Final answer:
Generic drugs are cheaper than brand-name drugs because they utilize the brand's existing clinical trial data and have lower marketing and development costs. They must be bioequivalent to brand-name drugs to receive FDA approval through an ANDA.
Step-by-step explanation:
Why Are Generic Drugs Cheaper?
Generic drugs are significantly cheaper than name-brand drugs because they do not have to repeat the expensive animal and clinical (human) studies that were required of the brand-name drugs to demonstrate safety and effectiveness. Once the patent protection for the brand-name drug has expired, other companies can produce and sell the generic equivalents, which must contain the same active ingredients as the original formulation and be bioequivalent, meaning they act in the same way and provide the same clinical benefit.
However, generic drugs can be sold at substantial discounts, commonly about 85% less, compared to the brand-name medication. The savings come from reduced marketing and development costs, as generics rely on the clinical trial data of the brand-name drugs for FDA approval through an ANDA (Abbreviated New Drug Application). The major scandal in 1989 involving corruption in generic drug approval at the FDA highlighted that while generics are typically equivalent and safe, oversight is critical to ensure quality and efficacy.