Ever Wonder Why Even Generic Drugs Are So Outrageously Expensive?

By Craig R. Smith

Yes, you guessed it: another example of crony capitalism.

Generic drugs are generally much cheaper than patent protected brand name drugs. But they are still quite expensive, especially given that the active ingredients often cost the manufacturer only a few pennies. And in many cases, there are no generic versions available even after the patent on the brand name drug has expired. The reason for this is a branded drug company friendly regulatory environment run by the Food and Drug Administration (FDA). This is an agency that is supposed to protect consumers, not drug companies, and is in urgent need of top-to-bottom reform.

Here is how the FDA prevents generic drugs from appearing and also keeps the prices of those that do appear high.


A major element driving up the cost of generic drugs is bioequivalence testing. If a company wants to manufacture a generic drug, be it a prescription drug like finasteride or an over-the-counter drug like ibuprofen, it must file an Abbreviated New Drug Application (ANDA) with the FDA, even if it is manufactured by others already. The company doesn’t have to perform clinical trials for an ANDA, but it does have to show that it’s biologically similar, or “bioequivalent,” to the original drug. For drugs that are difficult to synthesize, this requirement is important. For most drugs, however, the raw material can be purchased, often from the identical supplier that provides it for the branded drug.

To show bioequivalence, the company typically needs to perform human studies that take nearly two years. This can be waived, but it’s up to the FDA.

Other Obstacles

– Foot-dragging: The FDA’s Office of Generic Drugs currently has an estimated 1,900 different generic medications awaiting action—and the approval time for generic applications has slowed until it averages more than 26 months.

– Name-brand preference: Pharmacy chains get money from drug manufacturers to push their name brands instead of generics. A bill in the previous Congress (HR 5234) would have made transparent exactly how much money the pharmacies are receiving from pharmaceutical companies to promote drugs still under patent, but it died in committee.

– Pay-to-delay: Bayer AG paid rival drug makers nearly $400 million to stay out of the generic Cipro market. By paying competitors to delay their challenges to the patent, they are ensuring an exclusive market for themselves—and the ability to charge whatever they wish.

What We Can Do About This Mess

We can’t really fix this without new legislation, as proposed in 2009 by Bill Faloon of the Life Extension Foundation. Such a bill should allow supplement companies to produce and sell generic drugs. It should also eliminate the red tape (including human trials) that is needlessly preventing generic competition and thus artificially preserving patent drug profits.

Life Extension is already selling generic drugs through its unique online pharmacy at a fraction of the price available elsewhere. If you need drugs, this is a great resource to know about and take advantage of. But with new legislation, all generics could sell for far less.