Fact Checked

Generic vs. Brand Name Drugs: What’s the Difference?

If you’ve ever googled “how to save money on your prescriptions,” you’ve undoubtedly come across articles telling you to choose the generic version of medication over the brand name version of the drug. Some people may find themselves wondering about the differences between generic vs brand name drugs and which one offers the best value. Generic drugs have been on the market for decades, but many people still have concerns about whether or not they are safe if they are as effective as brand name medications, and how to know which to choose. There are key differences between generic and brand name drugs, and which one you should choose depends on the situation.

How They Work

Many people have misconceptions about the way that generic medications work because they hear the word “generic” and immediately think of the off-brand foods at the grocery store that don't taste quite right or the “knock-off” shoes their parents bought them as kids that just didn’t look as cool as the real thing everyone else had. However, generic drugs aren’t “knock-offs” or even “off-brand” medications, and they work just as effectively as the brand name medication in most cases. Generic drugs contain the same active ingredient as the brand name medication but may have different inactive ingredients. The active ingredient is the portion of the medication that is responsible for producing a therapeutic effect, such as lower blood pressure or reduced congestion. Inactive ingredients affect things like taste and color but do not impact how the drug actually works. In order to receive FDA approval, a generic medication must have the same safety, strength, quality, dosage form, route of administration, performance characteristics, and intended use as the brand name drug. The manufacturer of the generic drug must prove that the drug is bioequivalent to its brand name counterpart, meaning that the chemical composition of the two drugs is highly similar. The FDA allows for a variation of up to 20 percent in chemical composition, but most generic drugs differ in chemical composition from the brand name drug by only 4 percent

Cost

One of the biggest differences between generic and brand name medications is the cost. The FDA states that the average cost of a generic drug is 80 to 85 percent less than its brand name counterpart, and patients save an estimated 3 billion dollars per week by purchasing generic drugs. What is it about brand name drugs that make them so much more expensive than the generic medication? There are two major factors: research and the patent process.

Research 

Brand name drugs are new medications (or were new at the time of release) and are released prior to the generic drug. Developing a new drug takes years of research, time, and money, and drug manufacturers want to make sure their investment is protected. Therefore, they patent their medication during the research and development process in order to ensure that their company has the sole right to sell the medication during the time period that the patent is in effect. However, just having a patent does not mean that the manufacturer is able to sell the drug. The medication must be FDA-approved prior to sale. During the exclusivity period, no other generic or brand name drugs that are bioequivalent may be sold or produced. The high costs of many years of research and development are recouped during the exclusivity period.

Patent Process

As mentioned above, drugs are patented prior to their release. The drug manufacturer typically names the brand name drug something that is easy to say and remember because this makes the medication easier to market and sell to patients. However, all brand name drugs are also produced with a generic name that indicates the active ingredient. During the exclusivity period, the manufacturer of the brand name medication is the only company allowed to sell the drug under the brand name and the generic name. As the sole manufacturer of the medication, the brand is responsible for setting the price of the drug. This price is often quite high in order to recover the initial costs of research and development, marketing, patenting, and more, and drug manufacturers also want to make a profit.

Insurance Coverage

In terms of insurance coverage, there are also differences between generic and brand name medications. While the specifics regarding insurance coverage for generic and brand name medications will vary depending on both the insurance plan and the medication, as a general rule, generic drugs are more likely to be covered by insurance than brand name medications. Insurance companies prefer that patients take a generic drug over the brand name in order to keep the costs down. Some plans do allow patients to choose the brand name drug at a higher cost, but patients must pay not only the copay that they would have paid for the generic drug but also the cost difference between the two medications. That can make things pricey! Some insurance companies are unwilling to cover brand name medications unless you try the generic medication first and can prove it does not work for you (a process called step therapy) or your doctor files an appeal that explains why you need the brand name medication. If your insurance company continues to deny your claim, your doctor may be able to prescribe an alternative medication or request that the medication be added to your insurance company’s preferred drug list. In order to get a medication added to the preferred drug list, which includes only the drugs that have the best coverage, your doctor will need to write a letter and provide academic and clinical evidence of the medication’s effectiveness. 

Other Ways to Pay

If your insurance refuses to cover your medication, there may be other ways to pay depending on whether you are using generic or brand name medication. 

Pharmacy Discount Card

Pharmacy discount cards can help you save big on your prescription drugs regardless of your insured status.  Health insurance often does not cover all medications, especially brand name drugs, and it also comes with coverage limits that may reduce your savings, but pharmacy discount cards can be used towards all FDA-approved brand name and generic medications. Typical savings with pharmacy discount card programs like USA Rx range from 10 to 75 percent so it’s possible to save a significant amount of money. There is no cost associated with signing up for a pharmacy discount card, and most have few or no eligibility requirements, so you don’t have to worry about providing any detailed medical information or payment to enroll. All you need to get started is to provide your name and some basic contact information, and you can print your card online and start saving the same day.

Coupons and Rebates

One area where generic and brand name drugs differ is the availability of coupons and rebates. Brand name drugs are sometimes eligible for coupons and rebates from the manufacturers that can help lower or eliminate your co-pay, but generic drugs are usually not eligible for coupons and rebate programs.  Coupons and rebates can often be obtained directly from your doctor’s office, as they are often offered in conjunction with the free samples of the medication that the doctors receive. You can also check online, as many manufacturers offer coupons and rebates directly from their websites. Finally, your pharmacy may be aware of additional savings programs that are available for brand name drugs that are commonly not covered by insurance, such as the new class of blood thinners, including Xarelto and Eliquis. 
Patient Assistance Programs
Patient assistance programs are offered by some drug companies for medications that are not covered by most insurance plans or are notoriously expensive. These programs are typically offered to people who are low-income, uninsured, underinsured, or whose insurance does not cover a specific medication. Patients who receive assistance via these programs may have the cost of their medication reduced or eliminated; however, there are eligibility requirements associated with patient assistance programs. Most people with Medicare or Medicaid coverage are ineligible for these programs, and some programs have maximum income criteria.

Effectiveness

One thing many people are concerned about when it comes to choosing a generic drug over a brand name medication is how its effectiveness compares. As previously discussed, in order to receive FDA-approval, generics drugs are required to be the bioequivalent of the brand name drug. Therefore, the chemical makeup of the two drugs is nearly identical, with about a four percent variation on average. It is important to note that the FDA does not require that the generic version be tested for therapeutic equivalence, which is where some of the concern over the effectiveness of generic drugs lies. The FDA does not require generic drug manufacturers to prove that their medication is therapeutically equivalent to the brand name medication because the chemical composition of the two medications is nearly identical. Therefore, it can reasonably be expected that the two drugs will act on the conditions they are designed to treat in similar ways. 

Safety

One thing that is guaranteed when it comes to both generic and brand name medications is safety. Both generic and brand name medications are highly regulated by the FDA and are rigorously studied and tested prior to approval. In addition to testing the medications and individual ingredients themselves, the FDA also tests to see how sturdy the packaging of the medication is, the shelf life of the medication, and the consistency of the product. In addition to testing the safety of the medications prior to their approval, the FDA also continues to monitor for adverse effects following the release of the drugs. Any reports of adverse effects are monitored and investigated by the FDA, and these investigations may change how a medication is used or packaged. The FDA encourages people to report if they experience undesirable effects when switching from a brand name drug to a generic drug or switching from one generic drug to another.

Knowing the Difference

How can you tell if you’re picking up the right prescription? Don’t worry, your generic and brand name medications won’t look alike, so you don’t have to worry about getting the right one. Trademark laws prevent generic medications from being designed to resemble the brand name drugs, and the two medications also have different inactive ingredients that may affect their shape, flavor, color, and texture. Your pharmacy also will print a description of your medication on the side of your prescription bottle, so if you’re concerned and want to make sure you got the right drug, just check to make sure that the description on the bottle matches your medication.

Which to Choose

If they’re just as safe, just as effective, and significantly cheaper, why would anyone not choose to take the generic version of a drug? While all of those things are true, there are some situations where it may be the right choice to stay on a brand name medication rather than switching to the generic version. For example, some medications do not have a generic version available. This could be because the drug is still under a patent from the original manufacturer or because researchers are not exactly clear on how a given medication works and cannot identify the active ingredients. In other situations, drugs with a narrow therapeutic index, such as blood thinners and some mood stabilizers, can cause significant changes in the blood concentration of the medication if a patient switches brands, possibly leading to harmful effects. Patients should stick to the brand or generic recommended by their doctor and not switch without a doctor’s approval. In other situations, people simply do not receive the same level of treatment from the generic drug as the brand name drug. This may be due to the person’s individual anatomy and the way their bodies absorb and process the medication. In these situations, it makes sense for the patient to continue taking the brand name medication.
 

Published July 13th, 2020 by Bridget Reed
Fact Checked by Chris Riley

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