Insurelane Insurance Blog

Generic drugs have been one of the savvy healthcare consumer’s best kept secrets for years. Generic drugs let people treat their chronic conditions at a fraction of the cost of brand name versions. And now they’re being touted as a partial solution to the problem of rising healthcare costs.

What Are Generic Drugs? And Why Are They So Cheap?

Part of the reason brand-name drugs are so expensive is that years of research go into making them. And when a drug is finally ready for the public, billions of dollars are spent marketing and advertising it. To get back this investment in research and marketing, drug companies charge you hefty fees.

Once a drug has been approved by the Federal government, the company has a patent on it. This gives them the exclusive right to make and sell the drug for a period time. The period of time can vary— the government has been known to grant patent extensions that buy the company a little extra time to sell their product. Once the patent is up, other companies can make and sell equivalent versions of the drug. These generic drugs contain the same active chemical as the original drug, but can’t use the original brand name. Because these companies don’t have to invest nearly as much in research — and spend little on advertising — they can sell their drugs for much less.

The Push For Generics

Healthcare costs are always rising. Critics like to use the phrase “out of control” when they talk about the constant increases. And the cost of brand name prescription drugs doesn’t help matters.

So now the insurance companies and Medicare are pushing back by promoting generic drugs as an alternative. With generic drugs, consumers can save on their co-pays and out-of-pocket costs. Medicare and the insurance companies will save on the amount of the bill that they’re responsible for.

Insurance companies have started sending their members free samples of generic drugs to convince people that generics are just as effective as brand name versions. They’ve been waiving co-pays on generic prescriptions. They’ve been placing promotional materials in doctors offices to encourage generic drug use. Some companies — including Aetna — have even installed vending machines in doctor’s offices to dispense 30-day free trials of the drugs.

Blue Cross Blue Shield of Michigan and the Blue Care Network have launched a website called “Generic Drugs: The Unadvertised Brand” in an effort to convince consumers of the effectiveness, safety, and affordability of generic drugs. The website has a calculator to help you see how much you can save by switching to generics. For example, someone who takes Wellbutrin SR twice a day can save $120 a month by switching to the generic Bupropion Hcl.

The government is getting in on the act, too. Dr. Mark McClellan, of the Center for Medicare and Medicaid Services, is urging Medicare beneficiaries to switch to generic drugs. With the recent worries about seniors facing the "doughnut hole," or gap in Medicare drug coverage, this is timely advice. Said Oregon Senator Gordon Smith: “If you want to stay out of the doughnut hole that much longer, use generics.”

So far, the insurance companies and the government are fighting an uphill battle. Eric Elliot, the director of medical products at Aetna, said, “Our piece is a fraction of what the brand-name industry spends.... This is not a silver bullet and not the program that is going to change the world. But we are trying to change prescribers’ habits.”

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