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State generic substitution laws permit, and sometimes require, a pharmacist to ignore the instructions on a prescription written by a physician. When the prescriber specifies a particular company’s product, using the product’s brand name, these state laws direct the pharmacist to dispense a less expensive but equivalent product made by another company. The brand name, however, is a trademark. Like other trademarks, drug trademarks distinguish goods in the market from others and signal the source of the goods. As soon as generic drugs are available, however, state law instructs the pharmacist to read the brand name—written by the doctor—as an instruction to dispense a different company's product. This is the opposite of how trademarks are supposed to operate.

This Article shows that the generic drug substitution laws of the 1970s are an anomaly in our legal system. Substitution at the pharmacy was illegal, and it still is otherwise illegal. The substitution laws created an exception in pharmacy law and broke with long-standing policy in food and drug law as well as unfair competition law. These laws were intended to, and did, undermine proprietary (trademark) rights to achieve savings for payors after efforts to mandate generic prescribing failed. And they prioritized short-term cost savings over the dynamic pro-competitive benefits of a properly functioning trademark system. However, much has changed since the 1970s. The regulatory framework has changed, regulatory science has evolved, drug research and development has evolved, the industries have changed, the healthcare finance system is utterly different, and the relationship among parties in healthcare delivery has evolved. Policymakers should consider whether the assumptions that supported these laws remain true today.



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