Prices of pharmaceuticals in poor countries are much lower than in wealthy countries.

Keeping pharmaceuticals affordable in poor countries is important for public health. Economic models suggest that manufacturers should be able to charge substantially lower prices in those markets than in industrialized countries without drastically reducing their profits. We report the results of a study of thirty drugs in twenty-nine countries, showing that many prices are already substantially discounted in middle-income and developing countries, compared to prices in the United States and other industrialized countries, and do not exceed long-run marginal costs. We also argue that the so-called peak load pricing model offers an economic foundation for fair drug pricing in the case of developing countries, and is a better solution than other pricing models to the problem of how to reduce drug prices in these countries to the level of manufacturers' marginal costs.