5 ms·
Generics still require FDA approval, which costs on the order of single digit $millions to obtain. Plus you’ve got to set up the plant to create the drug, which
by pja 9y ago
Generics still require FDA approval, which costs on the order of single digit $millions to obtain. Plus you’ve got to set up the plant to create the drug, which costs more $. Would you invest $millions in a product when a competitor (who probably already has plant capacity from when they made the drug while it was under patent) could come in and undercut you at a moments notice?
Obviously not - so the system ends up in a metastable state where one monopoly producer can charge high prices for a drug & no competitor will enter the market because they know the producer can and will undercut them the moment they try and do so.
This one of the reasons why the health care system in the US is completely borked.
- shadowtree 9y agoOnly true for rare and ultra-rare diseases.
- pja 9y agoAs far as I’m aware, all generic manufacturers must prove what the FDA calls bioequivalence: https://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/AbbreviatedNewDrugApplicationANDAGenerics/default.htm https://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrug...
- ABCLAW 9y agoThis is accurate for niche drugs, but the business model for producing generics isn't solely one in which small players exist. Large omnibus generics manufacturers almost always have a larger industrial base and better chemical engineers than one-off drug producers. If the drug has a fairly stable high volume demand, they can finance expenditures for approval, then leverage their production and distribution networks to produce substantial margin even if they dramatically slash prices.