Cuba's Global Engagement--Joint Venturing Biotechnology

While much global attention has been focused on the ramifications of Cuba's potentially sharp reconstruction of a portion of its economic model, many have been oblivious to the steady march of Cuban state sector businesses into high end usually Western dominated markets.  The failure to adequately take these moves into account in assessing Cuban economic policy (and its potential) can lead to serious miscalculations of the potency and prospects for the Cuban economy.  This is especially the case with respect to the deployment by the Cuban state of its vast investment in education for the production of high end technology that can be sold at a premium to the aging populations of the developed states.

Patricia Grogg, for example, recently reported on the efforts to penetrate European Union with new drug treatments developed in Cuba.  Patricia Grogg, Biotecnología cuban toca las puertas del Norte, Cuba a la Mano--IPS News Serives (Visiones) Oct. 22, 2010), available in loosely translated English as Cuban Treatment for Diabetic Foot Ulcers Heads for Europe (IPS News Services (Oct. 22, 2010).

Patricia Grogg

Grogg writes:

 Cuba's biotechnology industry is hoping to conquer the European Union market with Heberprot-P, a therapeutic drug used to prevent foot amputations in patients with diabetes.
Heberprot-P, developed by the Genetic Engineering and Biotechnology Centre (CIGB), stimulates tissue healing in deep, hard-to-heal foot ulcers that frequently occur as a complication of diabetes. It was approved in Cuba in 2006 and has been in clinical use on the island since 2007.  Cuban Treatment for Diabetic Foot Ulcers Heads for Europe (supra). 

[The Spanish version reads:] La industria biotecnológica de Cuba aspira a entrar por la puerta ancha al mercado de la Unión Europea (UE) con Heberprot-P, medicamento terapéutico capaz de evitar las amputaciones en pacientes de "diabetes mellitus", que padecen casi 300 millones de personas en el mundo.

The drug has already been approved in Algeria and several Southern Hemisphere states, including Venezuela and Argentina.  Id.  Its marketing and sale in Venezuela has been augmented through Cuba's state to trade commercial trade arrangements under the ALBA regime.    But the big news the potential for penetration of the lucrative Euriopean market:

Ernesto López Mola, head of CIGB's business and project development department, told IPS that last week, a Phase II clinical trial was given the green light at hospitals in Spain, with a view to approval of the product in that European country.
The clinical trial is part of a trade agreement between CIGB and AEMPS, the Spanish agency for medicines and healthcare products, which falls under the Ministry of Health and Social Policy. If successful, it will open the door to sales of Heberprot-P throughout the European Union. Cuban Treatment for Diabetic Foot Ulcers Heads for Europe (supra).

The Spanish version suggests the importance of this phase more directly:

Pero la novedad es que la semana pasada se aprobó la fase dos de un estudio clínico en instituciones hospitalarias de alto nivel de España, a fin de registrar el producto en ese país europeo, dijo a IPS el director del Departamento de Proyectos y Desarrollo de Negocios del Centro de Ingeniería Genética y Biotecnología, Ernesto López Mola.
La operación es parte de un acuerdo comercial entre esa institución cubana y la Agencia Española de Medicamentos y Productos Sanitarios (AEMPS), entidad pública con carácter autónomo adscrita al Ministerio de Sanidad, Política Social e Igualdad de la nación ibérica. De resultar exitosa, permitirá la comercialización de Heberprot-P en toda Europa comunitaria. Patricia Grogg, Biotecnología cuban toca las puertas del Norte

The forms through which this penetration will be effected suggest a new approach to Cuban engagement with the global economy, one that is more willing to adapt to the conventional forms of economic activity even in the service of the state sector.  While the terms of joint venture are not yet clear, the article suggests a cooperative venture with European entities inthhe production and marketing of the product in Europe.  "It is the first time we are breaking into a market of this size with one of our products," López Mola said, adding that a considerable investment has been made to ensure production standards in Cuba comply with EU regulations. "In this case, we will produce the active principle here, and Spain will complete production of the finished product for use in the trial."  Cuban Treatment for Diabetic Foot Ulcers Heads for Europe (supra). ("Es la primera vez que estamos incursionando con un producto en un mercado de esta magnitud", comentó López Mola. Añadió que se hizo una inversión productiva importante para adecuarse a las regulaciones de la UE. "En este caso, fabricamos acá el principio activo y en España se termina el producto que se usará en el estudio", explicó. Patricia Grogg, Biotecnología cuban toca las puertas del Norte).

 From Patricia Grogg, Biotecnología cuban toca las puertas del Norte

But most important, perhaps, the Cubans have an eye on the enormous American market.  The consideration of the American market suggests an increasing preparation for the day the American embargo ends (and it appears likely sooner rather than later) and the need to position Cuban high end industry for that eventually well before markets are open.  

 En tanto, el mercado de Estados Unidos sigue prohibido para Cuba por el embargo que aplica Washington desde los años 60. "Pero no hay duda de que la población de ese país necesita este medicamento y es un área que en algún momento podemos trabajar de conjunto con empresas de ese país", comentó López Mola.
Según datos citados por el funcionario, en Estados Unidos habría casi 21 millones de pacientes diabéticos, de los cuales 15 por ciento desarrolla una úlcera que en 15 de cada 100 casos lleva a la amputación. "En costos, se habla de 64.000 dólares por amputado", comentó.
Aparte del bloqueo económico impuesto por Washington a Cuba, "siempre hay resistencia a creer que los latinoamericanos podemos ser capaces de crear medicamentos únicos en el mundo, como el Heberprot-P. Además estamos hablando de un producto nuevo que por primera vez va del Sur al Norte", destacó López Mola. Patricia Grogg, Biotecnología cuban toca las puertas del Norte

In the English version:

Meanwhile, the U.S. market continues to be off-limits for Cuba because of the embargo imposed by Washington since the 1960s. "But there is no doubt that the U.S. population needs this medicine, and at some point we could come to a joint arrangement with U.S. companies," López Mola said.
According to statistics cited by López Mola, there are 21 million diabetes sufferers in the United States, of whom 15 percent develop ulcers. Fifteen out of 100 of these cases eventually lead to amputations. "In economic terms, the healthcare costs for each amputated patient are said to be around 64,000 dollars," he said.
Aside from the U.S. economic blockade against Cuba, "there is always resistance to the idea that Latin Americans are capable of producing original medicines like Heberprot-P, the only one of its kind in the world.  Cuban Treatment for Diabetic Foot Ulcers Heads for Europe (supra). 

To that end, the European connection will be immensely helpful.  López Mola is quoted as suggesting  that "'La experiencia en la UE será decisiva para la credibilidad. Además, en Cuba existe una farmacovigilancia intensiva sobre los más de 4.000 pacientes que han usado el producto', comentó."  Patricia Grogg, Biotecnología cuban toca las puertas del Norte("The experience with the drug in the EU will be decisive for its credibility. More than 4,000 Cuban patients who have been treated are also being carefully monitored" for adverse side-effects, he said." Cuban Treatment for Diabetic Foot Ulcers Heads for Europe (supra). )  

But it is more than credibility that is at stake.  The European connections, and the  opportunity to season Cuban economic operations within the conventional parameters of economic globalization  will also serve to protect these Cuban efforts from being overwhelmed by its larger and more experienced competitors. These will provide both a base for learning the most effective forms  and methods of economic global engagement, and a measure of protection of cuban industry through a well woven set of joint venture arrangements with European companies supported by European regulators.  The willingness of the Cuban state to adapt to these forms of enterprise (at least with respect to its activities abroad) and its ability to learn and conform its operations to the commercial expectations these markets, remains to be seen.  t requires, at a minimum, the overcoming of some ideological hurdles that have not yet been completely worked through.  See Larry Catá Backer, Cuban Corporate Governance at the Crossroads: Cuban Marxism, Private Economic Collectives and Free Market Globalism. Transnational Law & Contemporary Problems, Vol. 14, No. 1, 2005.   More importantly, it will test the ability of the Cubans to conform to the behavioral expectations of commercial activity abroad, especially with respect to human rights expectations within the developed world.  See, e.g.,  Larry Catá Backer, Globalization and the Socialist Multinational: Cuba and ALBA’s Grannacional Projects at the Intersection of Business and Human Rights (August 1, 2010).

More importantly, perhaps, this move suggests the outbound phase of the great restructuring of the Cuban economic model.  While the focus has been on the tentative steps toward opening Cuban economic activity at the very bottom of wealth producing activity within the Island, it may be as important to examine the equally significant efforts to restructure Cuban outbound investment.  Here again, the model appears to be undergoing something of a change.  This change embraces the conventional forms of economic activity against which a more vigorous Fidel Castro once  fulminated.  See, Larry Catá Backer,  Ideologies of Globalization and Sovereign Debt: Cuba and the IMF. Pennsylvania State International Law Review, Vol. 24, 2006; Larry Catá Backer, Economic Globalization Ascendant: Four Perspectives on the Emerging Ideology of the State in the New Global Order. University of California, Berkeley La Raza Law Journal, Vol. 17, No. 1, 2006. A