Generic drugs are required to show bioequivalence with the brand name drug before being approved by the FDA. Peak serum concentration (Cmax) and area under the curve (AUC; total drug absorbed) must fall within 80%-125% of the brand name drug's values.
From Vol. 44 (W1141C) of The Medical Letter on Drugs and Therapeutics,
"With some older drugs, such as phenytoin (Dilantin, and others), the generic manufacturers’ main challenge was to make a generic that was absorbed as poorly as the brand-name original."
Because generic drugs must closely match the bioavailability of their brand-name counterparts, a poorly formulated brand-name drug yields similarly poorly formulated generic drugs. This is a bit of a waste but it serves the interests of patient safety. If generic phenytoin were available in formulations that yielded greater bioavailability, prescribers and pharmacists would have to constantly differentiate doses. By standardizing the dose, even at a level of inefficient absorption, medication errors are avoided.