Why are Generic Versions Cheaper Than Brand-Name Drugs?

Developing new drugs is a very lengthy and expensive process. Estimates have ranged from $1 billion to as high as $2.8 billion for a single drug before any revenue from sales. The process can take as long as ten years, including clinical trials, which alone take six to seven years on average. Also, there is an average failure rate of roughly 90%, for which there is never going to be any cost recovery.

Once a drug is approved, the developer has a limited exclusive patent during which only its version can be sold. This comes down to being a relatively short window in which the company can earn enough to recover the outlay for the specific drug, as well as to justify general research and development. This means very high prices for a brand-name drug. Once the patent expires, a competing drug can be brought to market by a different company that did not have to conduct all the research or test in three-phase clinical trials. Further, there is no risk of failure. A generic version can also be on the market within just a few years and sold at prices far below the full cost of the original.

All of this combines to make generic drugs far cheaper to bring to the market, which is reflected in the price difference. The bottom line is that the lower price of generics is not an indication of lower quality but is purely related to the much lower all-in cost of the generic versions compared to branded drugs.

Do generics deliver the same benefits with the same risks as the equivalent brand-name drugs?

The US Food and Drug Administration (FDA) requires generic drugs to have the same active ingredient, strength, dosage form, and route of administration as the brand-name drug. The generic manufacturer must prove its drug is the same (bioequivalent) as the brand-name drug.

For a comprehensive explanation of the regulations applied by the FDA when approving genetic versions of branded drugs, you can read the official notices on the FDA website. The following is our summary.

The FDA ensures that:

• The active ingredient is the same as that of the brand-name drug
• The active ingredient is effective against the illness or condition it is treating
• Scientific evidence has been submitted that the generic drug’s active ingredient is the same as that of the brand-name medicine they copy
• The generic ingredient is the same strength as that of the brand-name drug
• The way the generic version is administered is the same as that of the product, being in the same form (such as a tablet or an injectable) and having the same route of administration (such as oral or topical)
• The medicine has the same use indications
• Any inactive ingredients in the medicine do not have other effects that interfere with or change the primary effect of the brand. If there are any differences, they must be shown to have no effect on how the medicine functions
• Evidence must be given that all the ingredients used in the product are acceptable according to FDA regulations
• The generic medicine remains effective for at least the same length of time as the brand. This requires “stability tests” to show that the generic product lasts for at least the same amount of time as the brand-name product.

There are also requirements to ensure that the production of the drug takes place under the same strict standards as the brand-name medicine. These include 

• It meets the same batch requirements for identity, strength, purity, and quality
• The manufacturer is consistently capable of producing the medicine correctly
• Each step of the manufacturing process will produce the same result each time. FDA regularly inspects drug manufacturers’ facilities to verify that the manufacturer is capable of making the medicine consistently and to check that the information the manufacturer has submitted to FDA is accurate
• The container in which the medicine will be shipped and sold is appropriate.

Can a pharmacist choose between a brand-name drug and the generic equivalent?

As we explained in an in-depth post that goes deeply into whether a pharmacist can switch between brand-name and generic drugs, doctors have complete discretion to either allow substitution of a generic when they write the prescription or to specify that only the brand-name drug satisfies the requirements for the particular patient. A dispensing pharmacist has some discretion to substitute an approved generic when the original prescription called for the brand-name drug, but only if the prescribing doctor has not written “brand only” or “do not substitute.”

How does IsraelPharm offer drugs for lower prices?

Americans continue to bear the highest cost for prescription medications in the world. The United States has no price controls on pharmaceutical products, and companies are able to set their own prices, which mostly ends up with consumers having to pay more than they would have had to in other countries. 

IsraelPharm sources its prescription medications from countries such as Israel, Turkey, the UK, Australia and Canada. These countries have government controlled national health plans which set the same high standards as the USA, but have capped drug prices to consumers.

It is generally possible to save between 50 and 80 percent on drug costs when sourced from IsraelPharm through our website. There are no hidden taxes, fees, or surcharges. You will only pay the cost of your drugs, as listed on our website. There are no currency conversion charges. All prices on our website are listed in U.S. dollars, and you are billed in U.S. dollars.

We are committed to the highest ethical and professional standards while delivering the best service and prices.

Frequently Asked Questions

Can I switch from generic to brand name?

Bioequivalence testing is generally sufficient that prescribing doctors can routinely allow substitution of generic for the brand version of most drugs. However, for narrow therapeutic, critical dose drugs, or for highly variable drugs, one cannot be certain of safe switching between products.

Can I ask the pharmacy for the brand name instead of the generic?

Most states have a law that lets pharmacists use less expensive generic drugs in place of many brand names. But if the doctor has written that a brand name is to be dispensed, then the pharmacist may not substitute generic.

What is a generic substitution policy?

Generic substitution is the situation where a different formulation of the same drug is substituted. The licensing authority has found all generic versions of a drug to be equivalent to each other and to the originator drug.