What are Generics and Why are They Cheaper Than Their Brand Name Equivalents?

What are Generic Drugs?

A generic drug is a medication produced and distributed without patent protection. While the generic drug may have a patent on the formulation, it does not have a patent on the active ingredient. A generic drug must contain the same active ingredients as the original formulation.

Why are Generic Drugs Cheaper Than Brand Name Drugs?

Cost of Patented Medicines:

• Research and Development: Innovative brand-name drugs require significant investment, often ranging from hundreds of millions to billions of dollars and taking nearly 10-15 years to develop.
• Advertising and Marketing: The costs of advertising and marketing are substantial.
• Expense Recovery: Manufacturers need to recover their expenses, which is why patented medicines are priced high.

Cost of Generic Drugs:

• Market Competition: When generic products become available, market competition often leads to substantially lower prices for both the original brand-name product and the generic versions.
• Patent Expiry: In the US, drug patents provide 20 years of protection, but this period includes the time before clinical trials begin, so the effective life of a drug patent is typically 7-12 years. The cost of discovering and testing a new drug may be as high as $800 million, though some estimates suggest it is closer to $100-$200 million.
• Evergreening: Brand-name drug companies may use various strategies to extend market exclusivity and delay generic competition, a process often referred to as ‘evergreening.’ This can involve litigation to preserve or extend patent protection, obtaining new patents on specific forms or production methods, or targeting existing patents for invalidation by generic manufacturers.

Why Generic Pills are Cheaper:

• Existing Formulas and Technology: The production of generics does not require new formulas or technology; existing ones are used by reverse-engineering known drug compounds.
• No Additional Advertising: Generic drugs benefit from the previous marketing efforts of the brand-name company, including media advertising, presentations by drug representatives, and distribution of free samples.
• No Clinical Trials Needed: Generic manufacturers do not need to conduct new clinical trials to prove the safety and efficacy of the drugs, as these trials have already been conducted by the brand-name company.

Generic drugs are cheaper and popular because they offer the same therapeutic benefits as brand-name drugs while saving patients and insurance companies significant costs.