Authorized Generic Pricing: Why They Cost Less Than Brand-Name Drugs

Nov 22, 2025

Have you ever picked up a prescription and noticed two identical-looking pills on the shelf-one with a big brand name, another with a plain label-and wondered why the plain one costs almost half? That’s not a mistake. It’s an authorized generic. And if you’re paying for prescriptions out of pocket, or even through insurance, you’re missing out if you don’t know how they work.

What Exactly Is an Authorized Generic?

An authorized generic isn’t a copy. It’s the exact same drug as the brand-name version-same active ingredient, same factory, same pills, same packaging (sometimes even the same bottle). The only difference? No brand name on it.

The brand-name company makes it. Or they license another company to make it under their original FDA approval. That’s why it’s called authorized. The FDA keeps a public list of these drugs, updated every quarter. As of October 2023, there were 137 authorized generics on that list.

Think of it like this: If you bought a Nike shoe from Nike’s own factory, but it had no swoosh on it and was sold under a different label, it’s still Nike. Same quality. Same materials. Just no logo. That’s what an authorized generic is.

Why Are They Cheaper?

Brand-name drugs cost a lot because the company spent years and millions developing them. Once the patent runs out, other companies can make copies. But here’s the twist: the original brand company can also make a generic version of their own drug-and sell it at a discount.

They do this to keep you from switching to a competitor’s generic. If you’re used to taking Lipitor, and suddenly you see a cheaper version with no name on it that’s made in the same factory, you’re more likely to stick with it than try a new generic from a company you’ve never heard of.

So why the price drop? No marketing. No advertising. No sales reps. No fancy packaging. No patent protection costs. The brand company doesn’t need to recoup R&D anymore. They’re just selling the same pill for less.

On average, authorized generics cost 4% to 8% less than the brand-name version. Sounds small? It adds up fast. If you’re taking a $300-a-month drug, that’s $12 to $24 saved every month. Over a year? That’s $144 to $288 in your pocket.

How Do They Compare to Regular Generics?

Regular generics come from other companies. They have to go through their own FDA approval process (an ANDA). They might be made in a different factory, sometimes even in a different country. They’re cheaper-often 80% less than the brand-but they’re not identical in every way. The fillers, the shape, the coating? Those can vary. And sometimes, patients notice differences in how the pill works or how it feels.

Authorized generics don’t have that issue. They’re made in the same facility, with the same formula, under the same strict controls as the brand. That’s why doctors and pharmacists often recommend them for patients who are sensitive to small changes in medication.

Here’s the real kicker: when an authorized generic hits the market, it forces the first generic competitor to drop its price too. The FTC found that when an authorized generic enters at the same time as a regular generic, pharmacy prices drop 13% to 18% compared to when only one generic is available. That’s not a coincidence. It’s competition.

Why Do Brands Do This? Isn’t It Self-Sabotage?

It seems counterintuitive. Why would a company cut its own profits? The answer is control.

When a patent expires, the first generic manufacturer gets 180 days of exclusivity. During that time, they’re the only one allowed to sell a generic version. They can charge almost as much as the brand-sometimes even more. That’s a problem for the brand company. They lose market share fast.

By launching their own authorized generic on day one, they prevent that monopoly. They keep you buying from them, even if it’s under a different label. And they make sure the price doesn’t spike. It’s a smart business move. They’re not giving up the market-they’re just changing the game.

Some critics say this is a tactic to delay real competition. The FTC has looked into it. In some cases, brand companies have used authorized generics as part of legal settlements with generic makers-paying them not to enter the market. But that’s illegal. The FTC has cracked down on those deals. What’s legal? Launching an authorized generic to compete fairly.

Real Examples: When Authorized Generics Made a Difference

In 2016, Mylan faced public outrage after raising the price of the EpiPen from $100 to $600. They responded by launching an authorized generic for $300. It wasn’t charity. It was damage control. But it worked. People who needed the drug could still get it without paying triple.

Gilead did something similar with Harvoni and Epclusa, two expensive hepatitis C drugs. Before their patents even expired, they released authorized generics. Why? Because they knew cheaper generics were coming. They didn’t want to lose all their customers to unknown brands. By offering their own version at a discount, they kept their market share and kept patients on their product.

These aren’t outliers. Since 2010, 67% of brand-name drug companies have used this strategy at least once. And they’re not slowing down. Industry data shows they spend $1.8 billion a year on marketing and distributing authorized generics.

How to Get One

You don’t need a special prescription. You don’t need to ask for it by name. But you do need to know how to ask your pharmacist.

When your doctor writes a prescription for a brand-name drug, ask: “Is there an authorized generic available?”

Pharmacists have access to formulary lists from your insurance plan. Sometimes, the authorized generic is listed as the preferred option. Other times, it’s buried under the brand name. If your insurance doesn’t cover it automatically, ask them to switch it. Many plans will approve it if you explain it’s the same drug, just cheaper.

Medicare Part D beneficiaries saw an 8.2% improvement in medication adherence when authorized generics were covered at the same tier as regular generics. That means people actually took their meds more often because they could afford them.

Watch Out for Hidden Costs

Here’s the catch: just because an authorized generic exists doesn’t mean your insurance will cover it at the lowest cost.

Pharmacy Benefit Managers (PBMs) control which drugs go on which tiers. Sometimes, they put the brand-name drug on the lowest tier to protect their own profits. Other times, they favor the authorized generic. It’s not always transparent.

Thirty-two states now require PBMs to disclose how they set prices. If you’re paying more than you should, you have the right to ask for an appeal. Don’t assume the price you see at the counter is the best possible one.

What’s Next for Authorized Generics?

The Inflation Reduction Act of 2023 capped out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year. That’s a big deal. It means more seniors will be looking for ways to save. Authorized generics are one of the easiest, safest, and most effective tools they have.

Industry analysts predict this strategy will stay popular through at least 2030. As more drugs lose patents, and as pressure grows to lower drug prices, brand companies will keep using authorized generics-not to trick you, but to stay competitive while keeping you on their medicine.

Bottom line: authorized generics aren’t a loophole. They’re a legitimate, FDA-approved way to get the exact same drug at a lower price. And if you’re paying for prescriptions, you’re leaving money on the table if you don’t ask for them.