Brookings December 12, 2022
Generic drugs are essential for bringing price competition to prescription drug markets and providing a moderating force on drug spending. They make up 92% of prescriptions, but only 16% of invoice-level spending in the US.
This price competition relies on a determination by FDA that generic products are therapeutically equivalent to a brand name drug. That determination enables the generic drug to be automatically substituted at the pharmacy counter for the brand-name product. This in turn allows lower priced generics to quickly take market share from the more expensive brand. Therapeutic equivalence rating also unlocks competition for physician-administered drugs: drugs rated as such are combined into a single Medicare reimbursement code with the branded version,...