Medication Cost & Quality

Medications: Lower Cost, Not Lower Quality

You’ve probably heard the phrase, “You get what you pay for.” In most cases, that phrase is used to indicate that lower-cost options don’t have the same quality as their more expensive counterparts.

While that may be true when it comes to clothing, purses and cars, that’s typically not the case with medications. Generic versions of brand name drugs are carefully analyzed to ensure they meet the same quality metrics, testifying to their effectiveness.

What’s the Difference Between Brand Name and Generic?

In many cases, the only difference is the name. Generic medications are made in the same way as the brand name medication—which is the original medication that was approved and brought to market.

When medications are first brought to market, manufacturers enjoy a period of exclusivity, where that medication can only be produced by their company. But after that period ends, other manufacturers can produce the medication. Those medication “copies” are referred to as generics.

Generic medications have the same active ingredient as the brand name and the same quality, dosage, strength and route of administration.

Why Are Generics Cheaper?

When brand name medications enter the market, they are often quite expensive. There are two main reasons for this:

The costs of research. It takes years of intense research and clinical trials to bring a medication to market. Drug testing alone is quite expensive, so companies have to recoup those costs through medication pricing.
The costs of marketing. Medication advertisements run on TV, in magazines and pamphlets in your doctor’s office. Marketing spreads the word about how a medication works and how it can potentially benefit customers.

Once a medication is approved by the FDA, it enjoys a patent period of about 17 years. During this time, the medication can only be produced by the company that initially released it. Once that exclusivity period ends, other companies can produce it.

Because those companies aren’t saddled with the costs of researching or marketing the medication, they are able to produce the medication at a lower cost.

There’s also a competitive factor: When multiple companies produce generic versions of the same medication, companies have to competitively price the product to win a share of the market, which means the consumer wins.