The High Cost of Choosing Brand-Name Drugs

Feb 25, 2013
In 2011, the use of brand-name medications when clinically-equivalent generics were available resulted in a pharmacy waste of $49.8 billion in the U.S.

In the world outside of the pharmaceutical industry, the word “generic” often is associated with lower quality – when I see a box of generic facial tissues, I assume that they will not be as thick or soft as my favorite Kleenex® brand. However, when it comes to medications, generics are required to be the same quality as the original brand-name counterpart.

A generic drug is a chemically equivalent, lower-cost version of a brand-name drug. Each generic medication dispensed in the U.S. must meet the same strict standards of the U.S. Food and Drug Administration (FDA) for quality and therapeutic efficacy. Additionally, generics must meet rigorous testing standards from the FDA to ensure bioequivalence to brand-name medications prior to approval. In other words, generic medications by law must contain the same active ingredients and work the same way in the human body. Not all brand medications have a generic alternative, but many do

Why does this matter? It comes down to excess spending for medication. At Express Scripts, we think of excess costs that do not provide additional clinical benefit as waste. Last year, the use of brand-name medications when clinically-equivalent generics were available resulted in a pharmacy waste of $49.8 billion in the U.S. alone. That's a high price tag for a seemingly simple choice.  

The average cost of generic medications is 81% less than brand medications. Moreover, the cost of generic medications is going down while the cost of brands is going up. In other words, plan sponsors and patients reap the benefits of deflation with generic medications (prices in 2011 actually decreased 4%), while inflation persists for brand medications (2011 brand prices increased 12.6%)... a net 16.6% widening of the price gap.

Plan sponsors pay the largest portion of this 81% difference, but it also impacts individual patients. In 2011, Express Scripts member copayments averaged $6.57 per month for generic medications and $36.73 for non-formulary brands. By structuring copays to reward members who make the most cost-effective choice and by implementing programs backed up with solid research such as step therapy and prior authorizations, plan sponsors play an integral role in driving waste out of the healthcare system.

And that is a healthy and fiscally responsible decision for everyone involved

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