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Increasing access to medicines 171lowest price close to the marginal cost of production. In the contextof a disease such as HIV/AIDS, where the total market for medicinesis massive and the humanitarian case for widespread distribution isgreat, companies may even choose to sell below marginal costs insome markets, provided that sufficient profit is recuperated inothers (Danzon & Furukawa, 2003).Market segmentation is underpinned by intellectual property –especially patents and trademarks – and contracts. If the intellectualproperty rights and contracts are respected, 34 firms can operatefreely within the marketplace without running the risk of havingseparate national or international markets compromised by theresale of the lowest priced medicines into markets where prices arerelatively higher. 35 However, infringements upon intellectualproperty rights mean that firms cannot control their own pricingschemes, with serious consequences. Not only does this act as a disincentivefor firms to sell their products in poor countries, it mayalso inhibit future innovation.In short, price differentiation allows companies to cater forpeople who otherwise could not afford to purchase their products.It allows countries that are not able to shoulder the costs of R&Dthemselves to afford expensive medicines. It also means output ishigher than the level that would occur if no differentiation werepossible. Moreover, the innovator is able to generate more revenue,providing a greater pool of resources for investing in new drugdevelopment.Price controlsUnfortunately, governments often restrict the ability of companiesto implement differential pricing strategies. For example, they frequentlyimpose price controls on drugs, capping the price of drugsand making any other sales price illegal. Nearly all economicallyadvanced countries – with the notable exception of the United States– impose price controls on medicines in one form or another (Danzon& Furukawa, 2003). Because the controlled price is effectively the only