A generic drug is a drug that is not branded but is similar to a branded or reference listed drug in terms of dosage, administration and performance.

According to guidelines from the United States Food and Drug Administration (FDA), the generic drug must have the same active ingredient as the brand name drug as well as the same dosage, strength, safety, conditions of use and route of administration.
 

The generic drug is bioequivalent to the branded product, meaning there is either no significant difference between the two drugs in terms of the rate and extent of absorption or if there is a difference, it is either intended or not medically significant.

So long as the FDA criteria are met, a generic drug may be marketed when the patent protections ends or the patent owner waives its rights. The competitive nature of the drug market means that once the generic drug is available, the cost of the drug is substantially lowered for both the original brand name product and the generic drug.

Every drug that has been developed by the original company has patent protection, which lasts for a variable amount of time, depending on the molecule. In the United States, for example, drug patents only last for about twenty years. Furthermore, these patents apply from well before clinical trials have begun testing the safety and efficacy of the medication. This means that the effective patented life of the drug, which begins after the drug has been approved, may only be seven to twelve years, for example. The majority of drugs, particularly the life saving ones, are then manufactured and sold as generic drugs.

One example of a well known generic drug is metformin, which is used to lower blood sugar levels in diabetes. Metformin is the generic form of a drug which is also available under the brand name Glucophage.