When a drug company develops a new medication it invests money in scientific research. Discovery, development and testing over a period of time takes a large investment in time and money. Generic drugs do not incur that expense. The company that does all this has what is called a patent on that drug.
The Federal Drug Administration imposes a time limit on the patent. The length of time one remains in effect varies from country to country. Once the patent has expired, other manufacturers are entitled to produce a generic version of the drug.
All generics are required to have the same ingredients the original formula contained. Requirements are put in place by the Federal Drug Administration. A generic version must contain the same or nearly the same active ingredients as the original brand name does.
The lower cost of generic drugs can be attributed to two factors. In the first place they are a copy of the brand name original. Secondly, several companies are allowed to make them.
This brings sales competition into the picture. Where competition between pharmaceutical producers exists, prices are lowered. Naturally, the buying public will buy a similar, almost identical drug that costs the least amount of money.
It costs much less to produce generic drugs in some countries. India is the biggest producer of generic drugs. This is because people work for wages that are minimal compared to wages in the United States.
President Obama signed a new law into effect on March 23, 2010. It gives the FDA the task of approving generic formulas before they can be produced and sold. The original developing company is granted twelve years of exclusivity. After that time period, a generic version can be made and put on the market. The new law is called the Patient Protection and Affordable Care Act.
People in the United States buy more generics than people in any other single country. When the patents on brand name drugs run out, most of them will be imitated and sold as generics. Since the generic medicines already hold 78% of the market in the US. The impact on the market is rather easy to predict.
All prescription drugs cost money to ensure safe manufacturing. One component of the cost of pharmaceuticals is the high cost of advertising on TV. It is obvious that the profit margin is higher as a result of those expenditures.
The cost is high for advertising. It does not point out to the consumers that generics can be produced in India for a portion of the cost it takes to produce them in the US. The large drug manufacturers have factories in India. These drugs are made safely at a fraction of what consumers pay for them. Yet, they imply it is unsafe to buy drugs from overseas.
To ensure safety, Indian law has enacted the death penalty for any pharmaceuticals manufacturer who knowingly makes unsafe or deliberately harmful generic drugs. This penalty covers all the producers of generics regardless of who buys them. This regulation keeps the consumers safe.