Generics – a simple way to reduce healthcare costs

Pharmaceuticals constitute 15.6% of worldwide healthcare costs. That number is already being reduced in countries that have adopted an active policy to use generic drugs instead of their more expensive branded equivalents. Understanding the mechanics is important.

What are generics drugs?

Generic drugs are the pharmaceutical equivalent of the original product that was covered under patent to the licensed inventor of the drug.[1]Generic Drug FAQs

To incentivise innovation, creators of a new pharmaceutical are given a patent monopoly (usually for 20 years) during which, that drug is protected from being copied by any other manufacturer. After the patent expires, that protection is withdrawn, and can be copied. Provided the active ingredients are identical to the original, the copy is a generic.

By law, generic drugs must be as high in quality, and as strong, pure and stable as brand name drugs.

Why are generics less expensive?

Once the monopoly is withdrawn, there is open competition, and the generic drugs are priced closer to the costs of manufacturing which is usually significantly less expensive than the original branded product.

At this point, the original brand usually invests heavily in marketing, trying and often succeeding to convince the public that their product is better. Not being aware that the generic is chemically identical, many people (and doctors) subscribe to this nonsense – costing us hundreds of millions of dollars.

The pharmaceutical companies spend twice as much on marketing as they do on research and development.[2]Switzerland’s healthcare is now the world’s most expensive. Misleading the public forms a significant portion of this expenditure. 

In Switzerland, where health insurance is mandatory, the solution is to legislate that the insurer only pays the price of the generic, and the insured pays the price differential for the branded product, when the insured insists that this is what they want, or the doctor prescribes the branded product. 

We should not have to subsidise this folly.

If you want to find the generic, the website makes all of this information available here.

To download the data, go here.