Educated plan decision makers promote lower healthcare costs for patients and plan sponsors. Being knowledgeable about prescription drug options results in the promotion of the most cost-effective and clinically appropriate medications for patients.
Below are definitions for some of the most common prescription drug types. Please note: All FDA-approved drug types listed below endure a thorough approval process for safety, quality, and effectiveness.
Brand Name Drugs
Brand name drugs are drugs sold under a trademarked product name. It is a long process to become a brand name drug. The new drug compound must go through various preclinical studies and clinical trials to prove its safety and effectiveness. The potential manufacturer can then submit a new drug application to the U.S. Food and Drug Administration (FDA). Once FDA-approved, brand name drugs can hit the market. The drug manufacturer can select a list price based on a variety of factors, including research and development costs and clinical trial costs. This list price is not government regulated and is often priced high. If the brand name drug is patented and has exclusivity, there is no competition in the market, and brand name drugs can continue to be priced high for years.
There is a common misconception that generic drugs do not work as well as brand name drugs. Generic drugs are comparable to brand name drugs in quality and performance but may have different inactive ingredients (dyes, flavoring, preservatives, etc.). Drug manufacturers of generic drugs must submit a shortened new drug application to the FDA and prove their product is the same as the branded product in several different ways.
Proposed generic drugs must:
- Have the same active ingredients, conditions of use, dosage form, strength, route of administration, and labeling (with certain differences allowed) as the reference brand name drug.
- Reach the part of the body where the reference brand name drug works within the same time frame and with the same amount administered.
- Meet the same quality and manufacturing standards as the reference brand name drug.1
Because generic drug manufacturers do not have to repeat clinical studies required by brand name drug manufacturers, they are typically less expensive than their brand name counterparts. Additionally, because multiple generic drugs are approved for a single referenced brand name drug, there is competition in the marketplace, resulting in lower prices. State laws allow pharmacists to substitute generic drugs for brand name drugs if the patient’s doctor doesn’t specify that the brand name drug is required.2 By asking providers to substitute a generic drug for a brand name drug, patients may be able to save money.
Branded Generic Drugs
Branded generic drugs are generic drugs that have been given a brand name to drive product recognition and increase sales. Branded generics can be sold by the brand name drug manufacturer or generic manufacturers after a drug patent expires. These drugs also need to submit a shortened new drug application for the FDA’s approval but do not need to go through their own clinical trials. Therefore, branded generics typically cost less than brand name drugs but more than generic drugs.3
Authorized Generic Drugs
Authorized generic drugs are brand name drugs without the brand name on its label. Authorized generics can be sold by the brand name drug manufacturer before the brand name drug patent expires. They do not require a new drug application to be submitted to the FDA.4 Brand name drug manufacturers can choose to price authorized generic drugs at a lower price, costing less than the brand name drug but typically more than regular generic drugs.
Biologics are composed of sugars, proteins, cells and tissues, and/or nucleic acids. These mixtures are difficult to identify and characterize. Biologic manufacturers conduct clinical trials to ensure they are safe and effective. A biologics license application must be submitted and approved before the biologic product can enter the market. Within the FDA is the Center for Biologics Evaluation and Research which regulates biological products for human use under federal law.5 Due to their complexity, biologics tend to be high-priced.
Biosimilars are medications that are very similar to and have no clinically meaningful differences from an existing FDA-approved biologic product. Like the FDA generic drug approval process, biosimilars need to submit a shortened application that proves its similarities to biologics.6 Biosimilars are less expensive than biologics because they do not need to go through their own clinical trials.
Interchangeable biosimilars are biosimilar products that have met additional requirements proving how they may be used in the marketplace. Manufacturers of interchangeable biosimilars must submit a shortened application and provide information showing how it is expected to produce the same clinical result as the reference product in any given patient. Once FDA-approved, interchangeable biosimilars are governed by each state. If a biosimilar is granted interchangeable status, it may be less costly to the patient.7
Specialty drugs are drugs used to treat specific chronic and/or genetic conditions such as rheumatoid arthritis, multiple sclerosis, cancer, etc. Specialty drugs may require special dosing, storing, monitoring, handling, and/or administration, such as injection or infusion. Therefore, they are higher priced. Specialty drugs may be available as any of the above drug types.8
More variables may come into play regarding the price of different prescription drug types, such as pricing tiers, formulary lists, and rebates. Consumers are encouraged to discuss their prescription drug type options with their providers to determine which products fit their needs clinically and financially.
Continued consumer education is important and can play a major role in pharmacy plan performance. National CooperativeRx offers a variety of educational resources for consumers and plan sponsors, such as blogs, short briefs, videos, webinars, and flyers. Additionally, CVS Caremark offers a suite of educational resources and digital tools for consumers.
If you are a plan sponsor interested in distributing consumer-focused educational materials to your plan participants, please reach out to your National CooperativeRx contact.
- Center for Drug Evaluation and Research. (n.d.). Generic Drug Facts. U.S. Food and Drug Administration. Retrieved February 14, 2023, from https://www.fda.gov/drugs/generic-drugs/generic-drug-facts
- U.S. Office of Personnel Management. (n.d.). Retrieved February 14, 2023, from https://www.opm.gov/frequently-asked-questions/insure-faq/health/can-i-ask-the-pharmacy-to-substitute-a-generic-drug-for-the-drug-prescribed-by-my-doctor/
- (2019, March 6). Branded generics: What they are and why they’re profitable. Retrieved February 14, 2023, from https://www.drugpatentwatch.com/blog/branded-generics-what-they-are-and-why-theyre-profitable/
- Center for Drug Evaluation and Research. (n.d.). FDA list of Authorized Generic Drugs. U.S. Food and Drug Administration. Retrieved February 14, 2023, from https://www.fda.gov/drugs/abbreviated-new-drug-application-anda/fda-list-authorized-generic-drugs
- Center for Drug Evaluation and Research. (n.d.). Frequently asked questions about therapeutic biological products. U.S. Food and Drug Administration. Retrieved February 14, 2023, from https://www.fda.gov/drugs/therapeutic-biologics-applications-bla/frequently-asked-questions-about-therapeutic-biological-products
- Center for Drug Evaluation and Research. (n.d.). Review and Approval. U.S. Food and Drug Administration. Retrieved February 14, 2023, from https://www.fda.gov/drugs/biosimilars/review-and-approval
- Interchangeable Biological Products – Food and Drug Administration. (n.d.). Retrieved February 14, 2023, from https://www.fda.gov/media/151094/download
- Specialty medications by condition | Michigan medicine – U of M health. (n.d.). Retrieved February 14, 2023, from https://www.uofmhealth.org/conditions-treatments/specialty-pharmacy-services/specialty-medications-condition