Brand-Name Drugs vs. Generics: What’s the Difference?

You’re in the midst of a headache, temples throbbing, and you rush to the drug store for medication only to have your headache intensify because you can’t decide whether you should get Tylenol or its generic form. Does that sound familiar?  Ever dreaded having to pick up an expensive prescription and then been shocked to receive a generic version of it at a lower or no co-pay? (What a nice surprise!) Or, are you wondering why sometimes there is no generic alternative of your medicine available?  Read on and hopefully, by the end of this article, you have all these questions answered.

Patents and Pharmaceutical companies

To understand the difference between on-brand versus generic medications, we must first understand patents. Patents, which are forms of intellectual property, offer pharmaceutical companies exclusive rights to sell their medications. This monopoly means that pharma companies don’t have any competition, so they can set high prices for these medicines. How high? If there’s really no alternative medicine for the disease in the market, it gives the pharma companies significant leverage when they negotiate with the insurance companies, and they can almost charge as much as they want. Sometimes this leads to shockingly high costs for consumers, which is causing this legal advantage to receive heat and pushback from the medical community and the general public.

Let us consider an example, Truvada, which is a medicine used to treat people with HIV. Truvada is still under patent protection in the U.S and currently costs $2000 a month. Compare that to its list price of $8 in Australia! When Truvada loses its patent protection, patients will be able to switch to a generic version of the medication, which will cost much much less. But in the meantime, because Truvada is protected from competition, cheaper generic alternatives are unavailable. 

But, why do these medications cost this much?

Developing a single drug can cost millions of dollars. Some of these developmental costs include:

• Pre-clinical research, which helps gather enough information about the drug’s safety and efficacy to justify starting clinical trials.
• Conducting clinical trials to test the drug in humans to show that it’s safe and works as intended.
• Post-approval development costs to estimate dosage, new indications for which the drug can be used and new routes of administration, etc.
• It is estimated that about 7 out of 8 drugs fail in clinical trials because they don’t work as intended. Therefore, pharma companies also need to recoup the losses incurred during the development of failed drugs. 

Since brand-name drugs are new, it takes a lot of investment to study the drug in detail before bringing it to patients. In comparison, since generics are not new drugs, it is sufficient to show using a few studies that they function exactly like the brand-name drugs. Hence they do not require as much testing, and in turn, financing to develop.

What’s the difference between brand name drugs and generics besides the price?

The FDA requires generic medications to have the same active pharmaceutical ingredient (API) as their brand-name counterpart. The active pharmaceutical ingredient is the component of the medicine that does the job that’s on the label. Although the API has to stay the same, the fillers, the inactive ingredients used to make the pills or capsules, can be different. Although rare, if you ever had an allergic reaction to your medication after switching from a brand-name to generic medicine, the fillers or excipients might be to blame. This doesn’t happen often because generics have to pass through rigorous standards set by the FDA before you can take them.

As a drug’s patent nears its expiration date, many generic alternatives start showing up. Competition from these generics helps keep their costs lower compared to brand-name drugs.

What if both brand-name medicines and generics are available? Do you have a say in which one you want to take? Yes and no. 

Once the generics land on store shelves, the insurance companies often set a lower co-pay for generics than for their brand-name counterparts. This encourages patients to choose the generic version. Considering that they have the same active component in the same amount, it makes sense to go with generics! So remember, the next time you can totally reach for the store brand acetaminophen if it helps save a few bucks.

There is a positive side to patents in the pharma industry. Although patents drive drug prices up, they also encourage innovation. They provide incentives both monetary and in recognition such as awards and honors, not just for the pharmaceutical companies but also for university research groups who started the preclinical research. Medicine has advanced by leaps and bounds. While patents play a crucial role in fueling these breakthroughs, generics are equally important, as they make medicines more affordable so patients can benefit from innovation at affordable prices.