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Opinion
Peter R. Orszag

Sometimes Brand-Name Drugs Really Are Better

Americans could save $32 billion a year by switching to generics. But would it make them feel as good?
Go ahead and buy that brand-name aspirin -- if you think it'll work. Photographer: JB Reed/Bloomberg
Go ahead and buy that brand-name aspirin -- if you think it'll work. Photographer: JB Reed/Bloomberg

When you go to the pharmacy for aspirin, do you buy Bayer or the private-label generic alternative offered by chains such as CVS? The price for Bayer's version is more than twice that of CVS's, yet the active ingredient is exactly the same. The choice may seem trivial, but it provides insight into larger economic and health questions.

Research by Matthew Gentzkow of the University of Chicago -- who last week won the prestigious John Bates Clark prize for the best young economist in the U.S. -- and co-authors studied exactly this question. They estimate that U.S. consumers would save $32 billion a year by switching to generic labels for goods (not just aspirin) that are equivalent to their brand-name alternatives.