When we're thinking about prescription drugs, an important distinction is between what we call branded and generic drugs. We'll talk here about these two groups. A key part of this discussion has to do with patents. Alongside the FDA approval process, a new idea for a drug can be seen as an invention and can be patented. Patents for prescription drugs are in principle the same as patents in other areas. When an inventor comes up with an invention and patents it, the inventor gets the right to be the only one selling the invention for a period of time. We sometimes say they get market exclusivity. Generally in the US, a patent lasts 20 years. But there can be factors that lengthen it or in some cases shorten it. As a small aside, one major thing that affects the period of market exclusivity for prescription drugs is that companies usually seek a patent before they start the FDA approval process. Since that process can take many years, the effective time a new drug can be on the market after approval but still protected by the patent can be much less than the full 20 years of patent life. So now, when a new drug first comes on the market, it will generally have patent protection. We often refer to the drug as sold by the manufacturer that first brings the drug to market with patent protection as a branded drug. They're sold as brand name products, often with some marketing efforts to establish and promote the brand. Often at this stage, the prices of products are comparatively high, which may not be unexpected since they're being sold during a time in which the manufacturer has market exclusivity as the only seller of this new product. After a while though, patents expire and other manufacturers may be able to figure out how to make the same drug. They could then start making it and selling it as well. They can compete if you will with the original manufacturer. They do have to get approval from the FDA to enter the market, but through a process different from and generally easier than the process used the first time the drug was reviewed since they're asking approval to make and sell the same thing that's already been approved for someone else. The common term for drugs made and sold by these additional manufacturers is a generic drug or just a generic. The idea with the name is that they'll be the same chemically as the branded drug, but not made by the original manufacturer. And they won't be labeled and sold with the same brand name as the original product, they'll be for sale as generic versions of the product. The original manufacturer may continue to sell the original branded product, but now in a world where there are also other selling essentially the same thing. One important thing to note here is the effect on price associated with the entry of generic drugs. While the drug is covered by a patent and there's only one seller, prices tend to be higher. Once generics enter the market, the arrival of more competition often leads to reductions in the prices charged for the drug. And these price changes are often notable, big enough to make a difference to manufacturers, and to the insurance companies, and patients, and others who pay the bills for prescription drugs. So there you have it, a bit on the important issues with patents and differences between branded and generic drugs. Lots of interesting things to keep your eye on.