What Are Generic Drugs?
Generic drugs, often called “generics,” are medicines made after the patent of a brand-name drug has expired. They must contain the same active ingredients as the original drug and work in the same way.
Why Are Generic Drugs Cheaper Than Brand-Name Drugs?
There are a few main reasons why generics usually cost less:
- Research & Development Costs
- Brand-name drugs require years of research, testing, and approval before they reach the market.
- This process can cost hundreds of millions (sometimes billions) of dollars.
- Generic companies don’t repeat this entire process, so their costs are lower.
- Marketing & Advertising
- Brand-name drugs spend heavily on advertising and promotion to build awareness.
- Generics don’t need to advertise as much, since the drug is already known.
- Cost Recovery
- Brand-name companies price drugs higher to recover the money spent on research, development, and marketing.
- Generics don’t have these costs to recover, so they can sell at a lower price.
- Competition
- When a generic enters the market, it increases competition.
- This often pushes down the price of both the brand-name and generic versions.
Timeline for Generic Drugs
- In the U.S., drug patents generally last 20 years.
- Because patents are usually filed early in the process, a company may have about 7–12 years of exclusive sales after the drug is finally approved.
- Developing a brand-new drug can cost anywhere from $100 million to over $800 million.
- Sometimes, companies use legal methods (like extending patents) to delay generic competition — a strategy known as “evergreening.”
Why Generic Drugs Save Money
- No New Formula Needed: Generics are made using existing knowledge, so no costly new inventions are required.
- Same Active Ingredients: Generics are bio-equivalent to brand-name drugs, meaning they work the same way in the body.
- No Large Clinical Trials: Safety and effectiveness are already proven by the original drug’s trials, so generics don’t need to repeat them.