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What makes brand-name medications so expensive?

For the last decade ‘brand name drugs’ and ‘generics’ have become buzz words not only among medical professionals, but also among ordinary customers who want to be savvy at health care issues as day by day they dig and delve in their search of the best treatment solutions suitable for them. Not only patients, but also doctors in the USA are becoming increasingly interested in the use of generic drugs available at any online pharmacy as they are more reasonably-priced, yet very effective alternatives of the branded versions.

With a staggering popularity of generic drugs, a keen reader will surely wonder why a brand name drug is so expensive compared to its more budget-friendly “bio-similar,” as it is frequently called. In this article, we will try to take you through each stage of the manufacture process of branded medications to explain what makes them so high-priced. But first let’s find out the difference between these two categories of drugs.

What are brand name and generic drugs all about?

A brand name or a “pioneer” drug is a drug that has a proprietary mark and must be patent-protected in order to be able to enter the market. A generic drug refers to a medication that serves as a cheaper version of a brand-name product, but proves to be similar to the comparable original drug in such aspects as dosage, safety, effectiveness, side effects, intended use, etc. Unlike their brand-name counterparts, generic drugs are manufactured by a pharmaceutical company without any need for exclusive rights. While the brand name form is protected by the patent, no generic copy is allowed to be manufactured.

But once the innovator’s patent protection for the production of brand-name medications expires, right on cue, generic drug manufacturers start taking over the pharmaceutical market by actively introducing their cheap copycat equivalents to customers. With an uprise of generic drugs, lots of underprivileged people around the globe have gained access to full-fledged, high-quality medicine. Even well-off people today often don’t mind saving their money on medications as they become regular customers of a generic pharmacy.

Does a high price mean better quality for branded medications compared to generics?

No such thing! Of course, a concern of those people who think, that the quality and effectiveness of cheap generic medications might be largely compromised, is wholly understandable. However, a generic drug manufacturer can offer for sale only those products that comply with the quality standards set by a regulatory agency responsible for health care protection in the country the manufacturer is located. Above all, in a vast majority of cases brand-name companies are related to as much as a half of the whole production of generic medications as they often produce the generic equivalents of their own or other brand-name products, and afterwards introduce them to the market under other generic names.

Prior to selling a pharmaceutical product, both generic and brand-name drug companies should prove that the medication they are about to produce will meet all necessary requirements for safety, effectiveness, and quality. Both of the versions are produced in the same facilities, share the same active ingredient, and undergo the same inspections. What makes these two types of manufactures so different from each other is that a company making an original brand-name medication spends years of rigorous trials to prove to the regulatory bodies that the drug is both safe and effective, while generic drug companies only have to prove their product is chemically equivalent or bioequivalent to an original drug.

Why do branded medications seem to be over-priced for many people?

If a generic medication is identical to the branded version, why then it costs 30 and sometimes even 80 per cent less compared to the original counterpart? The major reason for this lies in the fact that unlike generic drug companies, inventor manufacturers usually bear substantial expenses related to the new product development and research and this process usually takes as many as 20 years before a customer can finally find this drug in a Happy Family store or any other pharmacy around the world.

At a rough estimate, a pharmaceutical company should spend anywhere 100 to 800 million dollars to facilitate the drug entering the market. The time needed for a drug approval that involves costly scientific development and multiple clinical studies is usually between 8 to 12 years which is almost half of the whole 20 years-long patent period. Most importantly, manufacturers take on huge marketing costs to advertise a new product, and the figures in this case go far beyond the ones during the research and development stage.

Last but not least, let’s not forget that a pharmaceutical industry, a brand-name drug industry in particular, has been one of the most money-making ventures at all times due to the fact that being the only patent holders branded drug companies can boost prices to an all-time high. Plus, pharmaceutical companies are, by and large, focused on earning and accumulating profits for their stockholders. In general, these factors account for the final price of a branded medication we can now see in any online pharmacy.

How much does each stage of the drug development cost?

To help you get a better understanding of the factors that determine the price of a medication, let’s go through the ins and outs of the process of drug development.

The process of a new drug development involves two main stages:

▪ Preclinical studies
▪ Clinical trials

What is the purpose and cost of pre-clinical studies?

Preclinical studies are intended to assess drug safety and potential toxicity, as well as efficacy of a newly developed drug. In some cases sponsors may initiate supplementary studies to make sure that a new substance does not trigger any genetic abnormalities, deformities in fetus, or tumors. At this stage, the researchers also define the signs that should be placed under scrutiny subsequently during the initial stage of clinical trials.

Overall, preclinical research creates a pharmacological profile of the drug used for designing formulations which is indispensable for a drug production. The specifications formed at the stage of pre-clinical studies can also help scientists in identifying a chemical quality and purity of a drug.

Pre-clinical studies phase is deemed to be extremely high-cost and labor-intensive process requiring expert knowledge and specific laboratory conditions to be entitled to regulatory submission. On average, this phase of drug development may last from 2 to 4 years and cost approximately ten million dollars.

What is the purpose and cost of clinical trials?

When it comes to clinical trials, this stage involves several phases:

  • Phase I: Researchers obtain data concerning safety and effectiveness of a given substance.
  • Phase II: They select an optimal dosage to enhance the effectiveness and mitigate the severity of side effects if there are any. Typically, this phase serves as a demonstration of a drug’s capability to affect the disease.
  • Phase III: Trials become more extensive and are aimed at providing more solid evidence on efficacy and safety. During this phase scientists observe side effects and compare the given drug with other possible treatments.

The trials are usually performed with a much greater number of participants of up to 5000 patients and may take place at clinical centers of different countries. During this phase, the specific information required for labeling and drug approval documentation is collected to assure the regulators that the new product meets the quality standards. If the approval process is a success, a new drug can be introduced to the market.

The estimated duration of all the three phases mentioned above is 3-5 years and costs approximately one hundred million dollars.

The regulatory bodies may often require from pharmaceutical companies to conduct post marketing studies in order to obtain more precise data about safety and efficacy of the approved drug. Companies usually spend two or three years to complete this stage and undertake nearly fifty million dollars.