Why Same Generic Drugs Are Cheaper Than Patent Brand

Same drug, different price. This is what is obtainable in the pharmaceutical industry. Fortunately, not only in the pharmaceutical industry alone. We see this in other sectors like electronics.

What I am saying is that the same quantity and strength of paracetamol tablets from one company may have different prices from another. Let me illustrate. Emzor paracetamol sachet containing 500mg of 12 tablets cost less than GSK paracetamol called panadol with the same strength but 10 tablets. The difference in price is much.

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There is even a greater delima. Same drug from the same company may come with different prices. Let me clear the air. GSK paracetamol called panadol cost way less than another GSK paracetamol called panadol advance of the same strength and quantity.

Generic drug Vs brand drug

I said it is common in the electronic world too. Let me explain. Same television size from LG electronics may be far higher than that from Hisense. The reason for the price difference is both simple and complex. I will try my best to explain it.

Same Drug, Different Company

Companies with patents for any drug have the sole right to sell that product for some years. They fix the price based on the cost of production and research and development (R&D), marketing and promotion. This makes the selling price of such drugs very high. But at the expiration of the patent right, other companies can start producing the same drug. Because they did not spend money on R&D, marketing and promotion, the price is usually based on cost of production which is low.

You may wonder if the patent company has not recouped the money spent on R&D, marketing and promotion before the expiration of the patent for them to reduce the price of their product. It does not work like that. Most of these companies are still in further R&D of that product or other products. So they still need more money to stay afloat to carry out further R&D, marketing and promotion.

Even though both drugs contain the same active ingredient and same mechanism of action, both may not actually have the same level of effectiveness. The rate of action may vary a little. The other products in the markets try to meet the specification of the patent company. They actually do get close. However, they are not always the same level. This is another reason costs of drugs from patent companies are always higher than generic ones.

The United States of America (USA) federal drug agency (FDA) allows a 15 percent difference either more or less in blood adsorption for a generic compared to the patent drug. One analysis of 2000 products found the average difference was about 3.5 percent which was very acceptable.

Most patent companies try their best to make sure their products meet up to specification. However, we cannot remove batch by batch variations that occur all the time. But they try to reduce the difference.

Also, the patent company modifies the products to improve on its various properties such as bioavailability. They do this by adding different types of excipients. This further raises the price.

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The price variations also affect generic drugs. Most generics have different prices. This is because the cost of excipients is different for different generic out there. Some companies try to improve on their own brand products to beat that from the patent company. If they succeed, their own may also be expensive.

Same Drug, Same Company

Some companies in order not to lose sales, designs and developed a technique that is paying off. They produce a cheap product to compete with other generics. They give it a different name. This technique is working well. I guess they spend less in production of those products without much advance formulation. Panadol and panadol advance is a good example.

Still confused why the price difference, take a look at this. To explain the same drug and different price model, let us use food as an example. Same egusi soup, different taste and price from different restaurants. In some cases, the same restaurant. That is because what they use in cooking it is the same (egusi) with additional garnishing. I guess you know what I mean.