Why Are Generic Drugs Low Priced?


Generic drugs are low priced for plenty of causes. The expiry of a patent allows free competition, which immediately lowers the price.
A large number of diverse companies can now produce the drug and compete to sell it, so they want to get the production costs and profit margins down as low as possible whilst still retaining profitability in order to undercut their rivals.

Patent holders on the other hand have huge expenses in developing a new drug so often place huge profit margins in order to make this money back before the patent runs out, they don’t need to lower the price of their product as there is no competition as they are the only ones allowed to produce the drug.

There are often lower costs in developing and testing the drug for manufacture of generics as most of the hard work has already been done by the original developer and the company just has to show to regulators their drug contains no harmful substances rather than go though lengthyclinical trials. The company also have to prove that their drug is bioequivalent.

They also receive benefits of the previous patent holders marketing and often the drug is already well known by the medical profession making it easier to sell. The lower price may also open up new markets who were priced out before. Cheaper does not mean lower in quality as generic drugs are just as tightly regulated as branded alternatives.

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