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Medical Economics: Generic vs. Brand Drugs Essay

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Updated: May 5th, 2021

Generic drugs are replicas of brand-name medicines and must be similar in terms of their route of administration, dosage, risks, proposed application, impact, and side effects. In this aspect, the pharmacological influence of generic drugs is exactly the same as that of their brand version. Though the medication obtained at a pharmacy counter might appear slightly different from the brand version, generic drugs have a similar or even better efficacy when compared to their costlier counterparts. Generic drugs have the same active ingredients as the brand medicines and the manufacturing of both have to satisfy the set degree of excellence (Skipper & Vejlin, 2015).

For a generic/brand drug to be approved, it has to first pass the strict tests used by the Food and Drug Administration (FDA) with regard to such aspects as identity, quality, efficacy, strength, and purity to mention a few. Cost is the major difference between brand and generic medicaments. Contrary to brand drugs, the generic ones compete directly on price, which leads to cheap prices for customers.

A brand drug signifies the original medicine and has the privilege of branding the name. Developing a brand-name medicine demands much time and a large amount of money. It could cost even a billion dollars for over a decade to develop and promote a brand drug (Manzoli et al., 2016). After successfully developing a new drug, the innovating company patents it to enable an exclusive sale of the medicine (where no other pharmaceutical company is allowed to copy, develop, or vend the drug) in a bid to recover the money spent at the development stage, and get some profit.

After some years, the patent expires and other drug companies can apply to the Food and Drug Administration for manufacturing and selling authorization. When the FDA approves such applications, the companies begin to manufacture and sell the generic forms of the chosen drugs, which must have similar active ingredients, nature (for instance, liquid, capsule, or pill), and concentration as the original compound.

A generic drug is free to use other inactive ingredients, for instance, fillers and preservatives, apart from the ones used in the original compound. Nevertheless, trademark regulations prohibit generic drugs from having a similar appearance in terms of color and looks as the original medicines. The companies that manufacture and sell generic drugs have an easier time than the ones that develop the original forms.

A generic drug company simply borrows the research of the firm that manufactured the original form, which makes its work simpler, quicker, and cheaper. In this regard, the generic drug sells at a much lower cost when compared to a brand-name medicine (Grabowski, Long, Mortimer, & Boyo, 2016). The moment that many companies start to manufacture and sell the generic form of a given brand drug, competition results in price decrease.

The Food and Drug Administration makes sure that a generic drug is just as pure and stable as its original form (the brand drug). In this aspect, the generic drug has to have a similar dosage and perform the same task as the original medicine prior to its approval. Companies that manufacture generic drugs sell them at lower prices than the ones that develop the original forms. This is attributable to the fact that they do not take as much time and expensive laboratory tests as a brand-name medicine company before achieving FDA approval.

References

Grabowski, H., Long, G., Mortimer, R., & Boyo, A. (2016). Updated trends in US brand-name and generic drug competition. Journal of Medical Economics, 19(9), 836-844.

Manzoli, L., Flacco, M. E., Boccia, S., D’Andrea, E., Panic, N., Marzuillo, C.,… Ioannidis, J. P. (2016). Generic versus brand-name drugs used in cardiovascular diseases. European Journal of Epidemiology, 31(4), 351-368.

Skipper, N., & Vejlin, R. (2015). Determinants of generic vs. brand drug choice: Evidence from population-wide Danish data. Social Science & Medicine, 130, 204-215.

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IvyPanda. (2021) 'Medical Economics: Generic vs. Brand Drugs'. 5 May.

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