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Medicare Brand-Name vs. Generic Prescription Drugs: Comparing Costs and Effectiveness

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Whether or not you’re enrolled in a Medicare Part D Prescription Drug Plan, you may want to learn about the terms “generic” and “brand-name.” Generic prescription medications are typically much less expensive than brand-name equivalents, leading some people to wonder whether they work as well. This article gives you a brief overview to help you understand the similarities and differences involved.

If you are a Medicare beneficiary taking prescription medications, taking a generic drug (if available) can help significantly reduce spending on prescriptions. However, you should never take any prescription drug, nor substitute one for another, without consulting your doctor.

Generic vs. brand-name drugs

According to the U.S. Food and Drug Administration (FDA), a brand-name drug is any medication “marketed under a proprietary, trademark-protected name.” A generic drug is a drug that is equal to a brand-name drug in “dosage, safety, strength, how it is taken, quality, performance, and intended use.” In other words, the “generic” and “brand-name” labels are primarily related to how the drug is sold to consumers, not differences in active ingredients, usage, or how it works on the patient. This applies to both prescription and over-the-counter medications.

Why brand-name drugs cost more than generic drugs

According to the FDA, generic medications can cost, on average, 80 to 85 percent less than the brand-name equivalents. Brand-name drugs are typically more expensive because of the higher initial costs to develop, market, and sell a brand-new drug. A pharmaceutical company that develops a brand-name drug will file for a patent that prohibits other manufacturers from producing and selling the medication for a set time period. Other drug manufacturers are only allowed to make generics after the patent or exclusivity rights expire. Generic drug makers are able to both develop and sell the generic medications at a much lower cost, not because the quality of the generic is inferior to the brand-name drug, but because the original manufacturer has already paid for the bulk of costs to discover and develop a prescription drug from scratch.

The FDA requires every generic drug to go through multiple, vigorous rounds of safety testing before approving it as a brand-name substitute. An FDA-approved generic medication should have no difference in effect, strength, safety, or usage from a brand-name drug. However, the FDA does allow for small variations in inactive drug ingredients. For example, a generic drug must have the same active ingredients as the brand-name drug, but the FDA doesn’t require that it has the same inactive ingredients.

Medicare Part D coverage of generic and brand-name drugs

Under the Medicare Part D program, beneficiaries can get prescription drug coverage through a stand-alone Medicare Part D Prescription Drug Plan (PDP) or a Medicare Advantage Prescription Drug plan. Taking generic prescription drugs instead of brand-name drugs could save money. However, not everyone may be able to take a generic alternative. Depending on your condition, a generic drug may not be available, or it may be medically necessary for you to take the brand-name drug. Certain individuals may react to specific inactive ingredients differently. Ask your doctor what medications would work best for your condition and if there is a generic alternative. Always talk with your provider before beginning a new medication or switching prescription drugs.

If your doctor decides it’s medically necessary for you to take the brand-name medication, you may have to pay higher out-of-pocket costs, depending on your drug plan’s payment structure. Medicare prescription drug plans often place drugs into different payment “tiers” with different costs for each tier. Higher tiers usually have higher copayment and/or coinsurance costs, Every Medicare Prescription Drug Plan categorizes its covered drugs independently.

Brand-name drugs are often on higher tiers than generic drugs, but not always. Some Medicare Prescription Drug Plans use step therapy, which requires you to first try a lower-cost medication before the plan will cover a more expensive drug. However, if it’s medically necessary for you to be on a brand-name drug, you may be able to request a plan exception if the brand-name medication isn’t covered or is covered at a higher cost than a generic equivalent.

To learn more about the Medicare Part D Prescription Drug Plans in your vicinity that may cover your medications, just enter your zip code where indicated on this page to get started.

This website and its contents are for informational purposes only. Nothing on the website should ever be used as a substitute for professional medical advice. You should always consult with your medical provider regarding diagnosis or treatment for a health condition, including decisions about the correct medication for your condition, as well as prior to undertaking any specific exercise or dietary routine.


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