more competition = lower prices. When the first-to-file generic has no rivals, they can charge more. But as soon as an authorized generic appears - even if it’s made by the same company that made the brand - it puts pressure on prices.

The authorized generic doesn’t need to build a new factory or prove bioequivalence. It’s already made. It’s already approved. It can flood the market instantly. That forces the first-to-file generic to slash prices to stay competitive.

The FTC found that when an authorized generic enters during the 180-day exclusivity window, it cuts the first-filer’s revenue by 40% to 52%. And that hit doesn’t go away after 180 days - revenues stay lower for at least 30 months.

Who Benefits? The Pharmacy, the Patient, the System

You might think pharmacies lose out when prices drop. But the opposite is true. Gross profit per prescription goes up when an authorized generic joins the market. Why? Because even though the selling price drops, the cost to the pharmacy drops even more. The spread between what they pay and what they charge widens.

Patients win too. Lower prices mean lower out-of-pocket costs, especially for those without insurance or with high deductibles. The healthcare system saves billions. Medicare, Medicaid, and private insurers pay less per prescription. That means more money stays in the system for other treatments.

What About the Brand Company? Are They Losing Money?

Yes - but strategically. The brand company doesn’t make as much on the brand version anymore. But by launching an authorized generic, they capture a chunk of the generic market. Instead of losing all revenue to a rival generic maker, they keep some of it. It’s a way to soften the blow of losing patent protection.

Some critics say this is a trick - a way for big pharma to delay real competition. But the FTC’s research found no evidence that authorized generics reduce the number of patent challenges by generic companies. In fact, generic firms still file ANDAs at the same rate. The 180-day exclusivity incentive is still strong enough to drive competition.

What Happens When More Generics Enter?

The real price crash comes when multiple generics flood the market. The FDA found:

• With one generic (first-to-file only): prices are 39% lower than brand.
• With two generics (first-to-file + authorized generic): prices drop to 54% lower.
• With four generics: prices fall to 79% lower.
• With six or more: prices drop over 95% below brand.

That’s why the early phase matters. The first 180 days set the tone. If an authorized generic enters early, prices fall faster. If it doesn’t, the first-filer holds prices high for longer.

Are Authorized Generics Really Cheaper Long-Term?

Some worry that authorized generics are less aggressive - that they’re just a way for big pharma to control the market. But the FTC’s long-term data shows otherwise. Authorized generics don’t charge more than other generics. Their prices stay low. In fact, they often become the cheapest option.

One study found that 20% of authorized generics launched between 2010 and 2014 had no sales in Medicare data after five years. That means many didn’t survive long-term - not because they were expensive, but because they got crushed by cheaper, independent generics.

Regulators Are Watching

The FTC has been monitoring this space for years. In 2022, Commissioner Alvaro Bedoya said the agency remains vigilant about potential anti-competitive behavior. That includes situations where brand companies delay generic entry by paying rivals to stay out of the market - a practice called “pay-for-delay.”

The Supreme Court ruled against these deals in 2013, but they still happen. Authorized generics are legal. But when they’re used as part of a settlement to block competition, regulators step in.

What Should You Do?

If you’re paying for a generic drug, ask your pharmacist: “Is this an authorized generic or a first-to-file generic?” You might be surprised to learn they’re different.

If your prescription is expensive, ask if there’s a version with more competition - like one with multiple generics available. That’s when you’ll get the deepest discounts.

And if you’re on a fixed income or have high out-of-pocket costs, know this: the presence of an authorized generic could be saving you $5, $10, or even $20 per month. That adds up fast.

Final Thought: Competition Is the Real Discount

The cheapest drugs aren’t the ones with the most marketing. They’re the ones with the most competitors. Authorized generics aren’t a loophole. They’re a tool. And when used right, they push prices down faster - helping patients, pharmacies, and the whole system.

The bottom line? Don’t assume all generics are the same. The difference between an authorized generic and a first-to-file generic isn’t just legal - it’s financial. And that difference matters.