How Multiple Generic Drug Manufacturers Drive Down Prices

When you pick up a prescription for metformin, lisinopril, or levothyroxine, you probably don’t think about how many companies make it. But that’s exactly what keeps your copay low. The more generic manufacturers making the same drug, the lower the price drops. It’s simple economics: more sellers = less power for any one company to charge high prices.

Why multiple generic makers matter

Generic drugs aren’t just cheaper copies-they’re exact chemical twins of brand-name drugs, approved by the FDA to work the same way. But unlike brand drugs, which have patent protection, generics can be made by anyone once the patent expires. And that’s when the real price battle begins.

When the first generic hits the market, prices usually drop by about 17%. That’s good. But when a second company joins, the price falls another 22%. By the time there are three manufacturers, you’re looking at a 52% drop from the original brand price. With four or more, it’s common to see prices fall by over 70%.

Take metformin, the most common diabetes drug. In 2024, at least eight different companies made it. That’s why you can get a 90-day supply for under $10 at many pharmacies. Compare that to a brand-name drug like Humira, which still has no true generic competitor after 20 years. Its price? Over $7,000 a month. The difference isn’t about quality-it’s about competition.

The numbers don’t lie

A 2021 study tracking 50 brand-name drugs and their generic versions found clear patterns:

• 1 generic manufacturer: 17% price drop
• 2 generic manufacturers: 39.5% drop
• 3 generic manufacturers: 52.5% drop
• 4+ generic manufacturers: 70.2% drop

These numbers come from Medicare spending data between 2015 and 2019. The same trend holds for other drugs. The FDA estimated that generic drugs saved the U.S. healthcare system $1.7 trillion between 2010 and 2019. In 2022 alone, 742 new generic approvals were expected to save $14.5 billion in one year.

But here’s the catch: not all drugs have this kind of competition. Some drugs have only one or two makers. And when that happens, prices don’t drop-they spike.

When competition disappears

The problem isn’t too many generic makers-it’s too few. Over half of all generic drugs in the U.S. now have only one or two manufacturers. That’s up from just 20 years ago. Why? Because big companies have bought up smaller ones. Mergers have cut the number of players, and fewer players means less pressure to lower prices.

When a drug has only one maker, prices can stay high-or even jump unexpectedly. In 2023, patients reported levetiracetam (an epilepsy drug) suddenly costing 300% more after two manufacturers quit the market. One pharmacy chain saw the price go from $15 to $60 for a 30-day supply. That’s not inflation. That’s monopoly pricing.

Some manufacturers leave because the profit margin is too thin. When five companies are fighting over a $0.10-per-pill drug, someone has to quit. But when only one remains, that company can raise prices without fear of losing customers.

Oral drugs vs. injected drugs

Not all generics are created equal. Oral pills-like antibiotics or blood pressure meds-see the strongest competition. They’re easy to make, cheap to produce, and simple to distribute. That’s why you’ll find 10+ makers for drugs like amoxicillin or atorvastatin.

But injectable or infused generics? Not so much. These drugs are harder to manufacture. They need sterile environments, specialized equipment, and stricter quality controls. Fewer companies can make them. So even if a brand-name injectable loses its patent, you might still have only one or two generic options. That means prices stay high.

The same is true for biosimilars-generic versions of complex biologic drugs like insulin or rheumatoid arthritis treatments. Even though they’ve been approved, uptake is slow. Medicare patients paid nearly 27% more for biologics than they would have if biosimilars had been treated like regular generics.

Who controls the price?

You might think pharmacies set the price. They don’t. It’s the Pharmacy Benefit Managers (PBMs)-the middlemen between drug makers, insurers, and pharmacies-who negotiate bulk deals. PBMs have huge buying power, which can help keep prices down. But they also get kickbacks from drug makers, which can distort the system.

Brand-name companies sometimes fight back by launching their own “authorized generics.” These are made by the original company but sold under a different label. The result? The brand price drops slightly, but the generic price doesn’t fall as much as it should. In fact, the FTC found that brand prices were 22% higher when the original company launched its own generic.

What you can do

You don’t need to be an economist to use this system to your advantage. Here’s how:

1. Ask your pharmacist: “How many companies make this generic?” If they say three or more, you’re likely getting the best price.
2. Use GoodRx or SingleCare. These apps compare prices across pharmacies and show you which generic brand is cheapest.
3. Check the FDA’s Orange Book. It lists which generics are rated “AB”-meaning they’re interchangeable with the brand. Avoid BX-rated drugs unless your doctor says it’s safe.
4. If your drug has only one maker and the price jumps, ask your doctor about switching to a similar drug with more competition.

Some states allow pharmacists to swap one generic for another without telling you. That’s fine for most drugs-but not for ones with a narrow therapeutic index, like warfarin or thyroid meds. Always ask if your prescription was changed.

The future of generic competition

The FDA launched the Drug Competition Action Plan in 2017 to fix broken markets. The CREATES Act of 2019 tried to stop brand companies from blocking generic makers from getting samples they need to test their drugs. The FTC has started challenging mergers that would reduce competition.

But the system is still fragile. If the trend of consolidation continues, we could see more drug shortages and sudden price spikes. The Congressional Budget Office predicts generics and biosimilars will save Medicare $158 billion by 2031-but only if enough companies stay in the game.

Right now, the system works best when there are many small players. But when a few big firms control the market, patients pay the price. The answer isn’t to stop generics-it’s to protect competition.