Medical drugs have large fixed costs, the costs of research, development and testing, low marginal cost, the cost of making one more pill. If the company sells the drug at marginal cost everyone to whom it is worth at least the cost of producing the pill gets it but the company never covers the fixed cost; if it keeps doing that it goes out of business. If it sells the drug at a price enough above marginal cost to pay back the initial expenditure many people who value the pill above the cost of producing it do not get it. The solution is price discrimination, selling the drug at a high price to customers who are willing to pay it, at a low price to customers who are not. In practice this usually means selling the drug at a high price in rich countries and a low price in poor countries. The problem is preventing resale. If the same pill sells for five dollars in Nigeria and fifty in France, what prevents an enterprising Nigerian from buying in Nigeria and selling in France, costing...
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