Eli5 – How do name brand drugs turn a profit?

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Might sound like a loaded question, but hear me out.

In the Good ol’ USA, generic drugs are required by the FDA to have the exact same make up as the name brand drug (ie. Benadryl vs generic Diphenhydramine). I’d imagine this is also a requirement in other countries.

So how exactly do those companies turn a profit when a generic version of their drug can swoop in and undercut them?

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16 Answers

Anonymous 0 Comments

People are not rational consumers. Most people will pick a heavily-advertised brand over a generic because they recognize the name, and will pick a more expensive product over a cheaper version of the exact same thing because they assume the more expensive one is higher quality.

None of that makes sense, but there’s no rule that people need to make sense.

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