- Health Care, Drugs & Insurance
WHY DO GENERICS COST LESS?
Where Genercis Come From
WHY GENERICS COST LESS
As a pharmacist, one of the more frequently asked questions I receive is about the cost of generic medications. Sometimes generic medications are SO MUCH less expensive than their brand-name counterparts, that patients begin to wonder - and rightly so - about the real difference between them. Are they really the same? If so, why do they cost so much less?
The cost of generic prescription drugs is an important issue for several reasons:
- Conventional wisdom says that "you get what you pay for." If generic drugs are exactly the same as a brand name, we would expect them to cost about the same. But they don't. In fact, they are often hundreds of dollars less per month or per year.
- The issue concerns our health. If generic medications are not the same, or if the quality is less reliable, we want to know. This is not about a piece of art that we want to hang on a wall, it is about a drug we are going to put in our bodies.
- False and misleading information has sometimes circulated about the quality of generic medications and the process by which they are approved. I have heard some remarkable explanations for why generics cost less; everything from claims that they contain "half" the dose of the "real" medicine to stories that generics are medicines that were gathered from the deceased or are typically expired.
What I hope to do is provide you with the real reasons why generic prescription medications cost so much less. These reasons should help you make an informed decision about whether a generic medication might be right for you.
There are essentially 3 reasons for the low cost of generic prescription medications:
GENERIC PRICES: LOW COST REASON #1
1) The FIRST reason that generics cost less is that the manufacturer spent less to produce it.
By "produce" I mean the total cost involved in bringing the medication to market. The brand name (original manufacturer's product) had to be studied extensively for both SAFETY and EFFECTIVENESS. Such studies are very costly, and often do not produce favorable results. These drugs never make it to market. Consequently, part of the cost of successful medications necessarily includes the costs of products that fail.
When a manufacturer discovers a new drug or entity they wish to study, they are typically granted a 20 year patent. This patent will allow them the exclusive right to market this drug...IF it proves to be safe and effective AFTER the various trials. Most drugs do NOT make it through this process. For those that do, there may be only several years left on the patent during which time a manufacturer must charge enough to cover all of their expenses, and make a profit.
Once the patent expires, ANY generic manufacturer may then produce the medication. The generic manufacturer ONLY has to prove that their product has the SAME ingredients and the SAME properties (i.e. same absorption, same dissolving properties, same blood levels produced by the brand, etc.). The generic manufacturer does NOT have to prove the drug is safe and effective...because that has already been done.
GENERIC PRICES: LOW COST REASON #2
2) SECONDLY, generic medications cost less because of "COMPETITION."
While the brand name product was exclusively available they were the only source for the product. When the patent expires, any and all generic manufacturers may produce it. Why would a pharmacy buy a generic from 1 manufacturer rather than another? Price. So generic manufacturers will price their drug as low as they can to gain that coveted spot on my pharmacy shelf.
Because there are dozens of generic manufacturers competing for the sales of the same generic drug, price wars tend to benefit the consumer and the market drives down the cost. Additionally, pharmacies or distributors may contract with 1 specific generic manufacturer to exclusively carry their generic line of products...in exchange for even lower prices on these generic prescription drugs.
GENERIC PRICES: LOW COST REASON #3
3) The THIRD and final reason why generic medications cost less is due to the INSURANCE INDUSTRY. What? The insurance industry? Yes. Health care insurance plans determine how much they are willing to pay a pharmacy for generic medications. This is called their "reimbursement rate." It is always calculated to be the lowest price they can convince a pharmacy to accept. Consequently, the low reimbursements that they demand force pharmacies to be very diligent in shopping for the lowest price generic drug they can obtain.
While ultimately trying to save themselves money, insurance companies also save you and I money by competitively driving down the price on prescription drugs, but especially on generic drugs which cost much less.
FINAL QUESTIONS AND ANSWERS
I hope this brief article has helped you understand why generics cost less. Here are a few final questions and answers that often come up with respect to generic prescription medication:
1) Are generics EXACTLY the same as the brand name? Generic drugs must meet the same FDA standards as the brand name product. They must contain the same active ingredient and deliver the medication in the same way.
2) Don't generic drugs use different fillers? A generic manufacturer may use different fillers, colors or other inert ingredients when making the generic product. These do not alter the quality of the medication.
3) Why does my generic prescription pill look different? Pill shape, color and size may be different with the generic product. These characteristics will not effect the way the medication works.
4) The brand name pill was bigger. Does that mean it had more medicine? No. The actual amount of "active" medication inside a pill or capsule is usually just a very small fraction of the pill contents. The rest is made up of various fillers and dispersing agents to help the medicine dissolve appropriately.
5) Why wasn't my generic very much less than the brand name? Sometimes, especially when a generic is first marketed, the price will not come down much. Over time, usually several months, as more generics become available, the cost will go down further.
6) Why didn't the generic drug work as well as the brand name? There may be times when an individual does not feel they get the same benefit with the generic drug. I typically recommend people try a 'different' generic in those cases. It is hard to explain scientifically why a generic would not work, while the brand name does.
7) Aren't some drugs too risky to substitute with a generic?Some drugs have a Narrow Therapeutic Index (NTI) and require very precise blood levels for safe and effective treatment. These include drugs like digoxin, warfarin and some seizure medications. However, if a generic has been approved, it is considered to be identical to the brand and may be substituted.
8) Can't I always get the brand name if I want it? Some states require the doctor to write "no substitution" on the prescription for you to obtain the brand name product when a generic is available. Also, your insurance may require the generic substitution when one is available.
Feel free to ask me any additional questions you may have!