Are generics really the same as branded drugs?

FORTUNE — In October the Food and Drug Administration took a highly unusual step: It declared that a generic drug it had previously approved — a version of the popular antidepressant Wellbutrin — was not in fact “bioequivalent” to the name-brand version. The FDA withdrew its approval.

The federal action shook the business. Teva Pharmaceuticals (TEVA), which marketed the generic in question, has stopped selling it, and other companies are now testing their versions of Wellbutrin at the FDA’s request. The episode is bringing momentum to a movement that has been quietly building among many doctors and medical societies that are increasingly willing to ask a question that borders on heresy: Are generics really identical to the branded products they are meant to replicate? To a surprising degree, they say, the answer is no.

If you’re a layperson, this is the way you probably think of generics: They’re the exact same products in different packaging; generics companies can sell such medications for a fraction of the cost of the originals because they don’t have to spend huge sums on drug development and marketing.

That apparent miracle explains why more than 80% of all U.S. prescriptions dispensed in 2012 were generic. Using nonbranded medications saved Americans $193 billion this past year, according to the Generic Pharmaceutical Association.

MORE: Lloyd Dean – the medicine man of Dignity Health

But generic drugs diverge from the originals far more than most of us believe. For starters, it’s not as if the maker of the original pharmaceutical hands over its manufacturing blueprint when its patent runs out or is challenged. The patent reveals the components, but it doesn’t explain how to make the drug. In reality, manufacturing a generic requires reverse engineering, and the result is an approximation rather than a duplicate of the original.

The FDA’s rules effectively acknowledge that. The agency’s definition of bioequivalence is surprisingly broad: A generic’s maximum concentration of active ingredient in the blood must not fall more than 20% below or 25% above that of the brand name. This means a potential range of 45%, by that measure, among generics labeled as being the same.

There are other differences. The generic must contain the same active ingredient as the original. But the additional ingredients, known as excipients, can be different and are often of lower quality. Those differences can affect what’s called bioavailability — the amount of drug that could potentially be absorbed into the bloodstream. As the American Heart Association recently noted, “Some additives traditionally thought to be inert, such as alcohol sugars, cyclodextrans, and polysorbate-80, may alter a drug’s dissolution, thereby impacting its bioavailability.”

MORE: The bloody patent battle over a healing machine

The FDA standards also do not specifically regulate how quickly the medicine reaches peak concentration in the blood. That can become a major issue for patients who take generic versions of time-release drugs, which constitute 10% of the market, according to IMS Health. The time-release mechanisms for branded drugs are usually protected by separate patents, so generics companies engineer alternative and usually cheaper mechanisms.

That can result in drugs that release active ingredients into the blood far more quickly, leaving patients feeling dizzy or nauseated. Barbara Davit, director of the division of bioequivalence II in the FDA’s Office of Generic Drugs, acknowledges that the agency does not apply “formal statistics” to measuring Tmax, the time it takes for a drug to reach maximum concentration. But reviewers do informally consider it, she says, asserting that applications have been rejected because of Tmax results.

Much of the credit for the FDA’s decision to withdraw its approval for Teva’s version of Wellbutrin goes to Joe Graedon, a pharmacologist, advocate, and co-host, with his wife, Terry, of an NPR radio program called The People’s Pharmacy. Prompted in large part by a deluge of critical reports from listeners who felt sickened by generics or found them ineffective, he undertook his own research. In 2008 he encouraged an independent laboratory to test the generic equivalent of Wellbutrin 300 mg after listeners complained that Teva’s version, Budeprion XL, had made them feel woozy, sick to their stomach, or even suicidal.

Joe Graedon, a pharmacologist and radio host, has pushed for transparency on nonbranded drugs.

He was stunned to learn that the generic’s active ingredient dissolved four times more quickly in the first two hours than that of the brand name because of a different time-release mechanism. Graedon began pushing the FDA to release more results from generic-drug companies’ pharmacologic studies. (The FDA generally relies on company tests rather than conduct its own.)

The FDA refused to divulge the data, deeming it proprietary. For five years the agency dismissed complaints from Graedon and others that the generic Wellbutrin wasn’t the same as the original. Eventually, however, patient advocates pressured the regulators to conduct their own tests. The results revealed that on average Teva’s product achieved a 75% concentration within the blood — below the 80% minimum — and in some cases delivered as little as 40%. (This episode is extremely unusual, argues Gordon Johnston, a representative for the Generic Pharmaceutical Association, who says the FDA’s standard “has been demonstrated to assure bioequivalence between brand and generic drugs.” Johnston notes that the agency occasionally withdraws approval for name-brand drugs too.)

In the case of some medications, small differences can have large effects. Doctors are most concerned about so-called narrow therapeutic index drugs. These treat conditions like epilepsy, hypertension, and endocrine disorders that require precise dosing, where minor variations can lead to life-threatening complications. Medical societies such as the American Academy of Neurology, the Endocrine Society, and the American Heart Association contend that a switch to generics can cause adverse events, and they oppose doing so without a doctor’s approval.

MORE: Big Pharma and unfiltered speech – a dangerous prescription

At a meeting of the FDA’s advisory committee for pharmaceutical science and clinical pharmacology in 2011, Dr. James Hennessey, clinical director of the division of endocrinology at Beth Israel Deaconess Medical Center in Boston, presented evidence of three different generic formulations of levothyroxine (used to treat hypothyroidism). All were more potent than the branded version and varied from one another. One was 12.5% above, another 9% above, and another 3% above the brand name’s potency. All had been approved as bioequivalent. Noting that “less than 10% dose intervals make clinical differences,” Hennessey told the advisory committee meeting, “These differences are too large.”

The committee voted to support the tightening of bioequivalence standards for narrow therapeutic index drugs. The FDA’s Davit says the agency is working on a proposal to “narrow the acceptance criteria.”

Improving the testing of generics could yield benefits. Timothy Welty, chair of clinical sciences at Drake University’s College of Pharmacy and Health Sciences, has gotten an FDA grant to perform studies that will compare, among other things, generics with other generics (something the FDA doesn’t do). He’ll also test generics on patients who actually have the disease being treated. The agency doesn’t require that. It assumes that since the active ingredient is the same as the original’s, companies don’t need to test whether the generic has an effect; they simply need to ascertain whether it reaches the target concentrations in the bloodstream.

Those are the questions that hover over generics when manufacturers follow the rules. Then there are the issues that occur when they don’t.

With an estimated 80% of active drug ingredients and 40% of finished medications coming from overseas — in some cases from manufacturing plants that the FDA has not yet inspected — quality can be significantly compromised. In November the maker of generic Lipitor, Ranbaxy Pharmaceuticals, recalled 480,000 bottles after tiny shards of glass were found inside pills. (The FDA granted Ranbaxy, India’s largest generics company, permission to produce a version of the anticholesterol medication, a process Fortune chronicled in a 2011 article titled “The War Over Lipitor.” The approval came after a seven-year investigation in which the Justice Department concluded that, among other misbehavior, Ranbaxy had fabricated drug-approval data. The company agreed to pay $500 million and entered into a consent decree.)

MORE: 2013 – the year we become the health care nation

In July, Congress passed the Generic Drug User Fee Amendments of 2012, which the industry hopes will confer greater legitimacy and reassure doctors and patients. The generic-drug industry has agreed to pay $299 million a year to the FDA over five years to speed up the review and approval of generic-drug applications and increase inspections of generic-manufacturing plants abroad.

The FDA’s position that generics are safe and therapeutically identical has rarely varied. But in October 2010, Dr. Janet Woodcock, director of the FDA’s Center for Drug Evaluation and Research, acknowledged in a speech to the Generic Pharmaceutical Association, “I’ve heard it enough times from enough people to believe that there are a few products that aren’t meeting quality standards.”

Such admissions have done little to slow the drive toward generics. As Graedon points out, patients, insurers, and the government all benefit from the massive cost savings of using generics. Few have wanted to ask questions. Now, in the wake of the FDA’s action in the Teva case, that may begin to change.

This story is from the January 14, 2013 issue of Fortune.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.