How Multiple Generic Drug Manufacturers Drive Down Prices

When a brand-name drug loses its patent, something powerful happens: dozens of companies start making the exact same medicine. Not a copy. Not a similar version. The same active ingredient, same dosage, same way it works in your body. These are generic drugs. And when more companies jump in to make them, prices don’t just drop-they crash.

Why more manufacturers mean lower prices

It’s basic economics, but it’s worth saying out loud: when there’s only one company selling a drug, they can charge whatever they want. But when five, ten, or even twenty companies are selling the same thing, they have to compete. And the only real way to win is by offering a lower price.

Take metformin, the most common diabetes drug. In 2024, over eight different manufacturers made it. That’s why you can buy a 90-day supply for under $10 at many pharmacies. Compare that to a brand-name version from 15 years ago, which could cost $200 or more. The difference isn’t because metformin got cheaper to make. It’s because so many companies are fighting for your business.

A 2021 study in JAMA Network Open looked at 50 brand-name drugs and tracked what happened when generics entered the market. The results were clear:

• One generic manufacturer? Price dropped by about 17%.
• Two manufacturers? Down 39.5%.
• Three manufacturers? Down 52.5%.
• Four or more? Prices fell by over 70%.

That’s not a trend. That’s a collapse in price-and it’s all because of competition.

What happens when there’s only one or two makers?

But here’s the problem: competition isn’t always there.

Some generic drugs have only one or two manufacturers. That’s not a coincidence. Over the last 20 years, many small generic companies have been bought by bigger ones. A 2017 study by researchers from MIT, the University of Chicago, and the University of Maryland found that more than half of all generic drugs had two or fewer makers. Some had just one.

And when there’s only one maker? Prices don’t drop. They stay high. Sometimes they spike.

In 2023, patients on Reddit reported that the epilepsy drug levetiracetam jumped 300-500% in price after two of the five manufacturers quit the market. One patient had to switch medications because they couldn’t afford the new cost. That’s not an isolated case. It happens often with older, low-margin drugs where profit is thin and competition is weak.

The FDA estimates that generic drugs saved the U.S. healthcare system $1.7 trillion between 2009 and 2019. But those savings only happen when competition is real. When companies merge or exit, those savings vanish.

Oral pills vs. injected drugs: Why some generics are cheaper than others

Not all generics are created equal. The easiest drugs to copy are oral pills-things you swallow. These are called small-molecule drugs. They’re simple to manufacture, and many companies can make them cheaply.

But injectable or infused drugs? Those are harder. They require sterile environments, special equipment, and stricter quality controls. Fewer companies can make them. So competition is weaker. Prices stay higher.

The same goes for biologics-complex drugs made from living cells, like insulin or rheumatoid arthritis treatments. Even when biosimilars (their generic equivalents) come out, they rarely drive prices down like traditional generics do. A 2021 study found that if biosimilars were treated like regular generics under Medicare, spending on these drugs would have been nearly 27% lower.

That’s why you’ll see metformin at $8.99 and insulin at $300-even though both have been around for decades.

Who’s really saving money?

You might think patients are the ones benefiting most from low generic prices. And yes, many are. But the biggest savings go to insurance companies, Medicare, Medicaid, and pharmacy benefit managers (PBMs).

A 2020 report from the U.S. Department of Health and Human Services found that prices for generics with three or more competitors dropped about 20% after three years. With ten or more makers, prices fell 70-80% below what the brand-name drug originally cost.

But here’s the catch: pharmacies and PBMs sometimes keep the savings instead of passing them on. Some patients still pay high copays because their insurance plan doesn’t reflect the true low cost of the drug. That’s why tools like GoodRx exist-they show you the actual cash price, which is often way below your insurance copay.

How to use this to your advantage

You don’t need to be an economist to save money on your meds. Here’s what you can do:

• Ask your pharmacist: “How many companies make this generic?” If they say three or more, you’re likely getting a good deal.
• Use price comparison apps like GoodRx. They pull real-time prices from over 70,000 pharmacies. You’d be surprised how much the same pill costs at different stores.
• Check the FDA’s Orange Book. It lists which generics are rated as “AB” - meaning they’re therapeutically equal to the brand. Don’t settle for BX-rated versions unless your doctor says it’s okay.
• If your drug has only one or two makers, ask your doctor if there’s another generic version you can switch to. Sometimes, switching to a different manufacturer can mean a lower price.
• Call your pharmacy before picking up a prescription. Prices can change daily, and a quick call could save you $50.

The future: Will competition keep working?

The system works well-when it’s allowed to. But consolidation is still happening. Between 2014 and 2016, nearly 100 generic drug companies were bought by larger ones. Many of these deals flew under the radar of regulators because the companies were small.

The FDA launched its Drug Competition Action Plan in 2017 to fix this. The CREATES Act of 2019 was meant to stop brand-name companies from blocking generic makers from getting samples they need to test their drugs. And since 2021, the FTC has challenged several mergers that would reduce competition in generic markets.

But it’s an uphill battle. The generic drug industry is made up of hundreds of small players. When a few of them merge, it can turn a competitive market into a near-monopoly overnight.

The good news? The data still holds. More manufacturers = lower prices. The bad news? That formula is under threat.

What you can do next

Don’t assume your prescription is cheap just because it’s generic. Always check. Ask questions. Compare prices. If your drug has only one or two makers, speak up. Talk to your doctor, your pharmacist, or even your insurance provider. The system only works if people use it.

The next time you fill a prescription, look at the label. See how many companies make that drug. If it’s more than three, you’re winning. If it’s one? You might be paying more than you should.

Generic drugs are one of the most powerful tools we have to control healthcare costs. But only if competition stays alive.