Generic and Branded Medicines

What’s the Difference Between Generic and Branded Pharmaceuticals?

The U.S. Food & Drug Administration (FDA) states that “A generic drug is a medication created to be the same as an existing approved brand-name drug in dosage form, safety, strength, route of administration, quality, and performance characteristics”.  They further this by stating that all FDA approved generic drugs have been tested for the same quality as their brand-name equivalent, meaning they use the same exact active ingredients and carry the same risks and benefits. 

Generic equivalents are able to reduce their sticker price, while maintaining the exact same components as their brand name counterparts, when patents and exclusivities expire. Once a patent expires, a generic drug can receive full approval to be sold. A major reason generic drugs can charge less money for their product, is that they do not have to repeat animal and clinical (human) studies demonstrating safety and effectiveness.

Generic Drugs Vs Branded Drugs

Generic Vs Branded MedicineMarketplace competition is another price driver.  Once generics can be made, basic economics works in favor of lowering costs to buyers since different brands are now competing with one another. Often, between research costs being factored out and market competition, generic drugs can be sold for around 85% less than their name brand counterpart.

The Research

A similar study to the FDA by Kessilheim, Misono, Lee, Stedman, Brookhart, Choudhry, and Shrank (2008) concluded that there is no evidence indicating brand name drugs are superior to generic drugs. Aditionally, an article by Melissa Stoppler, M.D. & Barbara K. Hecht, Ph.D. refers to generic drugs as “copies of brand-name drugs that have exactly the same dosage, intended use, effects, side effects, route of administration, risks, safety, and strength as the original drug” (2009).

What is interesting is that “many companies manufacture both brand name and generic drugs” the FDA estimates this to be around 50% (Stoppler & Hecht, 2009).  This is significant because many people believe generic drugs are produced in poor quality laboratories that may be inferior to that of brand names, but really they are often produced at the same place by the same people. When patents expire, often, many brands will continue to market their name brand drugs while producing their own generic version to profit off people who compare prices (riverpharmacy.ca, 2017).

Truly, the only difference between the drugs is the inactive ingredients that affect color, taste, binders, and fillers. What is also interesting is that in most countries, where physicians habitually prescribe brand name drugs, pharmacists can still fill prescriptions with generic equivalents if requested (riverpharmacy.ca, 2017).

Deciding on Generic versus Brand Name

Generic and Branded DrugsAn article in the Social Science and Medicine journal, by Niels Skipper and Rune Vejlin (2015), looked at whether the demand for brand name drugs was patient or doctor driven in the Denmark population. Since pharmaceutical prices have become an important policy issue in most developed countries, and generic brands save both customers and governments money, they were curious to know who was contributing to the decision making.

Even with generic brands being composed of the same active ingredients, brand name drugs often still sell well after generics become available. Their study was conducted over an 11 year period. What they found was that “the choice of brand-name versions is positively correlated with both doctor and patient income and age of the prescribing doctor.” (Skipper & Vejlin, 2015). This shows that there may be a lack of information about the differences in generic versus brand name pharmaceuticals leading people to unnecessarily spend more money for the same product.

One major difference for who is prescribed what might be whether or not doctors are incentivized to encourage brand name or generic drugs.  “ For example, in Japan (Iizuka (2012)), Korea (Kwon (2003)), Switzerland (Rischatsch et al. (2013)) and Taiwan (Liu et al. (2009)), physicians face financial incentives in the prescribing decision” (Skipper & Vejlin, 2015). In the countries listed above, brand name drug usage is almost entirely patient driven because physicians are given incentives to prescribe generics.

One reason suggested by Skipper and Vejlin for patients continuing to use brand names after a generic becomes available is the ‘generic competition paradox’ coined by Scherer (1993) explaining brand-loyal customers sticking to the brand they started with regardless of price differences. In the study above, by Iizuka (2012), findings show that some countries such as Japan, Italy, France, and Spain have already shifted to the take-up of generic drugs. 

So why aren’t other places, such as Denmark, joining in on this bandwagon? A striking difference of approximately 70% of people in Japan are using a generic drug two years after patent expiration, as compared to only 1.5% of people in Denmark (Iizuka, 2012). This is an immense difference and adds up to a massive amount of dollars that could potentially be saved by consumers.

The Politics

Regardless of the research, money in politics always comes into play.  Recently, the U.S. senate looked into legislation to allow consumers earlier access to generic drugs.  In response to this, brand-name companies lobbied against the GAAP act wanting to protect the loopholes that allow them to keep generic drugs off the market (citizen.org, 2017). 

To influence congress, the brand-name industry has spent more than $423 million during the last three election cycles as compared to about $10 million that the generic industry has spent (approx. 2% of the brand name). Brand name companies “also employed nine lobbyists for every one employed by generic companies”  (think PhRMA versus GPhA) (citizen.org, 2017). Political activists will continue to lobby and spend money where money can be made. It is imperative that government and individuals are made aware of generic options in order to cut unnecessary costs.

Conclusion

Generic pharmaceuticals are copies of their brand name counterparts.  There is not a distinctive difference that makes one superior to the other but generic brands can save you significant amounts of money. Governments, researchers, and drug companies alike will tell you that there is not a significant difference in one versus the other and unless you have an allergy to a specific non-active ingredient the drugs will work the same.

Citations:

  • Chu, Edward, and Ania Hamp. “Generic vs. brand drugs which is better? The cost savings of generic latanoprost may improve compliance, for example, but does the generic ‘equivalent’ work as well as the brand-name drug?” Review of Optometry, 15 Feb. 2012, p. 68+. General OneFile, go.galegroup.com/ps/i.dop=ITOF&sw=w&u=vol_b92b&v=2.1&id=GALE%7CA282824853&it=r&asid=f84d6064b2fc0a7fc8a6f466d5c53691. Accessed 11 Oct. 2017.
  • Iizuka, 2012. T. Iizuka Physician agency and adoption of generic pharmaceuticals
    Am. Econ. Rev., 102 (2012), pp. 2826-2858
  • Kesselheim et al., 2008. A.S. Kesselheim, A.S. Misono, J.L. Lee, M.R. Stedman, M.A. Brookhart, N.K.Choudhry, W.H. Shrank Clinical equivalence of generic and brand-name drugs used in cardiovascular disease J. Am. Med. Assoc., 300 (2008), pp. 2514-2526
  • Kwon, 2003. Soonman Kwon Pharmaceutical reform and physician strikes in Korea: separation of drug prescribing and dispensing
    Soc. Sci. Med., 57 (3) (2003), pp. 529-538
  • Liu et al., 2009. Ya-Ming Liu, Yea-Huei Kao Yang, Chee-Ruey Hsieh Financial incentives and physicians’ prescription decisions on the choice between brand-name and generic drugs: evidence from Taiwan J. Health Econ., 28 (2) (2009), pp. 341-349
  • Rischatsch et al., 2013. M. Rischatsch, M. Trottmann, P. Zweifel Generic substitution, financial interests, and imperfect agency Int. J. Health Care Financ. Econ., 13 (2) (2013), pp. 115-138
  • Skipper, Niels, and Rune Vejlin. “Determinants of generic vs. brand drug choice: Evidence from population-Wide Danish data.” Social Science & Medicine, vol. 130, Apr. 2015, pp. 204–215. Science Direct,
    www.sciencedirect.com/science/article/pii/S0277953615000210?via%3Dihub.
  • Stoppler, Melissa, and Barbara K Hecht. “Generic drugs vs brand name drugs by MedicineNet.Com.” MedicineNet, 2009, www.medicinenet.com/script/main/art.asp?articlekey=46204.
  • The Other Drug War: Big Pharmas 625 Washington Lobbyists. July, 19, 2002.
    www.bing.com/cr?IG=FDCBF730552B45EC9E6FED81FFDA06FE&CID=2CC64679DF6B6B493DD54D61DE6D6AB7&rd=1&h=AesbqM4EdSKL4XOHW37q93fTwvi_49JkWlAos9-uGtM&v=1&r=https%3a%2f%2fwww.citizen.org%2four-work%2fgovernment-reform%2fother-drug-war-big-pharmas-625-washington-lobbyists&p=DevEx,5082.1.
  • U.S. Food and Drug Administration. Greater Access to Generic Drugs: New FDA Initiatives to Improve the Drug Review Process and Reduce Legal Loopholes. January 2006. Available at:
    www.fda.gov/drugs/resourcesforyou/consum-ers/ucm143545.htm (accessed January 2012).
  • Welcome to RiverPharmacy.Ca! > River Pharmacy.” > River Pharmacy, 2006-2017,
    www.riverpharmacy.ca/index.php.
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