8 Things You May Not Know About Generic Drugs

Authors: Janet Young, M.D. and Anne Fischer

We all know about expensive brand-name drugs - these are the drugs you often see in TV commercials, with happy people experiencing life to the fullest to soothing music while a subtle voice reads lists of possible side-effects.

They have names that are easy to pronounce and intended to be easily remembered when talking with your physician. Generic drugs are usually thought of as those drugs with long names that we can’t pronounce that cost less than a brand-name drug.

The FDA defines a generic drug as ”a medication created to be the same as an already marketed brand-name drug in dosage form, safety, strength, route of administration, quality, performance characteristics, and intended use.

Inactive ingredients may differ between a generic drug and its brand-name counterpart, provided there is no effect on safety or how the drug works. Not all brand-name drugs have generic equivalents because brand-name drugs are generally patented and also have a period of exclusivity during which generics cannot be marketed.

A common strategy for cost containment among payers is to encourage patients to switch from a brand name to a generic drug. This seems simple enough – once someone knows that they can get the same drug at a lower price, why wouldn’t they switch?

Read on to learn 8 things you may not know about generic drugs, including some of the reasons your members may still be taking brand-name drugs.

1. Patients don’t always want to switch and physicians follow their lead.
Patients may be hesitant to switch to a generic drug based on a lack of confidence in its quality and effectiveness. They may have the image of buying a generic store-brand cola instead of Coke or Pepsi. And physicians don’t always convince them differently – often, physicians prescribe brand-name drugs based on the patient’s request or because they are unaware that a generic alternative exists.

2. Patients sometimes have to pay more for generic drugs than brand-name drugs.
While the overall cost of a generic drug is typically less than a brand-name drug, the out-of-pocket amount for the patient may actually be higher for some generic drugs. Manufacturers of brand-name drugs may provide coupons to help patients cover out-of-pocket costs that ultimately make it less expensive for the patient to buy the brand name. Employers need to be aware of these incentives when determining drug formularies and copays.

3. There are different state laws related to pharmacy substitution of a generic when the prescription is for a brand-name drug.
As of August 2020, seven states require patient consent prior to generic substitution, 19 states require pharmacists to substitute generics where available, and 32 states require pharmacists to notify patients that a generic drug has been substituted. All states have laws preventing substitution of a generic for a brand-name drug when the prescriber indicates this with “Dispense as Written” or similar state-specific wording.

4. There are reasons why individuals may need a brand-name drug even when there is a generic drug available.
Some drugs, like antiepileptic drugs and blood thinners, have a narrow therapeutic index, meaning that small differences in blood concentration of these drugs may lead to either an insufficient therapeutic response or toxic levels causing adverse effects. It may be recommended that a person stick with a brand name if that was what was initially prescribed rather than risk complications by switching to a generic drug that may have slightly different therapeutic levels.

The American College of Gynecologists and Obstetricians (ACOG) supports allowing a patient to receive a branded oral contraceptive or to continue taking a specific generic oral contraceptive to prevent confusion because of different packaging that may lead to non-compliance. Many generic oral contraceptives are available as branded generics, allowing for procurement from a single manufacturer.

5. New generic drugs are likely to be more expensive during the first 180 days following their approval.
The first generic drug manufacturer to receive approval for a drug no longer protected by patent or exclusivity is generally given marketing exclusivity for 180 days. During these 180 days, no other forms of the drug can be approved by the FDA. Lack of competition within the first 180 days may result in higher initial prices for the generic drug, decreasing once other similar generics enter the market. Generic drugs without competitors are called single-source generic drugs.

6. Drugs may not be consistently categorized as brand name or generic.
While the distinction may seem straightforward, there may be ambiguity in how to classify drugs, such as single-source generic drugs, which are sometimes classified as brand name by PBMs. It is important for employers to clearly specify the criteria for categorizing drugs as brand name or generic in contracts with PBMs.

7. You can’t always tell by the drug’s name whether it is a brand-name drug or a generic drug.
Some generic drugs have brand names, and others with generic names are actually made by the same manufacturer as the original patented brand-name drug.

Generic drugs with brand names are referred to as “branded generics.” They have been approved under the same process as other generics, but have been assigned a name other than the chemical (generic) name. Companies that manufacture branded generics hope for brand loyalty. A branded generic has some of the advantages of a brand-name drug – assuring that an individual is receiving a drug from the same manufacturer while being able to receive the drug at a lower cost. Some branded generics may cost less than typical brand-name drugs but more than generically named generic drugs. Many oral contraceptives are branded generic drugs.

Generic drugs that are identical to the original brand-name drug, manufactured by the same company or another company with the brand name company’s permission, but marketed without the brand name are referred to as “authorized generic drugs.” An example of an authorized generic is Albuterol HFA inhalation aerosol which is made by Teva who also markets it under the brand name Proair HFA.

8. Generic drugs do not exist for biologic drugs like Humira or Remicade, which are among the most expensive drugs.
Biologic drugs are large-molecule drugs made by living cells. Unlike a brand-name drug which can be replicated via a chemical process, it is not possible to create an exact copy of a biologic drug. Biosimilar drugs have the same main amino acid sequence as the original biologic, but can have other minor differences in structure, provided they do not impact its clinical performance or safety. Pharmacists are NOT allowed to automatically substitute a biosimilar drug for a biologic.

Generic substitution is an often-cited approach for cost savings for both patients and insurers. This approach may not be appropriate for all patients, and may even lead to increased cost. It’s important to identify which drugs are the best targets for such an approach, and to remember that there will always be situations where a substitution may not be possible.

In Springbuk Insights™, we highlight several specific drugs that are likely candidates for savings. We recently added new information, expanding the list of generic drugs and descriptions. We regularly monitor newly released generic drugs and update the information provided in the Springbuk health intelligence platform. To see what drug savings opportunities exist in your population, request a personalized walk-through at springbuk.com/request.

Generic Drugs and Biosimilars Secure Big Savings for US Patients
Generic Drug Facts | fda.gov
The FDA, Generics and Differentiating Authorized from Branded Types
Encouraging Competition Through Generic Drugs
Brand Versus Generic Oral Contraceptives
Sacks CA, et al. JAMA Intern Med. 2020;doi:10.1001/jamainternmed.2020.3588
Biosimilars: Not Simply Generics
Physician Acquiescence to Patient Demands for Brand-Name Drugs: Results of a National Survey of Physicians. Eric G. Campbell, PhD; Genevieve Pham-Kanter, PhD; Christine Vogeli, PhD; Lisa I. Iezzoni, MD. JAMA Intern Med. 2013;173(3):237-239. doi:10.1001/jamainternmed.2013.1539

Janet Young, MD

With more than 20 years of experience, Janet Young has provided clinical expertise and oversight to the development of healthcare analytics used in provider, payer, employer, and government sectors. Most recently, Young served as a lead clinical scientist at IBM Watson Health, guiding clinical content development related to new models, methods and analytics using claims, EMR, Health Risk Assessment, and socio-demographic data.

Anne Fischer, Sr. Director of Data Science and Methods

With more than 20 years of experience, Anne Fischer has held multiple leadership roles in the Healthcare Information Technology industry and garnered extensive experience in healthcare analytics, with a focus on complex algorithms such as episode groupers and risk models. Prior to joining Springbuk, Anne spent the bulk of her career at Truven Health Analytics, eventually leading the Value-Based Care Emerging Analytics team after Truven’s acquisition by IBM Watson Health. Anne joined the Springbuk Health Intelligence team in 2019 as the Sr. Director of Data Science and Methods to spearhead the enhancement and development of analytics that drive value to healthcare payers and their members.