Hong Kong Pharmaceuticals and Healthcare Report Q4 2009

According to BMI's Asia Pacific Pharmaceuticals & Healthcare Business Environment Ranking table for Q409, Hong Kong's pharmaceutical market slipped from being the fifth-most attractive in the region to a joint sixth. Globally, Hong Kong places joint 25th out of the 71 countries surveyed by BMI. Although we forecast a 5.7% GDP contraction in 2009, Hong Kong still offers substantial commercial opportunities, given its focus on biotechnology and the use of medicines for the treatment of lifestyle diseases.

Additionally, the territory is also a gateway to mainland China, the pharmaceutical market of which is expected to grow strongly in the coming years. Therefore, from being valued at HKD7.32bn (US$939mn) in 2008 at consumer prices, we expect Hong Kong's pharmaceutical expenditure to rise by a compound annual growth rate (CAGR) of 4.93% in local currency terms, reaching HKD9.31bn (US$1.20bn) by 2013.

In fact, during the recent inauguration of the Hong Kong Science Park Biotech Centre, the financial secretary lauded Hong Kong's biotechnology industry for providing an important link between Western industries and the Chinese mainland. The government remains committed to developing of biotechnology as a draw for foreign investment and an engine for local job creation. To date, through its Innovation & Technology Fund, established in 1999, authorities have provided financing for some 140 life sciences research programmes. Future similar schemes include the Life Sciences Acceleration Programme, which can potentially provide up to HKD9.3mn for a project.

While Hong Kong's epidemiological profile closely resembles that of developed nations, infectious diseases have re-emerged as causes of morbidity in recent times. The threat of a communicable disease pandemic is still present, as illustrated by the appearance of swine flu. By early August 2009, eight more hospital workers were diagnosed with the A (H1N1) virus, with the Centre for Health Protection warning of a possible outbreak during the summer peak season. Manufacturers of influenza vaccines are quick to recognise the commercial opportunity this represents. To this end, in June 2009, UK major GlaxoSmithKline (GSK) created a joint venture (JV) with a Chinese company for the development and production of flu vaccines (both seasonal and pandemic), which will be distributed to China, Hong Kong and Macau. Around the same time, Canadian Afexa Life Sciences signed an agreement with a Hong Kong healthcare company for marketing and distributing its popular herbal medicine for the treatment of colds and coughs.

In the meantime, local press reported that new legislation may be drawn up in early 2010, calling for more accountability in the health maintenance organisation (HMO) sector. Presently, HMO regulation appears to be severely lacking, even though there are reports of some HMOs restricting doctors' prescribing choices and placing caps on medical procedures in order to lower costs. The legislation would call for at least half of HMOs' top management to be professional physicians.