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August 9, 2010

Brand-Name Drugs

Why Are Brand-Name Drugs Often More Expensive Than Generic Drugs?

Brand-name drugs are medications with patent protection so that only the company holding the patent has the right to manufacture the drug. A pharmaceutical company may choose to license the manufacturing of a generic form of the drug to other companies but normally the pharmaceutical company does not do this because it is more profitable to retain the exclusive rights to manufacturing the drug.

The creation of a new medication may take years of researching, testing, and regulatory approval with no guarantee of success. Given the tens of millions that may be invested in the creation of a new drug, a pharmaceutical company has a strong financial interest in protecting its patent rights on a medication. Generic forms of a brand-name drug are normally created after the expiration of a patent on a medication. A generic drug is identical in effectiveness to its corresponding brand-name drug. However, consumers should be careful to ask their doctor or pharmacist if they are receiving a generic form of their brand-name drug or a generic drug within the same drug class as their brand-name drug. Generic drugs within the same drug class have no requirement to have identical effectiveness to a brand-name drug with different active ingredients.

Prescription drug insurance often covers a list of brand-name and generic drugs. Given the lower costs of generics, insurance plans have strong motivation to promote the use of generic drugs. Preferred brand-name drugs are drugs covered by an insurance plan that believes the brand-name drug is an excellent value given cost and effectiveness.

If you take an expensive brand-name drug and that drug does not have a generic equivalent, you should ask your doctor or pharmacist if there are less expensive alternative medications covered by your insurance plan.

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Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare and provide Medicare Part A and Part B coverage. Medicare prescription drug coverage is insurance run by an insurance company or other private company approved by Medicare. A Medicare Supplement plan is a health insurance plan provided by a private company that fills in the "gaps" in original Medicare coverage.