Generic Products

Why Drugs Are Expensive

Most countries prohibit advertising of prescription medicines to consumers. In the U.S., however, the Food and Drug Administration (FDA) relaxed restrictions in 1997 on what drug companies could say in broadcast and print ads. Other reasons drugs are so expensive include:

• Increasing volume of prescriptions
• Changes in types of drugs used (newer, high-priced drugs replacing older, less-expensive drugs)
• Manufacturers raising prices for existing drugs

Source: The Henry J. Kaiser Family Foundation, a non-profit, independent national health philanthropy dedicated to providing information and analysis on health issues to policymakers, the media and the general public.)
Did You Know…

• Pharmaceutical manufacturers spent about $3.4 billion in 2003 on direct-to-consumer TV, radio and print ads? These direct-to-consumer drug ads are designed to sell expensive brand name drugs.
• Pharmaceutical companies spend twice as much on marketing, advertising and administration as on research and development, according to a July 2002 study by the consumer health organization Families USA, a non-profit advocacy group in Washington, D.C.

Ads can increase your awareness of treatment options. When you know the symptoms of a disease, you’ll likely seek early treatment and possibly avoid more extensive and expensive treatment later.
However…

• Ads may create an artificial demand for a drug. If you need treatment, there’s a good chance there are equally effective, less expensive drugs already on the market.
• Studies show that one of every three patients will ask their doctor for an advertised drug. Seventy three (73) percent of the time doctors comply with the patient’s request for medication.

There’s a good chance an equally effective generic alternative is available at much less cost.

Spiraling Drug Cost

Industry experts predict that drug expenditures will rise 11.7% a year between 2003 and 2007 and an average of 10.3% a year between 2008 and 2011, according to a report by the National Institute for Health Care Management Research and Educational Foundation. “This will result, in part, from increased use by aging ‘baby boomers,’ those who are now between 44-55 years old, with, for example, drugs that treat high cholesterol,” says Jim Richards, R.Ph., professor emeritus, Pharmacy College of the University of Michigan.
“This is a good news/bad news scenario,” Professor Richards says. “The bad news is that drug costs are going up by double digits. The good news is that increased use of drugs, especially maintenance drugs, has helped improve our general health and quality of life.“

While the development of drugs is helping extend and save lives, the higher cost of drugs raises the total cost of your health care policy. This means health insurance rates go up. If your employer covers you at work, chances you’re now contributing more from your paycheck than you ever did. Although your portion may be growing larger, it pales against the real cost of drugs. Just a one percent increase in generic drug use would save companies millions of dollars a year. Members would also save millions in copayments.

According to the Congressional Budget Office, purchasers of generic drugs already are saving an estimated $8 to $10 billion a year at retail pharmacies.

Generics Can Help

Generic drugs are priced a lot lower than the equivalent brand-name versions – usually 30-75 percent less. Why? Generic drug manufacturers spend less on advertising and product development. The name equivalent is already well known while the generic has the same active ingredient. Because several different manufacturers may produce generic versions of the same medication, competition can drive prices down.

Generic drugs also enable senior citizens to lower their cost for prescription medications. Senior citizens represent 13 percent of the U.S. population, but they account for 25 to 33 percent of the prescription drugs used each year. Senior citizens use an average of 11 different prescriptions per year, so buying generics has the potential for significant savings.

Generic drugs are made with the same active ingredients and produce the same clinical benefit as their brand-name equivalents. By federal law, each generic drug is laboratory-tested to ensure the same amount of drug will be absorbed into the bloodstream. The difference? Name and price.

Who Makes Generics?

Drugs are originally marketed by their brand name, which is protected by patent for up to 20 years. Until the patent expires, no other companies can produce the generic equivalent, keeping the cost to the consumer higher. When the drug patent expires, the drug is able to be released by other companies, creating competition. The color or shape of the drug and the price may differ.
Did You Know…

• The FDA requires generics to have the same quality, strength, purity and stability as brand names.
• Generic drugs are held to the same federal Food and Drug Administration standards for safety and performance as the brand names but they sell for much less.
• The Congressional Budget Office says generic drugs save consumers an estimated $8 billion to $10 billion a year at retail pharmacies. Billions more are saved by hospitals using generic drugs.

Key Endorsements

• The American Medical Association, the largest organization of medical doctors, endorses generic drugs as acceptable for the American public.
• Hospitals routinely use generic drugs for treatment of their patients.
• The Food and Drug Administration (FDA) enforces generic drug standards through legislation.

The advertising for brand name drugs only tells part of the story. Generic drugs are just as safe and effective as their brand-name counterpart. Here are a few myths about generic drugs, and the facts you should know.

Myth:

Generic drugs don’t have the exact same ingredients as brand name drugs
Generic drugs are cheaper because the manufacturing plants don’t have to comply with the same rules the brand names do.
Generic drugs don’t work as quickly as brand name drugs.
Side effects are more common with generics than with brand name drugs.
Generics are cheaper because they’re made by less reliable manufacturers.
Doctors prefer brand name drugs; it’s only insurance companies that want me to use the cheaper generic version.
Generic drugs aren’t used by most people.

Fact:

A generic drug is made with the same active ingredients and is available in the same strength and dosage form as the equivalent brand name product.
The manufacturing process of all drugs is strictly regulated by the U.S. government and the same standards are met by all manufacturers.
A generic drug meets the same stringent performance and bioequivalence standards set by the U.S. federal government as the brand name drug.
A generic drug is as safe and provides the same therapeutic effects as the brand name product for patients of all ages.
Many of the generic drugs approved by the FDA are manufactured by companies that also make brand name drugs.

Health care professionals strongly support the use of generic drugs.
There were 77 generic drugs on the list of the top 200 drugs sold in the U.S. in the year 2000.