If you run python setup.py develop on several packages in the same virtualenv, you can develop both of them without having to re-install after making changes.
I recently extracted functionality from my project into a separate package, which I am now developing in this manner.
Is there a way to express this dependency in my setup.py file, so new developers can simply run python setup.py develop once in the primary project’s directory?
I do believe and fear the answer to your question is simply “No”.
setup.py just does not fit your needs. Finding tricks to do it nonetheless will probably cause more problems with new developers.
Sadly I cannot provide perfect alternatives:
if you know the platform of your devs.
and have them call “setup.py develop” explicitly for every package they need it for.
Remember explicit is better than implicit is part of the python zen.
I would go for the last one, but YMMV.