Probing Question: Why do name-brand prescription drugs cost more?
Identical in dosage, safety, strength, quality and performance, generic prescription drugs are chemically equivalent to name-brand prescription drugs. They involve the same risks and impart the same benefits. So why are name-brand prescriptions more costly than their generic counterparts?
Cheston Berlin, professor of pediatrics and pharmacology in the Penn State College of Medicine, attributes the difference to "innovation costs," specifically research, development, and marketing. "After a new drug is developed, the company must submit it for FDA approval," Berlin explained. "The FDA then grants a patent to the company for up to 20 years. The company uses this time to repay innovation costs. Also, during this time, no other company may produce a bioequivalent product."
Once the patent expires, competitors are free to produce identical drugs under generic names. With no innovation costs to cover, these substitutes can be offered at lower prices.
Dennis Shea, professor of health policy and administration, said consumers also may trace price differences to their insurance providers. "Initially, insurance companies paid equal amounts for all drugs," said Shea. "But this changed with a surge of generic drug developments in the late 1990s. Now, consumers are required to pay an additional amount for name-brand drugs."
Shea said insurance providers identify the least expensive alternative and use that drug as a reference. However, physicians and patients may argue that the best value is not the best drug for everyone. Although name-brand and generic prescription drugs are bioequivalent, Shea explained, inactive ingredients may differ, and these differences may cause side effects.
The solution, suggested Shea, is for people to contact their physician and pharmacist with questions and concerns. "When you ask your pharmacist to compare generic and name-brand prescriptions and get your doctor's approval, you're more likely to get the best medication at the best price."
Article is compliments of Penn State's Department of Public Information.