Are All Generic Drugs Created Equal? An Empirical Analysis of Generic Drug Manufacturing Location and Serious Drug Adverse Events

Abstract

Generic drugs provide lifesaving, affordable treatment to millions of people each day. Generic drug manufacturing has been steadily moving from advanced economies, such as the U.S., to emerging economies, such as India. Due to the opacity of drug supply chains, the quality risk implications of manufacturing in emerging economies have not been carefully empirically tested. This study addresses this gap. To do so, we identify a novel source of drug manufacturing location data that allows us to compare the occurrence of serious adverse events of generic drugs made in different locations. Using exact matching analyses based on the equivalency criteria established by the U.S. Food and Drug Administration, we find that generic drugs manufactured in India, where a majority of emerging economy generic drugs are made, are associated with significantly higher instances of serious adverse events than equivalent generic drugs made in the U.S., where a majority of advanced economy generic drugs are made. We further show that this key result is explained by mature generic drugs, which are particularly susceptible to operations and supply chain cost reduction efforts—efforts that unfortunately may compromise drug quality. Our study finding leads to implications for the FDA in their regulation of generic drugs.