What’s the difference between brand name and generic drugs?

During the Medicare webinar I presented yesterday for A.D. Banker & Company, we were talking about Medicare Part D and prescription drugs. When I explained the differences between brand name and generic drugs, nearly everyone was amazed that there were differences–they thought brand name and generic drugs had to be the same, but only with different names. Wrong.

One of my students suggested I write a blog post about the subject, so, thanks to her, here is some information you may not have known:

Brand name drugs are designed and manufactured by pharmaceutical companies that obtain patents for the drug. Once the company files for the patent, no other company can manufacture the drug for the term of the patent, which is 20 years from the date of filing. These drugs are issued two names: the brand name and a generic equivalent. For example, Tylenol® is the brand name drug and its generic equivalent is acetaminophen.

Generic drugs are similar, but not identical to brand name drugs. They’re required to have the same active ingredients and different inactive ingredients. Once the brand name drug’s patent expires, other companies are able to sell the generic equivalent. That’s why your RX migraine tablet is blue and round one month, and a different shade of blue and in an oblong shape the next month–your pharmacist used generic drugs from different manufacturers when filling your prescription.

Similarities

Brand name and generic drugs must:

a) Have the same ingredients

b) Have the same dosage strength and form

c) Be administered in the same way

d) Deliver similar amounts of the drug to the bloodstream

Differences

Brand name and generic drugs:

a) Must look different, as required by law

b) Must have different inactive ingredients

Generics may vary by manufacturer and usually cost less than their brand name equivalents because much the costs of R&D have been recouped by the original manufacturer during the 20-year term of the patent. Once multiple companies are legally permitted to sell the drug, the single company holding the patent now has competition, which causes the price to drop.

Sometimes the difference in inactive ingredients affects a patient, either because of their interaction with other drugs being taken or side effects. In this case, a doctor might prescribe the brand name drug, rather than its generic equivalent.

Click here to see what the FDA has to say about generic drugs. Obviously, I am not a doctor or pharmacist and you should direct your medical inquiries about the differences between brand name and generic drugs to the appropriate medical professional.

I hope you found this information interesting. Bet you didn’t know how easily so many things in our society affect the cost of insurance!

 

What Activities Void My Rental Car Agreement?

Allowing an unauthorized person to drive your rental car is the biggest mistake you can make when renting a car. Not only does it void your rental agreement, it will probably result in your insurance policy declining to pay any claim for damage that results while the unauthorized person is driving.

Auto insurance policies only provide coverage when authorized drivers use or have possession of a vehicle. Language exists in personal auto policies that SPECIFICALLY EXCLUDES COVERAGE for two types of unauthorized drivers–you need to read your policy (or ask your agent to do so) to determine which exclusion applies to you:

  1. A person who does not have the permission of the vehicle’s owner to drive the vehicle
  2. A person who does not have a “reasonable belief of entitlement” to drive the vehicle

So, what’s the difference? Here’s a brief story that explains:

Doris detests her daughter’s boyfriend. When Irene borrows her mother’s car, Doris informs her daughter that her boyfriend is not allowed to drive the car. Irene agrees. However, when they leave the restaurant after dinner later that evening, Irene gives her boyfriend the car keys and asks him to drive. The boyfriend is tailgating and rear-ends the car in front of him when it stops at a red light.

  1. If Doris’ auto insurance policy excludes coverage for a driver operating a car without the owner’s permission, the policy WILL NOT PAY for this accident. (Doris did not give the boyfriend permission and, in fact, withheld permission in her instructions to Irene.)
  2. If Dori’s auto insurance policy excludes coverage for a driver operating a car without a reasonable belief of entitlement to drive the car, the policy WILL PAY for this accident. (When Irene handed the boyfriend the car keys and asked him to drive, it was reasonable for him to believe he had permission to drive.)

What does this story have to do with renting cars? Well, if you allow an unauthorized person to drive your rental car, your insurance company will recognize that the driver did not have (1) permission of the rental car company to drive AND DID NOT HAVE (2) a reasonable belief he or she was able to do so … everyone knows (or should know) you can’t drive a rental car unless your name is on the agreement. Therefore, you not only voided the rental agreement, you also triggered one of your auto policy’s exclusions.

People rent cars when they go on vacation or travel for business. But they also rent cars because they want to conduct activities they’d rather not engage in while driving their own cars … such as all the things that prompt rental car companies to devise their list of prohibited uses. Not all rental car agreements contain these prohibitions, but they all contain MOST of the following activities that result in a loss that occurs:

  • During the commission of a crime
  • While the driver is under the influence of alcohol or drugs
  • While carrying people or cargo for a fee
  • While pushing or towing anything
  • During any type of race or speed contest
  • While teaching someone to drive
  • While using the rented vehicle outside the area stated on agreement
  • While driving on unpaved roads
  • While having more passengers than there are seatbelts
  • While transporting children without approved seatbelts
  • While the vehicle’s fluid levels are low
  • Because inadequately secured cargo, or an animal, inside the vehicle caused damage
  • While the vehicle is unlocked or the keys are lost, stolen, or left in the vehicle while not in operation
  • Because the driver did not allow enough height or width clearance
  • By theft and the renter does not return all the keys that were provided at the time of rental
  • Because the renter allowed an unauthorized driver to use/drive the car

Does Your Auto Insurance Follow You When You Rent a Car?

I can’t tell you how often I’ve heard this question. And the answer is yes … AND no!

Item 1

Under your PERSONAL auto insurance policy, the broadest coverage applies to the cars you own and insure on the policy. While coverage does follow you when you drive certain types of cars you don’t own, that coverage is limited. Most BUSINESS auto insurance policies do NOT follow the business or its employees when driving non-owned cars–unless the business has specifically purchased this coverage.

Item 2

When you rent a car, you sign a contract. That contract contains all kinds of terms and conditions. If you don’t read the contract, you don’t know what those terms and conditions are. If you don’t show the contract to your insurance agent, he or she doesn’t know what they are, either.

Regardless of whether you or anyone else reads the contract, you are still bound by its terms once you sign it!

Other Items of Note

I’ve read LOTS of auto rental agreements and ALL of them include terms that surprise most people who sign them, such as:

  1. You agree to be legally responsible for anything that happens to the car, or resulting from the car, during the term of your agreement. This agreement applies even if you would not otherwise be legally responsible under law.
  2. You agree to replace the car at a value determined by the rental car company if it is destroyed  (this includes numerous fees and charges the rental car company also determines). Unfortunately, your auto policy usually only provides coverage at book value, which is generally much less than the amount demanded by the rental car company.
  3. You agree that your insurance policy will pay first, before all other insurance policies pay, in the event of a claim. Unfortunately, the auto policies in most states say they’ll pay AFTER the rental car company’s policy pays first.

So, what does all this mean? Here are some examples of the three points I just mentioned:

  • When driving a rental car you are the middle car in a 3-car accident. Although the person who hit you from behind is legally responsible for your damage and damage to the car it pushed you into, when you signed the rental agreement, you agreed to be responsible for the damage to your rental car and the car you struck.
  • Your rental car is torched while parked in the lot at Disney World. The rental car company says the car’s replacement value is $33,000. However, your insurance company says it will only pay the car’s actual cash value (i.e., book value) minus your deductible, or $21,000. You signed the contract, so you’re legally responsible for the $12,000 difference.

In most states, your auto insurance company will not make payment for damage to the rental car until AFTER the rental car company’s policy pays first. It will eventually pay, but it could take months…

Trust me, the rental car agreement contains other provisions that disagree with your auto policy–these are just three of the big ones. If you have any questions, ask away…