Brand Name Drugs vs Generic

Brand Name or Generic

When a new drug is developed, like many products, it’s patented by the manufacturer, granting exclusive rights to market it for a specific time period. In Canada, this time period is typically 20 years from the date of patent filing. In these 20 years, other drug manufacturers cannot market a generic copy of the brand name drug. As soon as the patent expires however, other drug companies can sell generic equivalents, and do, most often at a lower price. In fact, in Canada, the average price for a brand name drug in 2011 was $72. The average price for a generic drug was $34.

What’s the difference?

Generic medications are closely reviewed by Health Canada and must pass a series of tests before the drug can enter the marketplace. In order for a drug to qualify as a generic equivalent, it must have the identical medicinal or active ingredient as its brand name counterpart, and be demonstrated to be as safe and effective as the brand name drug - so, the same thing, in a different package.

  

The impact on plan costs

Will plan sponsors see a drop in their drug claim costs if plan members start using less expensive, generic drugs? Yes, depending on plan member education and benefit plan design.

Plan design and plan member education

A key component to realizing savings from patent expiration involves designing a benefits plan that promotes the logic of using generic equivalent drugs where available. Keep in mind that when a patent expires on a brand name drug, some plan members still choose to use it, rather than a lower priced generic equivalent medication.

Based on our claims data, when a plan’s design encourages the use of generic medications, the plan experiences cost savings without comprising coverage. This approach balances the health needs of plan members and the cost needs of plan sponsors.

Talk to your Great-West representative for more information or visit us online here.