Generic Drugs: Cutting Cost, Not Corners

By Rados, Bill | FDA Consumer, October 1985 | Go to article overview

Generic Drugs: Cutting Cost, Not Corners


Rados, Bill, FDA Consumer


On Sept. 24, 1984, President Reagan signed a law simplifying FDA's approval process for substitute, or "generic," versions of brand-name drugs whose patents have expired. With the law now one year old, newly approved generics are entering the marketplace, offering savings to consumers, but only after satisfying FDA's requirements for quality and equivalence to the brand-name products with which they compete.

Over the past several years consumers have become more and more aware of the money they can save by purchasing generic rather than brand-name drugs. Indeed, the wor generic has been added to the public's vocabulary. While generics have the same active ingredient as their brand-name counterparts, they are usually sold at a substantially lower price. In fact, the potential for reducing U.S. health-care costs through wider availability of generic drugs prompted Congress to pass the law last year that streamlined FDA's approval process for generics. When President Reagan signed the law, he noted that "the American people will save money, and yet receive the best medicine that pharmaceutical science can provide."

Since generic drugs must meet the same FDA standards for safety, strength, purity and effectiveness as brand-name drugs, the differences between them are largely economic. All drugs have a generic name, also called the official or proprietary name, which applies to any manufacturer's version of the drug. Newly developed drugs are also given a brand or trade name by the innovator of the drug. Unlike generic names, which usually are contractions of a complex chemical name, brand names generally are short and easy to remember. For example, Darvon is Eli Lilly and Co.'s brand name for propoxyphene hydrochloride--the generic name for this prescription painkiller.

It's a common misconception that brand-name drugs are produced only by large, well-known firms while generics are made by small, unknown companies. A small drug company can put a brand name on its product just as a large company can market a drug under their brand names, products that have been manufactured, packaged and labeled by firms that make generic drugs. Some manufacturers may make a drug and sell it under both a trade name and its generic name. In other instances, large firms may make a generic version of a drug product but put their own brand name on it, even though it is not the original version of the product. These "branded generics" usually sell at a price somewhere between the original brand-name drug and "true" generic drug products. To avoid confusion, FDA prefers to reserve the term "brand-name drug" for the innovator's product, the one whose brand name has become a synonym for the drug itself (for exaple, Valium, Darvon, Dyazide) and to call all other duplicate products generic drugs, whether they are sold with a trade name or not.

The savings available when generic drugs are substituted for brand-name products vary widely from drug to drug and store to store. The average saving is between 30 and 40 percent but may be as high as 80 percent in some cases.

Because of the savings they offer consumers, generics have captured a significant share of the prescription drug market over the last decade. For example, generic versions are available for about one-third of the different types of prescription drugs sold as tablets or capsules. Of these generic versions, more than 75 percent have been judged therapeutically equivalent to their brand-name counterparts. The Generic Pharmaceutical Industry Association, a trade group representing generic manufacturers, says that in 1984 generic drugs accounted for 20 percent of total retail sales in the nearly $20 billion prescription drug market.

Also, public and private hospitals, military installations, and other government health facilities are making it increasingly common practice to dispense generic drugs whenever possible.

Pharmacists are tending toward greater acceptance of generics, according to the trade magazine American Druggist. …

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Generic Drugs: Cutting Cost, Not Corners
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