Brand VS. Generic Drugs: An Impeding Wholesaler Storage Limitation

Brand VS. Generic Drugs

An Impeding Wholesaler Storage Limitation

The main advantage of a generic over a brand name drug is the price. On average, the cost of a generic drug is 80 to 85 percent lower than its brand name equivalent. This is because the producers of generic drugs do not bear the same development costs as those who manufacture the original versions. Thus, the cost savings of making generic drugs are passed along to consumers.

According to Drugs.com, a great number of brand name drugs started to see their patents expire starting in 2012. The trend is only going to accelerate through 2016, resulting in the proliferation of generic drugs being introduced to the market. One economic forecast suggested that the world-wide market for generics will expand to $221 billion by 2016, with $104.1 billion in the United States alone.

Besides patent expiration the cost savings inherent in using generics will lead to their increased use. For example the treatment of brand name vs. generic drugs is due to change because of the implementation of the Affordable Care Act. As Forbes noted, a deal was struck with the pharmaceutical industry to extend the patent protection for certain expensive drugs in exchange for setting up an expedited system for approving generics. This represents a balancing act between the need of companies to recoup the expense of developing miracle drugs and consumers’ need for affordable medications. As a result the United States government, particularly through Medicare and Medicaid, is moving to encourage the use of generics as a way to cut down on costs.

This means that as consumers become more cost conscious and patents continue to expire on name brand drugs, the number of generic drugs is likely to expand beyond the current 80 percent of the number of prescribed medication in the United States. This will mean that several generic drugs for each brand name it is replacing will compete with one another. This will be a boon to the consumer, but a headache for wholesalers and distributors of medications who have limited warehouse space and now have to find a way to stock more products efficiently. This may impede effective distribution of drugs to pharmacies and health care providers, thus increasing costs and even causing some spot shortages.

One solution to this problem could be a warehousing system called ActivRAC mobile storage. Most warehouses use static shelves that tend to waste space. Under the ActivRAC mobile storage system, shelves are placed on carriage rails and are packed close together. A warehouse worker can access a particular shelf by either using a manual hand crank or a motorized system that moves the shelves around. It is estimated that this system increases warehouse storage space by 50 percent. Thus more room is created to store brand name drugs and their generic equivalents so that they can be easily accessed as orders come in. Thus wholesalers will not have to go to the great expense of building more warehouse space, now being able to use the space they have more efficiently. Coupled with the fact that pharmaceutical manufacturers are working to negotiate a new Fee for Service (FFS) distribution agreement with wholesalers, this solution will help them to profit from the coming rise of generic drugs and not see it as a burden or a huge cost.