Prescription pharmaceutical products in the U.S. generally are marketed as either generic or brand pharmaceuticals. Generic pharmaceutical products are bioequivalent (also known as biosimilar) of their respective brand products and provide a cost-efficient alternative to brand products. Brand pharmaceutical products are marketed under brand names through programs that are designed to generate physician and consumer loyalty.

Generic drug makers are hopeful that they will thrive over the next four or five years as some $60 billion in annual sales of branded drugs go off patent. Sandoz, the market leader for biosimilar drugs expects this market to grow to $20 billion by 2020, up from a current $250 million. There is also a second class of generic drugs, small molecule chemical drugs. Biological drugs are made of larger molecules than chemical drugs. Since generics of chemical drugs, which are made of small molecules, are relatively simple to copy, the market for generic drugs attracted a flurry of players.

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Disclosure: The author has a long position in IPXL.