Pfizer's iconic anti-depressant drug Zoloft just lost its patent protection. Pfizer announced that its Greenstone Ltd subsidiary would manufacture an "authorized generic" version of Zoloft. If an independent generic drug manufacturer brings a successful patent challenge against a brand name drug, then that manufacturer (and the brand name manufacturer) share an exclusive right to market the generic drug for the first 180 days after the patent expires under the Hatch Waxman amendments to the federal Food and Drug Act.
If the brand name manufacturer does not license or manufacture its own authorized generic, then it's clear sailing for the independent company, such as Teva, to gain market share. But if the independent must compete with an authorized generic, then the generic price drops even lower (50% of the brand name price according to the Wall Street Journal as compared to a 35% to 40% average dip when the independent generic manufacturer has no competition. The U.S. stock price of Teva, which now will be competing with Pfizer for sale of generic Zoloft, dropped 3% on Friday on the news. (Pfizer was up 1% on Friday.)