Brand Name vs. Generic Drugs: What’s the Difference?
Prescription drugs play an active role in the lives of more than 131 million Americans.1 These prescriptions, while often necessary to maintain or improve a person’s health, can come at a costly price to you, the employer – averaging $1,432 per employee in 2021.2 Given the necessity of these medications and the ever-rising cost of prescriptions, this may put you between a rock and a hard place when it comes to your bottom line.
This may be a tough pill to swallow; however, there are a few ways to help the medicine (and maybe the cost) go down. For starters, when meeting with your health provider, you may have the opportunity to discuss exchanging costly prescriptions for cost-effective, generic alternatives. Here’s the catch: do you know which ones to switch? How can you tell, and is it safe to switch from one to the other? Asking these questions can be great first steps to helping you lower your annual prescription costs.
Here are some key takeaways to consider when determining which medication may be better for your organization:
Drug Facts: Brand Name vs. Generic
Imagine this common scenario: you go to the doctor and leave with an expensive prescription to fill at the pharmacy. The pharmacist tells you of a generic alternative to this medication. Does it matter which medication you choose?
In most cases, it may not matter. According to the U.S. Food and Drug Administration (FDA), brand name prescriptions and their generic alternatives share the same active ingredient and safety standards, meaning their effectiveness are identical and safe. Other characteristics like color and flavoring are the differentiators, and that is due to American trademark laws. These laws prohibit generic versions of medicines from looking identical to other medications on the market.
In addition, trademark patents on name brand drugs typically span over 20 years, preventing companies from producing a generic version until the patent expires.3 You may recognize a few in the list below:
|
Brand Name |
Generic |
|
Advil, Motrin |
Ibuprofen |
|
Claritin |
Loratadine |
|
Tylenol |
Acetaminophen |
While these are only a few of the items on the FDA-approved drugs list, 4 not all prescriptions (i.e. insulin, adrenaline shots, specific mental health medications, etc.) have generic alternatives available. That’s why it may be important to find and replace costly prescriptions for generic versions when possible so you can save for the medications that do not have an available alternative.
Brand Loyalty vs. Potential Savings
Let’s reimagine that scenario from before with what you know now. Would you change your mind? If you’re like 62% of Americans, you may still trust the name brand option over the generic one. Why? Because, when it comes to prescription preference, a recent survey reveals how brand loyalty inspires higher trust and perception of increased quality medications.5 This could explain why despite generic and biosimilar prescriptions accounting for 90% of prescriptions filled in the U.S., they make up only 17.5% of the nation’s prescription spending.6
As off-brand medications tend to cost 80-85% less than name brand prescriptions, consider what you can do for your organization with those savings.6 Meanwhile, 63% of those same Americans surveyed above prefer to buy the generic drugs, citing cost as their primary concern.7
What You Can Do
If you’re facing a pricey prescription bill every year, you might consider the following:
- Schedule a meeting with your health provider to discuss prescription options
- Review the medications offered on your employee health plan
- Educate your employees on their prescription alternatives if possible
- Explore discount and mail order prescription programs
Drug costs can get out of hand fast, so giving your employees options with prescriptions can help them better manage their medical care.
This blog is up to date as of February 2025 and has not been updated for changes in the law, administration or current events.
This information is intended to be educational. It is general in nature and should not be considered financial, legal or tax advice. Consult an attorney or a tax professional regarding your specific situation.
