U.S. brand and generic prescription drug spending 2005-2020

In the United States, approximately 539 billion U.S. dollars was spent on medicines in 2020. Around 19 percent of this figure was spent on generic drugs, with sales of branded generics and unbranded generics accounting for 8.4 percent and 10.7 percnet, respectively.

Why are branded drugs more expensive?

Sales of brand name drugs account for some 81 percent of the total amount of money spent on medicines in the United States in 2020. One explanation for this large share is that brand name drugs can cost considerably more than generic versions. When a pharmaceutical company is granted a patent for a drug, key processes and active ingredients are protected; this exclusivity allows firms to price a product at what the market will bear. The brand name drug Humira is marketed at a high price in the United States, and sales of the drug generated around 21.4 billion U.S. dollars of non-discountinted spending in 2019.

What’s in a name? Knowing your medication types

A brand name drug is manufactured and marketed by a pharmaceutical company that owns the patent. When the patent expires, it is common for generic drugs to enter the market. These are almost identical versions of the brand name drug but are developed by competitors. Generic drugs are often sold under its chemical name but can also be assigned new brand names. If the latter is the case, the drug becomes known as branded generic.