ABSTRACT
The structure of the economies of scale and of the costs of firms in the pharmaceutical industry provide a strong inducement to the multinationalisation of operations and consequently to some inter national transfer of technology. The principal element of policy that permits firms to benefit from their international operations is the patent protection offered to their inventions abroad. Such patent pro tection also affects the behaviour of the firms including expenditures on research and promotion, pricing and the resulting profits. In establishing appropriate patent protection for a chiefly foreign owned pharmaceutical industry which does most of its research abroad, the authorities of countries such as Canada face two problems-that of balancing the extent to which they wish to induce price as against non-price competition and that of deciding to what extent Canadian consumers should contribute through high prices to the worldwide profitability of the research-based firms.
