Table 1 summarises recent data on sales and their composition in emerging countries. In a world pharmaceutical market valued at around $120 bn (reckoned at mid 1990s prices and exchange rates), emerging countries account for roughly 20 per cent of the total (China and Korea together make up close on one half of the aggregate). In emerging countries the share of sales captured by foreign firms plus imports, tends to exceed two thirds of the total. The only important countries where this relationship does not hold are China, India, Argentina and Egypt - in each of them, local enterprises have market shares above one half of total sales. Not even in these countries is export of finished products of any consequence (although in certain instances exports of intermediates, or bulk chemicals, is indeed appreciable).

TABLE 1. - Pharmaceutical sales and their distribution by source in emerging countries, 1993/1994 (approximate figures)

FF: Foreign firms.

For all its simplicity, the table gives a first approximation to what is at stake in the current wave of normalisation. In a number of emerging countries, the foreign firms (almost all are innovative pharmaceutical firms) obtain their sales by means of their local affiliates. But given, as will be shown later, that the advantages of local presence are not so substantial, it would be more convenient if the markets could be supplied through imports (a channel which is still not extensively used). Importation is, however, a safe method only if trade barriers are limited, and if the firm would not thereby run the risk of losing protection for its product; it is there that norms reveal their value. Table 1 also shows that foreign firms do not normally make up a high percentage of the total number of companies manufacturing drugs. That number appears to be quite high. There is little doubt that, in most emerging countries, a pronounced shakedown in the number of producing companies is imminent⁶. If those two tendencies are taken together, what then will happen to market structure?

⁶ Among the innovative pharmaceutical firms themselves, the total value of takeovers and mergers in the period from mid 1993 to mid 1995 reached about US$70 bn. Even so, the firm (Glaxo Wellcome) with the largest sales, still does not reach 6 per cent of the world market. Given the need to cut costs, the restructuring offers a route (although not the only one) to avoid parallel outlays on R&D as well as to capture whatever economies of scale there may be. In and of itself, the restructuring of the innovative pharmaceutical firms tends to increase the degree of market concentration in emerging countries. The much more marked impact in the future will come, however, from pressures on local producers.