Since a company may own both the brand and generic names, it prices the generic at a higher price to discourage sales of the generic. Because of this, people may not get the savings benefits of generic drugs. There are various answers to this question. Technology has played a role in the development of more effective medications. Creation of larger manufacturers through mergers and buy-outs of smaller pharmaceutical companies has provided the opportunity to increase the cost of generic medications.
Annual inflation plays a role, as does the increased utilization of drugs by the American public.
Pharmaceutical companies explain the need for making a profit as being tied to the research and development costs for newer, more effective medications. To put this in perspective, the budget for federal research is approximately a third of this figure. It takes an average of seven years for a drug to go through the FDA approval process, thus delaying any potential profits. The marketing of drugs by pharmaceutical companies is expensive. These promotions are intended to increase physician and consumer exposure to information about a particular drug.