Leveraging health strategy to drive economic growth

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Caroline Johnson and Sabrina Chan of the Hong Kong Association of the Pharmaceutical Industry suggest how

Photo: HKSARG, Information Services Department


GOAL: Sustainable financial planning in healthcare

Proposed action points:

  • Early resource planning for new medical advances
  • Greater allocation of resources to preventive measures and early treatments

 

HKAPI say:

The budget allocated by the government should be able to cope with the demographic changes in Hong Kong. Resources allocated to healthcare are an investment in people. With an aging population, it is critical to allocate a reasonable budget to health services in order to not only maintain the productivity and stability of society but also to improve the healthcare system and ensure it remains fit for purpose.

The ability of patients to afford treatment, particularly for cancer and rare diseases, is increasingly a focus of debate. There has also been growing discussion around the complexity of the Hospital Authority’s enlistment procedure for approved drugs, which often delays patient access to innovative medicines.

To ensure sustainable and timely access to innovative and effective treatments, the government should consider establishing a more visionary long-term healthcare financing strategy. Early planning provide resources for medical advances that address unmet needs is important to ensure budget planning is practical, drives better health outcomes for local people and saves expenditure in the long run.

Disease prevention and screening are the most effective ways to reduce downstream healthcare costs, numerous studies have shown. As prevention and early treatment generally cost less than treatment at more advanced stages of a disease, the government should allocate more resources to these two areas and extend screening programs to diseases that have a profound impact on society and families, such as diabetes, hepatitis and dementia.

Photo: The Hong Kong Association of the Pharmaceutical Industry (HKAPI) held its annual dinner on April 26, 2018. HK CE Carrie Lam (center) was in attendance.

 

GOAL: Greater investment in biomedical R&D

Proposed action point:

  • Introduce more attractive tax incentives

 

The government’s vision is to make Hong Kong a biomedical hub for Asia, which will require considerable investment in this area. The pharmaceutical industry includes a number of multinational corporations that have a long track record of sizable investment into R&D. The industry would like to be involved in discussions about resource allocation to ensure that funds are spent effectively and that more multinational pharmaceutical companies are attracted to invest in Hong Kong.

The pharmaceutical industry spent more than US$157 billion on R&D in this area in 2016. This figure may be more than US$200 billion by 2024, according to some estimates.

The experience of Singapore suggests that tax incentives will be a major factor in attracting multinationals to invest in Hong Kong. Eight of the world’s top-10 bio-pharmaceutical companies manufacture products in Singapore and, with strong tax incentives, the industry now accounts for about 20 percent of the nation’s manufacturing sector – the second-biggest component.

Under the “Inland Revenue (Amendment) (No. 7) Ordinance 2018,” gazetted late last year, Hong Kong will allow a tax deduction of 300 percent for the first HK$2 million of expenditure on local R&D and 200 percent for anything over that amount – with no cap. Overseas R&D spending will qualify for a 100 percent deduction.

While Singapore also offers a 100 percent deduction for overseas R&D spending, the deduction for local R&D is a flat 250 percent. Given most, if not all, big bio-pharmaceutical multinationals invest much more than HK$2 million a year on R&D – with some spending billions of dollars – Singapore’s tax benefits are more attractive.

 

Tax deduction rates offered by Hong Kong and Singapore: 

 

Hong Kong[1]

Singapore[2]

Local R&D

300 percent deduction for first HK$2 million and 200% for any further amount

250% without limit

Overseas R&D

100%

 

100%

 

 

GOAL: Boost Hong Kong’s attractiveness as a destination for clinical trials

Proposed action points:

  • Set up independent department to coordinate, facilitate and promote clinical trials within the Health Authority
  • Create single system of pathways that extends to all hospitals in the Greater Bay Area

 

Apart from tax incentives, a good R&D infrastructure and a strong system for implementation are vital. For example, Hong Kong would like to develop itself into a biomedical hub focused on clinical R&D of medicines for humans, given that clinical research paves the way for the growth of pre-clinical and other research industries.

The Hong Kong Association of the Pharmaceutical Industry in 2017 asked its 13 members – all multinationals – for their views on the importance of drivers in choosing the location of clinical trials. The attractiveness of Hong Kong by these measures was collected and analyzed. Of the 527 clinical trials conducted in 2015 in four Asian locations, 38 (7.2 percent) were in Hong Kong. This share was far below the other locations of South Korea, Taiwan and Singapore.

Survey results show that high data quality, experienced and credible investigators, mutual recognition of trial data between Hong Kong and Mainland China, well-equipped hospitals and simple and transparent approval procedures were Hong Kong’s top attractions as a location for clinical trials. However, the lack of government support, high cost and slow speed of conducting trials were the main deterrents.

Both Hong Kong and Singapore are considered as costly clinical trial locations. The average cost per trial, investigator fees, fees paid to healthcare institutions and contract research organizations are the major cost hurdles. But while Singapore scored well on the government’s role in fostering an ecosystem conducive to clinical trials and incentivizing companies to do more trials locally, Hong Kong performed relatively poorly in these areas.

Hong Kong also seems to lag behind in time taken to get approvals from regulators and the ethics committee. For example, it takes about five weeks to obtain a clinical trial certificate in Singapore; in Hong Kong, the wait is up to twice as long. This is because staffing levels at the relevant authority in Hong Kong are about half those at its Singaporean counterpart.  It also takes longer to recruit patients under the Hong Kong Hospital Authority (HA) as companies have to negotiate with various departments in different hospitals. Singapore offers a centralized “one-stop shop.”

 

Timeline for setting up a clinical trial:[4] 

 

 

Regulatory approval

Ethics committee approval

Singapore

30 business days

30 business days

Malaysia

30 business days

50 business days

Hong Kong

30-60 business days

30-60 business days

 

The pharmaceutical industry would like to see an independent department set up to coordinate, facilitate and promote clinical trials within the HA. The responsibilities of this department would include creating a single ethics committee to rapidly assess and approve clinical trials in public hospitals by combining ethics committees in different hospitals, providing a seed fund for clinical trials and reviewing incentives for pharmaceutical companies to support clinical trials in the HA – i.e. facilitating early access to new/innovative medicine in the public system.

There are also untapped opportunities to leverage Hong Kong’s strong relationship with China. The system of single pathways could be extended to all hospitals in the Greater Bay Area to bring investment while attracting and leveraging world-class investigators.

 

Looking ahead

 

The government set up a steering committee on genomic medicine in November 2017 and proposes to establish a strategic plan for developing genomic medicine in Hong Kong. Recently, the steering committee announced their initial ideas.

The steering committee consists of renowned medical scholars with relevant government officials to support policy.  However, the business world has been forgotten. For many years, pharmaceutical companies have been looking at the applications of genomes to different disease areas. This has resulted in the creation of many new precision medicines. The industry sincerely requests the government to involve pharmaceutical companies, as is the case in other countries, in the strategic development of genomic medicine in Hong Kong.

To ensure that genomic solutions are pragmatic and sustainable, all stakeholders can work together to have a rounded view on how to access existing health databases as well as on how to collect relevant information for the future. This will accelerate the development of new knowledge, medicines, diagnostics and devices. In addition, parties can collaborate to adjust work procedures and build the right infrastructure. In the long term, many disease areas will benefit, including rare and chronic conditions and cancer.

 

Conclusion

 

The pharmaceutical Industry is an important partner in the healthcare ecosystem as it invests billions of dollars in R&D and strives to ensure the application of the most advanced medical technologies to help patients in the real world. Only when these technologies are made widely available, can the value of medicine bring real benefits to humankind. For medical technology to develop in Hong Kong and support the advancement of medical practice, the pharmaceutical industry should be considered a core stakeholder. Only by working together, can we ensure a pragmatic, cohesive and sustainable healthcare system for Hong Kong.

 


[1] Effective from 1 April 2019. “news.gov.hk” website: https://www.news.gov.hk/chi/2018/11/20181102/20181102_121939_116.html?type=ticker

[2] Effective from 1 Jan 2019. “Inland Revenue Authority of Singapore” website: https://www.iras.gov.sg/irashome/Businesses/Companies/Working-out-Corporate-Income-Taxes/Business-Expenses/Tax-Treatment-of-Business-Expenses--Q---R-/

[3] Regulatory approval time was 107 days in Hong Kong, compared to 74 days in South Korea, 59 days in Singapore and 55 days in Taiwan.

[4] Clinical Research Malaysia (CRM) website 2017

 

 

 


 

The Healthcare & Insurance Committee provides a platform for AmCham members to share information, exchange views, network and advocate about trends and developments in medical insurance and healthcare issues.

The committee focuses on all aspects of Hong Kong’s health and private medical insurance, including regulations, innovation, technology, research and development, disease prevention and treatment, as well as commercial opportunities in the Greater Bay Area.

The committee will enhance the knowledge of AmCham members through regular meetings, forums and special events as well as support AmCham in responding to or submitting advocacy positions on insurance or health-related matters.

Amelie Dionne-Charest chairs the committee.

As stakeholders in healthcare, the pharmaceutical industry, together with the Hong Kong Association of the Pharmaceutical Industry and AmCham, take various opportunities to engage in dialogue with the government on how to collaborate to improve healthcare services.