Pharmacy Benefits Glossary
A guide to general pharmacy benefits terminology.
What Is a Brand-Name Drug? [Definition, Processes, and Future Trends]
A brand-name drug is a patented pharmaceutical developed, sold, and marketed by its manufacturer under a unique name or trademark. Brand-name drugs are sold exclusively by the manufacturer until the patent expires. At that point, generic versions of the drug may be approved and sold.
Brand-name drugs can also be specialty drugs, which are high-cost brand-name drugs developed for rare conditions and diseases.
Development and Approval Process
Brand-name drugs undergo numerous processes before they can be approved, patented, and sold. These stages include the following:
Discovery and Development
During the discovery and development processes, scientists conduct research to study diseases, identify potential targets for drug candidates, and test the efficacy of new compounds.
In preclinical testing, drugs undergo laboratory animal tests for safety, effectiveness, and side effects before entering human clinical trials.
Clinical Trials
In Phase I clinical trials, a small number of volunteers participate to assess the dosage range and side effects.
In Phase II, a larger sampling of patients with a specific condition is tested to see if the drug is effective and safe.
In Phase III clinical trials, large-scale trials include as many as thousands of subjects, using data from current and previous trials to gauge impact and side effects while comparing the results to existing treatments.
FDA Review and Approval
Once a drug has undergone rigorous, successful clinical trials, the developer submits a New Drug Application (NDA) to the FDA for approval. This initiates the drug’s approval process with the FDA.
The FDA reviews the NDA. Upon approval, the drug enters Phase IV trials, which involve continued monitoring of long-term safety and efficacy, with the FDA assessing side effects, risks, and effectiveness.
The developer obtains patents for exclusive marketing and sales rights during this stage. The FDA typically grants this market exclusivity for several years; the exact duration depends on numerous factors, including drug classification, status, and pediatric testing.
Cost and Consumer Choice
By definition, brand-name drugs cost significantly more than generic versions. Research and development (R&D) for a new drug can take years—even as long as a decade, costing the developer up to billions of dollars.
From initial development through testing, these manufacturers have no guarantee of profitability unless the drug is approved by the FDA.
Once the FDA approves the drug, the developer has to hire sales representatives, secure and defend its patent, and build the brand’s name with the public.
The high cost of brand-name drugs largely goes to recouping these years of costly development. Meanwhile, the drug is only protected for exclusivity on the market for a matter of years before the manufacturer faces competition from less expensive generic equivalents. This limited window of time is needed to recoup costs and secure the revenue required to invest in future R&D for new drugs.
The higher cost for brand-name drugs also means that patients often end up paying higher copays to cover these costs, and frequently, their provider requires prior authorization before covering the drug.
Despite the money spent on marketing brand-name drugs, 84% of US prescriptions are filled as generics. The tide is turning on long-held consumer concerns that generic drugs were made from lower-quality, less expensive ingredients. The healthcare industry aims to continue educating the public about the efficacy and safety of generics as a more affordable alternative to brand-name drugs.
