While generic drugs are eventually available at a lower cost, it often takes years before they receive FDA approval. Newer laws have been written to help cut down on the amount of time it takes to approve a generic drug, but they still take time.

Generic drugs have a starting point at least — the brand name version would have already created a formula and have data that can get a new research team started. But when all is said and done, you still have to create the drug and test it. And that takes time.

Generally speaking, generic drugs are less expensive than brand name drugs, which lends credence to the theory that consumers are actually funding the brand's marketing budget — not their research and development costs.

Generic drugs are typically the preferred drug for both consumers and insurance companies exactly because they're cheaper. Insurance companies actually encourage use of generics by listing them with a lower copay. Some generic drugs are literally free for enrollees. Usually these are saturated markets in common categories (high cholesterol, birth control pills, etc.).

However, generic drugs don't necessarily work for everyone. Filler and other inactive ingredients are used in most medication, and sometimes, a person is allergic to one of them, which means they require the brand name medication — which means they have to pay more.

Again, if competition is necessary to drive down prices, why are we seeing prescription drug prices consistently increasing in the U.S.?

A study from the The American Journal of Managed Care (AJMC) found that generic drug prices weren't affected by competition until there were at least three different products on the market. They also found that many generic drugs only had two manufacturers, which meant that their prices were largely unaffected by competition. Of course, their data also showed that the cost of generic drugs was increasing over time.