Generic vs. Name Brand Drugs

Is There Really a Difference?

When you’re browsing the drugstore aisles for a decongestant, acid reducer, or pain reliever, you’ll be faced with the choice of going with a heavily marketed national brand or the drugstore’s own generic brand. You might assume that the name brand is safer and of better quality. That assumption may not be true.

Brand-name drug manufacturers go to a great deal of effort to convince doctors, pharmacists, and the public that their products are produced to higher standards. The big drug companies want you to believe that their popular brands are safer and more effective than the same drugs sold under generic labels.

But remember: whether brand name or generic, no medicine can be sold or prescribed without FDA approval. Consumer advocates and investigative journalists have exposed major deficiencies in the way the FDA operates, but assuring the quality of generic drugs is actually one the FDA’s strong suits. Both brand name and generic drug companies are regulated by the FDA using the same standards for manufacturing facilities: quality, purity,
and the content of drugs.

If something is going to go wrong with a new drug on the market, it generally occurs during the first seven years when the patent enforces exclusivity on he brand-name drug. This prevents imitators from producing generic drugs. After the patent exclusivity expires, generic versions can enter the market and undercut the brand-name product.

Doctors and Pharmacists
More Often Choose Generics

In investing, the “smart money,” the insiders, often do the opposite of what the public does. The “dumb money” masses are usually on the wrong side of the trade. When it comes to the choice of whether to buy generic or brand name drugs, medical insiders tend to choose differently than lay folks.

You might suppose that physicians and pharmacists, as sticklers for safety and quality, would overwhelmingly prefer the name brand drugs. And that less-educated laymen, with lower average incomes, would opt for the cheaper generic versions.

You would be wrong. A 2014 study conducted by University of Chicago researchers found that the more informed you are about drugs, the more likely you are to choose generics. For example, if you know that the active ingredient in Tylenol is acetaminophen, you are more likely to choose generic acetaminophen. If you know that the active ingredient Advil is ibuprofen, you are more likely to opt for store-label ibuprofen.

In fact, the study found, about 92% of pharmacists buy store-brand headache remedies.

There is one advantage in opting for a national brand drug instead of the generic equivalent. It’s not an advantage the pharmaceutical companies are eager to tout, though.

In the event that a drug causes you harm, you’re more likely to be able to receive damages in a lawsuit if the defendant is a big-name drug company. It’s unlikely that you’d ever have to sue a drug maker or be a party in a class-action lawsuit against one. But you never know.