Generic drugs, also referred to as generics are drugs that are produced and distributed with no patent protection. There might still be a patent on the formulation but none exists for the active ingredients. The drug must therefore contain similar active ingredients to the original drugs.
Why are they comparatively much cheaper than their original brands?
Generic drugs are cheaper and save patients and insurance companies a lot of money because of the following reasons:
- There is no new formula or technology required in production since reverse engineering is used on known drug compounds.
- There is no additional advertising required for generic drugs since they are bio-equivalents of the patented drugs. They ride on the success of the marketing and advertising efforts of the original drugs including free samples and presentations by representatives.
- The manufacturers of these drugs do not have to provide clinical proof of the safety or efficiency of the drugs since this has already been done by the brand company.
Patented medicine on the other hand is more expensive because:
- These medicines require a lot of money and time to construe. It takes 10-15 years to make one, and it costs millions to billions of dollar funding.
- Advertising and marketing are costly
- Manufacturers try to compensate their expenses, pushing high up the prices of the medicines.
Generic drugs increase competition in the market and in the process lowers the price of the patented drugs too. Patented drugs are given a 20 year protection in the US, but these have to be applied for before clinical trials start. With this in mind, the life of the patent ranges from 7-12 years
Reports suggest that it costs patent companies around $800 million to produce drugs. However, Goozner (The $800 Million Dollar Pill) estimates this between $100-200 million.
The patent companies have since taken to different methods to safeguard against competition from generic drugs, including “evergreening”, a process through which they extend patent protection. When such patents are granted, they reset the initial clock on patents issued earlier, and this is basically aimed at invalidating the manufacturers of generic drugs.