<P> Enacted in 1984, the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch - Waxman Act, standardized procedures for recognition of generic drugs . In 2007, the FDA launched the Generic Initiative for Value and Efficiency (GIVE): an effort to modernize and streamline the generic drug approval process, and to increase the number and variety of generic products available . </P> <P> Before a company can market a generic drug, it needs to file an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration, seeking to demonstrate therapeutic equivalence to a previously approved "reference - listed drug" and proving that it can manufacture the drug safely and consistently . For an ANDA to be approved, the FDA requires the bioequivalence of a generic drug to be between 80% and 125% of the innovator product . (This range is part of a statistical calculation, and does not mean that generic drugs are allowed to differ from their brand - name counterparts by up to 25 percent .) The FDA evaluated 2,070 studies conducted between 1996 and 2007 that compared the absorption of brand - name and generic drugs into a person's body . The average difference in absorption between the generic and the brand - name drug was 3.5 percent, comparable to the difference between two batches of a brand - name drug . Non-innovator versions of biologic drugs, or biosimilars, require clinical trials for immunogenicity in addition to tests establishing bioequivalency . These products cannot be entirely identical because of batch - to - batch variability and their biological nature, and they are subject to extra rules . </P> <P> When an application is approved, the FDA adds the generic drug to its Approved Drug Products with Therapeutic Equivalence Evaluations list and annotates the list to show equivalence between the reference - listed drug and the generic . The FDA also recognizes drugs that use the same ingredients with different bioavailability, and divides them into therapeutic equivalence groups . For example, as of 2006, diltiazem hydrochloride had four equivalence groups, all using the same active ingredient, but considered equivalent only within each group . </P> <P> In order to start selling a drug promptly after the patent on innovator drug expires, a generic company has to file its ANDA well before the patent expires . This puts the generic company at risk of being sued for patent infringement, since the act of filing the ANDA is considered "constructive infringement" of the patent . In order to incentivize generic companies to take that risk the Hatch - Waxman act granted a 180 - day administrative exclusivity period to generic drug manufacturers who are the first to file an ANDA . </P>

Patents give pharmaceutical companies exclusive rights to produce and sell the patented medications