Generic drugs are less expensive because generic manufacturers don't have the investment costs of the developer of a new drug.
New drugs are developed under patent protection. The patent protects the investment--including research, development, marketing, and promotion--by giving the company the sole right to sell the drug while it is in effect.
As patents near expiration, other manufacturers can apply to the FDA to sell generic versions. Because those manufacturers don't have the same development costs, they can sell their product at substantial discounts.
Also, once generic drugs are approved, there is greater competition, which keeps the price down. Today, almost half of all prescriptions are filled with generic drugs.
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