When you pick up a prescription for generic sertraline or metformin, you probably don’t think about how the price got so low. Most people assume it’s just the free market doing its job-and they’re right. But behind that low price is a complex system of government policies designed not to set prices, but to force competition into the market. Unlike branded drugs, which can cost hundreds or even thousands of dollars a month, generic drugs often cost less than $10. How? Not because the government told manufacturers what to charge-but because it created the conditions for dozens of companies to fight over who can sell it cheapest.
Why Generic Drugs Don’t Need Price Caps
In 2023, generic drugs made up 90% of all prescriptions filled in the U.S., but only 23% of total drug spending. That’s because once a brand-name drug’s patent expires, generic versions flood the market. The first generic to enter might sell for 30% of the brand price. Within six months, that drops to 25%. By two years, with five or more competitors, it’s often down to 5-10%-sometimes even less. The FDA found that when three or more generic makers are selling the same drug, prices stabilize at just 10-15% of the original brand cost. No government agency has to step in. The market does it automatically.The Hatch-Waxman Act: The Secret Weapon Behind Low Prices
The foundation of this system was laid in 1984 with the Hatch-Waxman Act. Before this law, generic manufacturers had to run full clinical trials to prove their drug worked-just like the brand company did. That cost $2 billion and took 10 years. Hatch-Waxman changed that. It let generics prove they were bioequivalent-that they delivered the same amount of medicine into the bloodstream at the same rate. No new safety studies. No new efficacy trials. Just a few hundred thousand dollars and a few months of testing. The result? Generic approvals exploded. In 2023 alone, the FDA approved 1,083 new generic drugs. That’s more than three per day.How the FDA Keeps the Pipeline Flowing
The FDA doesn’t just approve generics-it actively speeds up the process. Under the Generic Drug User Fee Amendments (GDUFA), drugmakers pay fees that fund faster reviews. Since 2017, approval times have dropped from 18 months to under 10 months for standard generics. In 2023, the FDA met its 10-month target for 92% of applications. That’s not luck-it’s policy. The agency even created a special template for complex generics-drugs like inhalers or injectables that are harder to copy. Pilot programs using this template cut review times by 35%. Real-time tracking tools like the Generic Drug User Fee Public Dashboard let anyone see where an application stands. If a generic is stuck, you can see why-and who’s responsible.Why the Government Won’t Negotiate Generic Drug Prices
In 2022, Congress passed the Inflation Reduction Act, which lets Medicare negotiate prices for 15 high-cost brand-name drugs starting in 2027. But generics? Excluded. Why? The Department of Health and Human Services said it plainly: They don’t need it. The Congressional Budget Office estimated that capping generic drug prices would save Medicare just $2.1 billion a year-less than 0.4% of total generic spending. Meanwhile, negotiating brand-name drug prices could save $158 billion. Stanford Medicine calculated that extending negotiations to generics would only save $1.2 billion annually, while risking shortages. The same logic applies to the 2025 Most-Favored-Nation Executive Order-it targets drugs like Ozempic and Wegovy, not metformin. Why? Because generics are already cheap.
Who’s Watching for Cheating?
The market works-but only if everyone plays fair. That’s where the Federal Trade Commission (FTC) comes in. In 2023, the FTC challenged 37 "pay-for-delay" deals. These are secret agreements where brand companies pay generic makers to delay launching their cheaper version. One deal kept a generic version of the blood thinner Plavix off the market for two extra years. That cost consumers over $1 billion. The FTC stopped it. In January 2024, they blocked the merger of Teva and Sandoz-the two biggest generic makers-because it would have cut competition on 13 key drugs. The FTC doesn’t set prices. It just makes sure no one can rig the game.What Happens When Prices Drop Too Low?
There’s a flip side. When prices fall too far, manufacturers stop making the drug. In 2024, 18% of hospital pharmacists reported shortages of critical generic drugs because the price didn’t cover production costs. A single pill of digoxin, used for heart failure, dropped from 10 cents to 3 cents. The manufacturer shut down the line. The FDA’s 2023 Drug Shortage Report showed that only 0.3% of generics spiked in price-but 1 in 5 hospitals still saw shortages. The solution isn’t raising prices-it’s fixing the supply chain. The FDA now gives "Competitive Generic Therapy" status to drugs with few manufacturers, giving them faster review and a better shot at survival.Real People, Real Savings
For patients, the numbers speak for themselves. A 2024 KFF survey found that 76% of Medicare Part D users paid $10 or less for their generic prescriptions. Only 28% paid that little for brand-name drugs. Eighty-two percent of generic users said their meds were affordable. Compare that to 41% of brand-name users. On Drugs.com, 87% of reviews for generic drugs mentioned "affordable" or "cost-effective" as the top reason they kept using them. This isn’t theoretical. It’s daily life for millions. A single dose of lisinopril costs $0.15. A month’s supply? $4. That’s not charity. That’s competition.
