Have you ever wondered why generic drugs are cheaper than their branded counterparts? Well, wonder no more because I will give you the top 5 reasons generics are cheaper than branded drugs.
They Don’t Have to Recoup the Cost of the Patent
When a drug company markets a drug, it is usually the end product of years if not decades of research and development as well as stiff regulatory proceedings. This means that the company invested vast sums of money before it could even get the drug to market. To make matters worse, not all R&D projects bear fruit many other projects were abandoned as failures.
Hence the drug company will want to recover its investment in the drugs that they succeed in eventually selling.
Generics Don’t Pay Licenses Fees.
When a Drug company succeeds in developing and marketing a drug it owns the patent for the Drug. Normally, if another company wants to make a similar drug then it will have to pay a license fee to the original developer.
This fee can be quite large to make sure that the other manufacturers cannot undercut the price of the original maker.
Generic drugs are usually made after the patent is expired or with an express waiver of the patent. Hence the generic drug maker saves a lot of money from the waiver of the patent.
Generics Don’t Advertise
Big name brands tend to invest a lot of money in advertising and marketing their products. Generics barely advertise so they can afford to sell for a lot less than the brand name makers. The absence of the advertising cost extends to packaging whereby
Branded Drug Makers Have a Lot of Overhead
Aside from the great cost of developing the drugs, a name brand drug maker has a lot of overhead that forces it to pass the cost to its buyers. As a result the price of their product is higher than a generic drug maker.
For example, Bayer needs to attend to its Corporate Social Responsibility in order to maintain a positive brand image for people who are critical of it.
Branded Drug Makers Need to Subsidize Other Drugs
Due to the need for CSR, branded drug makers have to sell some of their medicines at a discount or even at below market price. In order to recoup the losses they need to increase the price of their top-selling drugs. It is a frowned upon practice but necessary so that the poor can have access to high-quality drugs.
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