Generic vs Brand-Name Medications: Cost Differences Explained

Generic drugs must meet the same FDA standards for active ingredient, strength, and quality as brand-name drugs, but they typically cost less because manufacturers skip repeating costly clinical trials and because multiple companies competing to sell the same generic pushes prices down. The size of the savings depends on the specific drug and how many generic versions exist. Prices vary by pharmacy, location, quantity, and eligibility, so it's worth comparing even between generic options.

What actually makes a drug "generic"

A generic drug is a copy of a brand-name drug, made by a different company once the original's patents and exclusivity periods expire. To get FDA approval, a generic manufacturer must show that its product is the same as the brand in active ingredient, strength, dosage form, and route of administration, and that it is bioequivalent, meaning it delivers the same amount of active ingredient to the bloodstream at about the same rate (FDA, What Is the Approval Process for Generic Drugs?). The FDA also inspects manufacturing facilities to confirm generics are made consistently and to the same quality standards as brand-name drugs (FDA, Generic Drug Facts).

Inactive ingredients, like fillers or coatings, can differ between a generic and its brand-name counterpart, but the FDA requires evidence that any such differences don't affect how the drug works or its safety.

Why generics cost less

Two main forces bring generic prices down. First, generic manufacturers don't have to repeat the expensive animal and human clinical trials that the original brand-name company already completed to prove safety and effectiveness. Second, once a generic is approved, other companies can often enter the same market, and competition among multiple generic makers pushes prices lower. FDA economic analysis found that for drugs with a single generic competitor, generic prices were about 39 percent lower than the brand price using one pricing benchmark, and that with six or more competitors, generic prices dropped by more than 95 percent compared to the brand price before generic competition began (FDA, Generic Competition and Drug Prices).

The scale of savings nationally

Generic drugs make up the large majority of prescriptions filled in the United States. FDA data shows that 90 percent of prescriptions dispensed in the U.S. are for generics, and that generic medications saved Americans an estimated $338 billion in 2020 alone (FDA, Generic Drug Program Annual Statistics). The same data shows that in 2019, the average generic copay was $6.97 compared to an average brand-name copay of $56.32, and that 92 percent of generic prescriptions were filled for $20 or less.

Why some drugs still don't have a generic

New brand-name drugs are protected by patents and marketing exclusivity periods that legally prevent competitors from selling a generic version for a set number of years. A generic application can only receive final approval once those patents expire or are successfully challenged in court (FDA, What Is the Approval Process for Generic Drugs?). This is why some newer, often more expensive, medications have no lower-cost generic option yet, while many older medications do.

How to find out if your medication has a generic option

Ask your pharmacist directly, or ask your doctor when the prescription is written. In many states, pharmacists are permitted to substitute an FDA-rated equivalent generic automatically unless your doctor specifically requires the brand-name version on the prescription. If you're prescribed a brand-name drug and want to know your options, our guide on how to find cheaper generic medication options walks through the process step by step.

Comparing generic and brand-name at a glance

What to ask your doctor or pharmacist

If cost is a concern, ask plainly: "Is there a generic version of this, and would it work for my situation?" Only your doctor or pharmacist can make the medical judgment about whether a generic or alternative drug is appropriate for you, since some conditions require a specific formulation. But raising the question costs nothing, and FDA data on the scale of generic use suggests it's a common and accepted question to ask.

Comparing prices even among generics

Even after choosing a generic, prices can still differ between pharmacies for the exact same generic drug, since each pharmacy negotiates its own acquisition cost and sets its own markup. Compare prescription prices on BetterBuyRx to see how a specific generic medication's price looks at pharmacies near you. For more background on why prices differ pharmacy to pharmacy, see our guide on why prescription prices vary between pharmacies.

Getting started

If you're currently taking a brand-name drug, your next refill is a good time to ask about a generic alternative. Search your medication on BetterBuyRx to see pricing for both the brand and any available generic version before your next fill.