Generic drugs work as well as brand-name drugs - here's why they're cheaper

• Generic drugs and brand name drugs are equally effective and safe.
• Generic drugs are 80% to 85% cheaper than brand name drugs.
• Your doctor may in rare cases recommend you take a brand-name form of a drug.

You've probably seen generic versions of drugs at the pharmacy or grocery store and wondered whether the cheaper alternative is as effective as the brand-name drug.

Generic drugs are in fact as safe and effective as brand-name drugs because they use the same active ingredients and follow the same manufacturing process.

"Generic medications typically cost about 80% to 85% less than the same brand-name drug. However, there is no difference in the efficacy of generic versus brand-name drugs," says Deepti Mundkur, MD, a San Diego-based internal medicine specialist.

Here's what you need to know about generic drugs and how they compare to brand-name medications.

Is there a difference in quality between brand-name and generic drugs?

According to the US Food and Drug Administration (FDA), generic drugs work exactly the same way and provide the same benefits as brand-name versions.

Important: One of the major functions of the FDA involves ensuring the safety and efficacy of drugs by making sure they are clinically tested. It oversees brand-name and generic versions of prescription and over-the-counter drugs.

Generic drugs are made available once the patent of an original brand-name drug expires.

There is a considerable difference in pricing between generic drugs and brand-name drugs because the generic drug manufacturers don't have to bear the costs of researching and developing the new treatment, conducting studies and trials to determine its safety, and marketing it to doctors and patients. Generic drug manufacturers can therefore pass those savings on to the consumer.

In order to receive FDA approval, generic drugs need to meet the following criteria:

• The generic drug must have the same effectiveness, quality, and dosage as the brand-name drug.
• The generic drug must contain the same active ingredients as the brand-name drug. The generic drug can have different inactive ingredients, although the FDA will assess those for safety as well.
• The generic drug manufacturer must follow the same strict manufacturing standards as the original drug company.
• The generic drug must be packaged in an appropriate container with the same information label (listing warnings and directions for use) as the brand-name medicine. However, the generic drug may differ in color, shape, or appearance from the brand-name drug.
• The generic drug must have exactly the same form (like tablet or injectable) and route of administration (like topical or oral) as its brand-name counterpart.

Even after the generic drug has received approval, the FDA continues to monitor generic drug manufacturers to ensure they are meeting safety and quality standards (in terms of manufacturing processes, and drug efficacy, safety, and stability).

The FDA also monitors any complaints, reporting side effects or adverse reactions. For example, if a particular drug has caused an allergic reaction or isn't effectively treating the condition.

Does insurance cover brand-name and generic drugs the same way?

"Generally, generic drugs are cost-effective alternatives to brand-name drugs, but if patients have a preference, I am happy to prescribe accordingly. Most doctors would also do the same," says Mundkur.

However, insurance companies may not be as accommodating if you'd prefer to use a brand-name product. "Insurance companies can oftentimes make it harder for patients to have a choice when they wish to access the more expensive brand medication," says Mundkur.

"It is very common for physicians to encounter insurance denials on brand-name medication prescriptions, leaving patients with no choice but to pay out-of-pocket for the more expensive medicine."

You can check which medications your insurance covers by looking at your plan's "formulary." The formulary provides a list of medications that are covered by your plan. It also tells you how the cost of each medication is split between you and the insurance company.

You can find your insurance plan's formulary on the insurance company's website. You should keep the name of your plan and your insurance card handy when you look it up. If you're looking for an insurance plan, you should make sure that any medication you're on, whether generic or brand-name, is covered by the plan. If you are unable to find the formulary online, you can call the insurance company and ask them to send you a copy.

When should you use a brand-name drug and when should you use a generic version?

According to Harvard Medical School, there are equally effective generic drugs for most common ailments, including diabetes, high blood pressure, high cholesterol, asthma, depression, and pain.

These are some examples of brand-name drugs and their generic counterparts that are just as effective, according to Mundkur:

However, there are some instances when brand-name drugs may be preferable to generic alternatives. These instances involve narrow therapeutic index drugs.

Important: Narrow therapeutic index drugs are medicines in which even minor changes in dosage can cause serious adverse reactions. This is because even a slight change in dosage can be toxic. Brand-name drugs may be preferred in these cases, as it could mean the difference between the medication helping you or hurting you.

Some anti-epileptic medications (like Tegretol, a form of carbamazepine, for instance) that prevent seizures are examples of narrow therapeutic index drugs. Generic options of these drugs may work perfectly for some patients, although they may require close monitoring; however, it may be safer to stick to a brand-name version if that's what your doctor has prescribed.

Most drugs, however, are wide therapeutic index drugs, which means that they have a broader margin of safety. Minor changes in dosage are less likely to cause toxic effects, making generic versions safe. Narrow therapeutic index drugs are few, so with decisions regarding most prescriptions it shouldn't be a concern. If you have questions, you can check with your doctor which category your medication falls into.

Insider's takeaway

Generic drugs are formulated with the same active ingredients as brand-name drugs and are cheaper alternatives that can save you a lot of money. They are regulated by the FDA and are as effective as their branded counterparts, except in rare cases of some narrow therapeutic index drugs.

The American College of Physicians recommends that doctors prescribe generic drugs as far as possible, to help make treatment more affordable for patients. If medication is more affordable, patients are more likely to adhere to their treatment plan, resulting in better outcomes.

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