In the US, generics make up 89% of prescriptions dispensed, yet this only accounts for 26% of total drug costs. The price of brand name medications is a much discussed and often contentious topic, but there’s no denying that the biggest driver of cost is research and development (R&D). Big pharmaceutical companies spend roughly 20% of their revenues on R&D. According to a 2022 study by the World Health Organization, the average cost of developing a new drug, from research through final approval, ranges from $43.4 million to $4.2 billion.
Drug patents are typically awarded within a few years from application submission and last for 20 years after the drug's invention. In most cases,10 of those years are spent perfecting, testing, and gaining approval to sell the drug. That means the pharmaceutical company has roughly a decade to recoup its development costs and make a profit before it has to compete with generic versions of the drug. Once the patent runs out, the FDA can approve qualified generic candidates.
Because generic drug makers don’t have to do years of research and costly studies, their development costs and time are greatly reduced. They can apply to the FDA through an Abbreviated New Drug Application (ANDA). Once they obtain approval, generic drug makers can afford to charge considerably less than the brand name drug. According to the Association for Accessible Medication, FDA-approved generic drugs saved the US healthcare system, including patients, employers, and taxpayers, $408 billion in 2022. The FDA encourages increased competition in the drug market to help reduce prices. When multiple generic companies are approved as an alternative to the same prescription drug, the competition typically results in lower prices for patients.
FDA Requirements for Generic Drugs
Generic drugs are approved only after a rigorous review by the FDA. Once a generic drug manufacturer submits an ANDA, the FDA evaluates the submission based on the following criteria:
- Pharmaceutical equivalence
The generic drug must have the same active ingredients, dosage, indications, strength, and method of administration (oral, injection etc.) as the brand name drug. Its inactive ingredients must not change the drug’s effect. Generic drug companies are also required to do months-long "stability tests" to demonstrate that their products have the same shelf life as brand name drugs. - Bioequivalence
In comparative studies, the generic performs the same way as the brand name drug and is as safe and effective. - Container and labeling
The generic drug is sold and shipped in an appropriate container and labeled the same way as the brand name drug with some exceptions, such as special indications protected by a patent or exclusivity. - Manufacturing
The FDA inspects manufacturing facilities to make sure that the manufacturer is consistently making each batch of the drug according to the brand name drug’s established requirements for identity, strength, purity, and quality. - Appearance
In this case, the FDA requires some differences. US Trademark laws require that a generic drug not look exactly like its brand name counterpart. Characteristics that have no effect on the drug’s safety and efficacy, such as color or flavor, should differentiate the generic.
Minute variations in purity, size, strength, and other parameters are unavoidable in mass produced drugs, whether between the brand name drug and a generic, or two batches of the same drug. The FDA accounts for that and has strict limitations on variability. FDA approval is an open-ended process. All approved drugs, whether brand or generic, are regularly monitored at all levels of the manufacturing process and supply chain. The FDA also follows and investigates reports of negative side effects. These investigations sometimes lead to changes in how a drug is manufactured or prescribed.
Why Pay More for the Original Brand Name Drug?
Most of the time, there is no reason to spend more money on the brand name drug. Where it is essential to stick to the brand name drug is with medicines classified as “narrow therapeutic index drugs.” These are drugs for which exquisitely precise doses are essential because even a very small change in the dose could be toxic, cause side effects, or lead to therapeutic failure. In such cases, your doctor will instruct the pharmacist not to offer a generic even if one exists.
Talk to Your Pharmacist
In general, “talk to your doctor” is always good advice, about your health, your condition, your treatment, side effects, and any other health and wellness related topic. However, your doctor isn’t necessarily informed about the cost of a prescription drug to a consumer and may not know whether a generic is available. So, when you pick up your prescription, go ahead and ask your pharmacist, “Is there a generic version of this drug?”
This article appeared in the April 2024 edition of the HealthPerks newsletter.
