Choosing between Brand Name or Generic Drugs

Almost half of all prescriptions in the United States are filled by generic drugs, yet they continue to be viewed with suspicion. Generic drugs cost as much as 80 percent less than their brand-name equivalents, creating the assumption their quality and effectiveness have in some way been compromised. And quite naturally, many people resist using them simply because their HMOs and insurance companies prefer they do.

By U.S. law, brand-name and generic drugs have the identical pharmacological effects. According to the Food and Drug Administration, generic drugs have exactly the same dosage, intended use, side effects, route of administration, safety, and strength as the original. The only difference is the coloring, shape, and name.

The higher price tag of brand-name drugs is a function of the expense that pharmaceutical companies incur in bringing a drug to market. They test thousands of compounds before selecting one for development, they pay for the extensive clinical trials required to prove its safety and efficacy, and they bear the costs of marketing and publicizing the new drug. A pharmaceutical company can easily spend more than $1 billion to produce a single successful drug.

To encourage pharmaceutical companies to take these risks, the government grants patents—usually lasting twenty years—which give a company the exclusive right to produce a drug. Companies apply for these patents early in the drug development process to protect their intellectual property from their competitors. Since the introduction of a drug can take as long as a decade, the effective benefit of these patents in enabling a drug company to recoup expenses and make a profit is reduced. That's why they charge so much for brand-name drugs.

When this patent expires, generic drug manufacturers can step in and give consumers a choice. Because they are spared development expenses, generic manufacturers can make their drugs available at a lower cost.

Nonetheless, the FDA goes to great lengths to ensure the generic version is bioequivalent to the original one. The same active ingredients are delivered to the body by the generic medication as by the brand-name one. The FDA also requires that the generic medicine have comparable bioavailability. This means the generic drug is absorbed by the body in roughly the same amount of time as the brand-name drug.

The net effect of the pharmaceutical patent system, which protects new drugs for just a fixed amount of time, is that the large pharmaceutical companies must continue to pour money into research and development if they want to stay profitable over the long term. At the same time, it ultimately provides savings to consumers who can purchase life-saving medications at a lower price when they are available in generic form. According to the FDA, generic drugs save consumers an estimated $8 to $10 billion a year.

Web Resource

For more information on generic drugs, visit the FDA Web site.