The ten years from the mid 1980s to the mid 1990s have seen the creation of a world economy marked by the establishment of international norms and competitive standards in all fields. Most of the issues, and of the conflicts to which they have given rise, have been evident in the debates and political decisions linked with the Uruguay Round. This essay argues that, within the industrial sector, pharmaceuticals is the branch which provides the outstanding example of success for international producer associations - in this case that formed by the innovative pharmaceutical firms.

These associations have targeted their pressure towards the conformity with norms by the emerging countries. That set is composed of the approximately 20 to 25 countries of Latin America, Asia and North Africa (thereby including some members of the Arab World), which together constitute (save for a few exceptions) the centres having rapid economic growth and large populations. Things are not quite the same with regard to the countries of Central Europe and the ex USSR: in those States normalisation tends to be assured «from the outset», due to the total reorganisation of their economies under the aegis of a complex of institutions (multilateral as well as bilateral, public as well as private). All the same, it would be risky to assert that these countries also would not be conflictive places (emerging countries style) in the future. For purposes of this essay, however, it is more useful to focus on the emerging countries.

The essay revolves around the following thesis:

1. The process of establishing the foundations of international markets which function in accordance with norms legitimised in and through international agreements, is already far advanced. A series of matters still requires improvement, and a few more years must lapse before everything is fully in place. But the process is most unlikely to come up against serious obstacles, and the chances that it may be reversed are minimal.

2. The global agreements go well beyond the «most favoured nation» principle (the pivotal clause in the elaboration of agreements under the old GATT, and to which, at least officially, exceptions were recognised only when the agreements created trading blocks), and the principle of «national treatment» (the cornerstone of the Paris Convention, the hitherto most important international instrument governing intellectual property). The objective now is what might be labelled a principle of Universal Treatment. Its essence is to ensure not only that all manufacturers and international traders receive equal treatment before the law of each country, but also that each national law contains the same critical elements. In this fashion the aim is that the famous «level playing field» should be the same field irrespective of the country¹.

¹ The terminology used in the text is circumspect, in the sense that the old principles continue to play an important role, above all in the process of tariff reduction. The changes announced by Japan in the November 1995 Summit Meeting of the Asia Pacific Economic Cooperation (APEC) countries offers a good illustration. The duties on 697 items (with a current import value of around $10 bn) were reduced according to the «most favoured nation» principle, i.e. without discrimination among supply sources. Nevertheless, some 80 per cent of the reductions will benefit the other APEC members, for the simple reason that the chosen basket of products is heavily loaded with articles of interest to them.

3. A principle of interference in internal affairs has been consecrated, with regard to certain features of the operation and use of the norms. It is important that this point be clearly understood. The reference it makes is not to mechanisms for the resolution of so-called «trade» disputes among countries. Instead, it refers to the constant monitoring of the operations of the administrative mechanisms and domestic institutions which bear responsibility for putting the new procedures and rules into practice². Under the guise of preventing the manipulation of non-tariff barriers to trade, pressure is maintained so that the administrative mechanisms of all countries achieve the same levels of speed, transparency and non-discrimination among users³.

² The example of China is striking. The bilateral arrangement with USA, signed end February 1995, on «Patents and the Application of Copyright», includes the establishment of permanent working groups, with the brief to monitor improvements in this field, and to arrange regular bilateral consultations designed to ensure that agreed changes are put into practice. That agreement followed another (dated 1992, and entering into force on 1 January, 1993), which set up legal bodies devoted entirely to conflict resolution in the intellectual property field. The Pharmaceutical Research Manufacturers Association (PhRMA) regards the 1995 Arrangement as a landmark, and wish to draw on it to obtain similar agreements from Argentina, Brazil, India, Singapore and Turkey (the 5 countries in the «priority» category according to the 1995 report of the association to the U.S. Trade Representative, a category which, were it to be confirmed, would render those countries liable to trade sanctions from USA).

³ The Final Agreement of Uruguay Round contains some clauses which foresee technical assistance to countries that wish to improve their administrative apparatus. Only time will tell whether such support will be forthcoming in the context of World Trade Organization or through bilateral channels.

4. The consolidation of the norms in pharmaceuticals alters the terms under which two markets have, till now, coexisted. The primary market is made up of the IPC. Each of these firms obtains its profits, at any given point of time, mainly from a handful of patented products sold in the OECD and in emerging countries. The decisive barrier to entry in this primary market is the huge cost/risk of R&D. The secondary market is formed by products sold under brand names (for items whose patents have ended), and of copies of them sold as generics. Competition in this market does depend to a large extent on prices (provided always that the drugs meet the basic requirements of efficacy, quality and safety). Some IPC are also active in the secondary market, both through their own tradename products and via generics manufacturing firms which belong to them. The norms tend to restrict the time periods and the geographic space in which the secondary market can function. Whereas the primary market seeks to be as global as possible, the secondary is made up of many largely unrelated segments.

It should be kept in mind that the two markets are present in OECD countries just as much as in emerging countries. This fact highlights the relevance to the latter of several of the struggles which have taken place in the OECD - some examples will illustrate the point. In USA a fierce conflict has taken place about whether or not the extension of patent protection obtained in the context of Uruguay Round negotiations is or is not additive to whatever extensions may emanate from the Waxman-Hatch amendment. Article 47 of the Agreement by which Spain adhered to the European Community prohibited parallel imports from Spain to other member countries for a period up to three years after the entry into force in Spain of a «modern» patent law. That Article has generated substantial tensions. Besides such instances, the facts of the pharmaceutical business themselves underscore how necessary it is for the emerging countries to stay abreast of what transpires in the key countries. An old lesson in the international pharmaceutical Industry is that, very often, attempts are made to impose in non-core countries certain laws or practices which have earlier been rejected in core locations. Although the prevailing discourse generally emphasises what exists in core countries, it is essential to remember that they too are centres of conflict and not all proposals circulated eventually find their way into law.

5. The normalisation process is (and has always been) political in nature. In that process the extraordinary powers of organisation and persuasion demonstrated by the innovative pharmaceutical firms have played a central role. The arguments propounded by them have enjoyed substantial success vis-a-vis approaches put forward (and previously employed) by firms/countries belonging to the secondary market.

6. The normalisation brought to the international stage implies, as far as pharmaceuticals are concerned, a triumph of globalisation processes over attempts at regionalisation. It would certainly be misleading to suggest that, even in the past, regional accords created great difficulties for internationalisation policies pursued by innovative pharmaceutical firms. What is argued here is that future drug policies in emerging countries will have still less room for manoeuvre than in the past. This will be so whether or not these are policies which may require cooperation among two or more countries⁴.

⁴ A recent publication of UNCTAD (1995) allows some very instructive information regarding regional cooperation among countries of Africa, Asia and Latin America, to be obtained. About 46 agreements remain valid (although not all of them are necessarily actively utilized); of that number, approximately half were signed among African countries, and about 20 per cent were elaborated during the present decade. Eleven of the agreements in Africa, six in Latin America and five in Asia, set out explicitly objectives relating to the creation of a common market, a free trade zone, or other conditions of preferential treatment for subregional trade. Not withstanding the targets set, in no case do «intra-block» exports reach even 20 per cent of total trade, and in only 4 cases (ASEAN and three Latin American groups) does the level exceed 14 per cent of total trade. If manufacturing trade is considered, exports of chemical products amount to roughly 11 per cent of the total («total» being defined as categories 5-8, excluding category 68, of the standard international trade classification). There is not one subregion in which pharmaceutical products rank among the twenty leading exports of manufactures.

The essay is structured as follows. Section 2 analyses the content of the norms and the kinds of concerns which are behind them. This is followed by an empirical examination of what has happened with the norms, and of market structure in emerging countries. The third section presents a perspective on the likely consequences (over time and according to geographic area) of the normalisation in emerging countries. The final part sketches some key elements to reinforce decision-making regarding drugs in countries (emerging countries) where local firms may not be under the direct control of innovative pharmaceutical firms.