What is a 'Generic Brand'

A generic brand is a type of consumer product that lacks a widely recognized name or logo because it typically isn't advertised. Generic brands are usually less expensive than brand-name products due to their lack of promotion, which can inflate the cost of a good or service. Generic brands are designed to be substitutes for more expensive brand-name goods. Generic brands are especially common in supermarket goods and pharmaceuticals, and tend to be more popular during a recession.

Breaking Down 'Generic Brand'

Generic brands are often known for their trimmed-down packaging and plain labels, as well as their lower prices. For example, a supermarket may offer its own generic product next to a name-brand product to appeal to a cost-conscious customer. A variation of a generic brand is a private label brand (also "store brand," "own brand" or "private brand"), in which an item carries the brand of a store. Some stores offer both value and premium versions of the same private label product.

Generic brands may be made on the same production line as name-brands or made by lesser-known manufacturers. They may be of the same quality as a similar name-brand product. Despite the difference in cost between name-brand and generic brands, there is little taste or nutritional difference between them. In some cases — without factoring in cost — some generics may even be preferable to name brands. Still, most consumers believe that generics are of a lesser quality compared to brand names. When comparing generic and brand-name products consumers tend to pay close attention to and compare their lists of individual ingredients.

Generic Brands and Drugs

A generic drug or pharmaceutical may be created when a name-brand drug's patent expires. In the U.S, which is responsible for most drug patents, the patent term length is 20 years. There is also an exclusivity period, whose length depends on the drug type and its use. Once a patent ends and an exclusivity has been satisfied a single manufacturer is permitted to produce a generic, chemically identical version of the brand-name drug. At the end of the generic's period of exclusivity, any other manufacturer that can prove that it can achieve the same drug efficacy may make a generic version of that drug.

Some manufacturers may even create a generic version of their brand-name drug, either by manufacturing it themselves or contracting it out to another manufacturer. This strategy makes sense because insurance company policy often dictates that a generic, when available, must be prescribed. Generics are sold at a discount from brand-name drugs, often about 80% less. Because of competition, margins on generic drugs can be very thin. As recently as 2015, it was estimated that generic drugs had saved U.S. consumers about $1 trillion over the previous decade.

Generic Brands: Brand-Name Generics

Some well-known name brands have become genericized. This can happen when a company loses trademark protection or if a name enters the lexicon:

  • Aspirin is trademark in 80 countries, but is the name used by any company in the U.S. for any acetylsalicylic acid product.
  • Dumpster was a trademarked type of mobile garbage bin, but is now the general name for any product serving this purpose.
  • Zipper was a trademark of rubber products maker B.F. Goodrich used in rubber boots.
  • Escalator was a trademark of Otis Elevator. Now it refers to any such device.
  1. Brand

    A brand is an identifying symbol, mark, logo, name, word and/or ...
  2. Generic Securities

    A security backed by recently issued loans or mortgages. Its ...
  3. Brand Equity

    The value premium that a company realizes from a product with ...
  4. Brand Management

    Brand management is a function of marketing that uses techniques ...
  5. Orange Book

    A list of drugs that the U.S. Food and Drug Administration has ...
  6. Brand Identity

    Brand identity is how a business presents itself to, and wants ...
Related Articles
  1. Trading

    5 Generic Products That Are Just As Good

    While some generic products are second-rate, others are just as good as the real thing. Here are six generics that take the cake.
  2. Investing

    Market Vectors Launches First Generic Drugs ETF (GNRX)

    Generic drugs have been a growing market in recent years. Now there is an ETF targeted at this market.
  3. Insurance

    How to Profit from the Generic Drug Trend

    Generic drugs are poised to steal market share as patent protections on a number of branded drugs expire. Investors should be ready, too.
  4. Insights

    Impax Hires Morgan Stanley for Strategic Review, Possible Sale

    The generic drug maker has hired Morgan Stanley to review available options, including an acquisition or sale of the company.
  5. Investing

    Samsung Wants to Become a Drug Company

    Samsung is expanding its drug efforts, inking a deal to create drugs for hard-to-treat diseases.
  6. Financial Advisor

    8 Hacks for Scoring Cheaper Prescription Drugs

    The rising cost of prescription drugs has caused many patients to scramble for funds. Here's what you can do to help clients lower pharmacy costs.
  7. Investing

    Mylan's Breast Cancer Drug Wins FDA Advisors' Approval

    Although the FDA isn’t obligated to follow panel recommendations, it often chooses to do so.
  8. Insights

    Why Drug Prices Keep Rising & How to Fight Back

    Despite pushback from politicians and disgruntled consumers, the cost of drugs keeps going up. Is there any relief on the horizon?
  9. Personal Finance

    The Drug Price-Fixing Probe Is Just the Beginning

    Federal prosecutors are charging several generic drug makers with price-fixing.
  10. Retirement

    Yes, Drug Prices Really Have Doubled

    It isn’t just your imagination: The price of prescription meds has been climbing. The trend is expected to continue, so start using these tips to save.
  1. What are the differences between brand name drugs and generic drugs?

    Discover the process by which brand name drugs lose their patent, allowing generics to be manufactured, as well as the differences ... Read Answer >>
  2. How does the profit margin compare for a generic drug versus a brand name drug?

    Learn how the profit margins compare for generic drugs and brand-name drugs. Brand-name drugs cost three to four times more ... Read Answer >>
  3. How does the drug sector benefit from the growth of emerging markets?

    Understand how the pharmaceutical industry benefits from the growth of emerging markets. Benefits are linked to growing economies ... Read Answer >>
  4. How do name-brand products compete with their generic competitors?

    On April 2, 1993, Phillip Morris announced that it was cutting the price of its cigarettes to compete with the growing number ... Read Answer >>
  5. Why is brand equity considered an intangible asset?

    Brand equity is an intangible asset because the value of the brand is not a physical asset and is instead determined by consumer ... Read Answer >>
  6. What are the primary risks associated with investing in the drugs sector?

    Learn more about the primary risks facing investors in the pharmaceutical and biotechnology industries. Find out how regulation ... Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center