The Changing Hong Kong Healthcare Market

INSIGHTS

September, 2016

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The graying of the city's population and regulatory changes offer opportunities for innovation

With population growth and an aging demographic, the Hong Kong pharmaceutical market is forecast to grow to over US$2 billion by 2019. The aging of Hong Kong is due to a combination of factors, including longer life expectancy and a low birth rate.

The launch of innovative drugs will drive growth in the market. Hong Kong is the leading choice for manufacturers of home-based equipment, hygiene-sterilized supplies, less-invasive procedure equipment, orthopedic tools and devices, as well as devices and supplies for high health-risk diseases and injuries.

Physician prescribed vs over-the-counter drugs

In a physician-dispensing market such as Hong Kong, retail pharmacists primarily focus on over-the-counter (OTC) drugs. The connection between drug prescribing and dispensing continues to be a lucrative source of income for physicians, clinics and hospitals. Separation between prescribing and dispensing is unlikely due to the powerful doctors’ lobby in the city.

Public vs private healthcare debate

The current healthcare system cannot continue to support the weight of the rapidly changing age demographic. Projections forecast that people over 65 years old in Hong Kong will more than double from 13% to 30% of the population by 2041. The strain of this increase will necessitate a 6.5% annual increase in public healthcare spending just to maintain services. The delicate balance between private and public healthcare will have to change.

Despite some resistance to change, there are innovative healthcare funding adjustments underway. These include tax rebates and deductions for enrolling in private healthcare insurance; allowing people of any age and in any health to take out insurance; guaranteed renewal for all members; and limiting of premiums for high-risk groups.

The government has set aside over US$1.6 billion to fund public hospital expansion and modernization, such as adding hospital beds and other treatment and diagnostic facilities. This will result in shorter waiting times for healthcare services, as well as additional mental health services.

The Hospital Authority will enhance its healthcare services for elderly patients, providing barrier-free hospital facilities by 2016. Improvements will include a joint replacement center, as well as enhanced geriatric rehabilitation and palliative care services. The Elderly Health Care Voucher Scheme doubled to US$256 last year and the number of vouchers increased to 640,000 for a total expenditure of US$70 million.

In 2014, the Hospital Authority launched pilot outpatient clinics in three districts to allow those with chronic diseases, such as hypertension or diabetes in a stable condition, to receive outpatient services from participating private doctors within their respective districts. The government plans to expand the program to the remaining 15 districts.

Emerging trends in Hong Kong healthcare

Hong Kong’s health indicators rank among the best in the world. Like other developed countries and regions, the burden of the healthcare system has shifted from communicable diseases to chronic diseases due to a more affluent lifestyle and medical advances. Recent data from the Department of Health’s Center for Health Protection concludes that over 28% of the population has a chronic illness such as hypertension (11%), diabetes (5%), high cholesterol (almost 4%), coronary heart disease (2%), asthma (1.1%), and stroke (0.6%). Over 36% of the population are considered obese and this trend continues to grow.

Cancer is by far the leading cause of death in the city, at 31%. Mortality rates from heart disease, cerebrovascular disease and chronic lower respiratory disease have all fallen in recent years. However, the infection rates of notifiable communicable diseases, such as HIV, continue to increase.

As the population ages, so will the demand for equipment that facilitates the prevention, detection, and management of illness. Treatment for cardiopulmonary disease, diabetes and neurological disorders will see rapid growth.

Hong Kong’s primary care system remains undeveloped. It will need to improve to address the needs of its aging population in disease prevention and management of chronic diseases.

The high burden of non-communicable diseases presents strong revenueearning opportunities for both pharmaceutical and medical devices firms, due to the need for increased diagnosis and treatment. The compound annual growth rate forecast from now until 2019 is 7.2%, reaching a total of US$2.2 billion.

The operating environment for the pharmaceutical industry in Hong Kong is likely to remain stable until 2018. Though market growth has slowed to single digits, Hong Kong will remain an attractive market, in large part due to its proximity to Mainland China.

Patented hi-tech drugs will continue to be imported and this sector is expected to grow. Hong Kong’s negative pharmaceutical trade balance is expected to widen over the next five years, with 7.2% imported and 3.9% exported by 2019. Cheap, off-patent drugs from Mainland China will increase this gap, highlighting Hong Kong’s need for less expensive pharmacueticals.

In contrast, pricing of generic drugs will continue to be forced down by the Hospital Authority’s volume purchasing and prescribing policies. Multinational generic drug-makers will dominate the generics market, as well as local firms with strict quality control. Eventually, generics from Mainland China will start to enter the market.

Retail pharmacists will continue to push for a greater role in healthcare, such as patient counseling and medication management. The government is looking for ways to increase pharmacist training and development. The Hong Kong Academy of Pharmacy is encouraging quality certification and a patient-centered approach to combat the sale of counterfeits.

Both cost and epidemiological considerations make Hong Kong an attractive base for clinical research and development and medical trials. According to data from Clinicaltrials.gov, Hong Kong hosted 82 clinical trials in 2013 and 91 in 2012. Of the 82 studies, there were 11 Phase I, 26 Phase II, 38 Phase III and seven Phase IV trials. However, Hong Kong is still considered a relatively small market with room for growth when compared to other markets such as Mainland China, Taiwan and South Korea.

Overcoming the challenge of regulatory changes

In response to a series of product scandals in 2009, Hong Kong enacted regulatory changes that affect the pharmaceutical market. In accordance with the Pharmacy and Poison Regulations Chapter 138A, Regulation 5, section 22, which went into effect on February 6, 2015, dealers licensed for wholesale are required to obtain a written order from the purchaser before completion of a sale of Part I poisons, dangerous drugs or antibiotics. The regulation is part of an effort to avoid ambiguity or miscommunication that could lead to wrongful delivery. The written order facilitates tracing the source of the drug, minimizes errors upon delivery, and combats the illegal sale of drugs, which enhances public safety.

The written order can be accepted in either paper or electronic format. Nevertheless, the impact of the mandatory requirement has been felt in the pharmaceutical field since most purchasers were used to ordering drugs via verbal orders. eZRx, one of ZPHK’s six eSolutions, provides an online ordering platform in full compliance with the written order ordinance.

Other regulatory changes in the pipeline include the Hong Kong Guide to GMP for Secondary Packaging, which will be implemented on October 1, 2015. The regulation states that secondary packaging can only be undertaken by licensed manufacturers, who comply with Good Manufacturing Practice requirements.

Zuellig Pharma eSolutions
As part of Zuellig Pharma’s on-going commitment to service quality, operational excellence and cutting-edge innovation, the company has developed a series of internet-based tools to facilitate operational efficiency across the supply chain, from order processing for purchasers to delivery of orders to customers. Zuellig Pharma’s eSolutions suite provides a unique and user-friendly solution for complete transparency in the order process, starting from when a customer places an order all the way to when they receive the product.

Zuellig Pharma Hong Kong is proud to introduce the following six new innovative eSolutions to improve communications, supply chain transparency and business efficiency and productivity: eZRx, eTender, eRedressing, eReturn, eMerchandising and Z|P Track & Trace.

The eSolutions platform improves communication both internally and externally, and increases productivity throughout the order fulfillment process. Zuellig Pharma’s eSolutions offers customers complete transparency so that they can clearly see where the order is and when it will be delivered. The innovative web-based eSolutions platform brings visibility to the entire order process cycle.

eZRx
Zuellig Pharma’s eZRx is an efficient internet-based, multi-functional B2B ordering platform. eZRx is fully compliant with the Hong Kong Department of Health’s written order ordinance. It is fully customizable and allows customers to make quick, easy, real-time order placements. Customers’ order history, bonus terms, deals and quantities ordered are all retrievable. Access to the order status is available at all times and multiple parties within a business can be connected to the order system.

The system provides real-time order confirmation for customers and full transparency. Invoice images can be captured for accuracy and reference while payment transactions sync to Zuellig Pharma’s ERP system. eZRx can also be developed into a marketing platform.

eTender

eTender offers users an effective digitalized tender management process with greater security, data centralization, workflow control, improved efficiency, real-time information availability and automated reminder alerts. It guides and monitors the entire tender management process to ensure full accountability and confidentiality.

The administration tool records tender information for two years, ensuring an up-to-date tender library that provides instant access to key tender information. This allows users to formulate a tender submission strategy. It is also customizable and offers greater security in tender document preparation, tender document clarification and contract follow-up.

To ensure a streamlined process, eTender tracks and traces tender status in real-time. By creating an archive document whenever a user makes a change, the system provides proof of document control. Each document contains multiple archived versions, providing full document history. eTender also includes user-only access and a matrix to define each user’s level of authorization.

The system improves work efficiency with a real-time to-do-list, which helps users identify tasks that need to be completed. Over the long term, eTender maximizes pricing strategy and provides comparative and pharmaceutical market trend analysis.

eRedressing

This tool enables all parts of the redressing process to be tracked and traced. eRedressing provides stakeholders with real-time visibility of redressing job status. It also improves the efficiency of shop-floor job management and production planning to ensure supply chain continuity.

eReturn

eReturn is a highly efficient online tool that eliminates manual paperwork and allows goods to be returned accurately and quickly. The solution saves time and ensures accuracy by automating many steps, enabling sales representatives to spend more time in the field driving sales.

The web-based system improves transparency while reducing lead times and the time required to process returns. The 100% paperless system allows searches by customer, product and batch number. In addition, the status of any return and its history can be fully tracked and traced.

eMerchandising

eMerchandising is an innovative solution for chain outlets, providing a comprehensive marketing and promotional tool that replaces inefficient paper-based systems with real-time online planning, synchronization of outlet promotions, and timely reporting.

The customizable system assists outlets in meeting a variety of needs, including wider product scans and channel extension. It offers quick and accurate solutions for common planogram issues, such as out of stock, side facing and empty boxes, as well as sub-optimal execution of display promotion programs and inefficient ad hoc promotions.

eMerchandising also provides execution and instant monitoring of key chain promotional programs to increase growth opportunities.

Z|P Track & Trace
Getting the right product to the right destination at the right time is the key to top service. Zuellig Pharma’s Z|P Track & Trace is a pioneering tracking tool that centralizes and standardizes communication between Zuellig Pharma Hong Kong’s delivery and customer service teams, ensuring optimum delivery to the end customer.

The Z|P Track & Trace handheld device can be used by all drivers and delivery personnel. It offers reliable, real-time visibility of customers’ order status, such as delivered, cancelled, rejected, returned or redelivered. It also facilitates communication through photographs. The system incorporates real-time notification for events such as damage or customer feedback, enabling the customer service team to react immediately.

The all-important last mile is effectively managed by notifying customers in advance of actual delivery to manage expectations for order delivery time.

Local capacity grows
- Zuellig Pharma’s warehouse capacity in both Hong Kong and Macau has expanded. The main pharmaceutical warehouse in Macau has more than doubled. The main Hong Kong Distribution Center in Tsing Yi has increased by 70,000 square feet.

- An automated order fulfillment system is being installed at the Tsing Yi Distribution Center.

- A new patient solutions service has been launched in both Hong Kong and Macau, headed by Ms. Kevina Chan, Patient Solutions Manager.

Our promise

Zuellig Pharma’s commitment to collaboration, innovation and passion for excellence are the keys to building strong successful partnerships with our clients and customers. eSolutions is the future of healthcare supply chain management.

References

1. Hong Kong Pharmaceuticals and Healthcare Report Q4 2015. (2015). BMI Industry Report & Forecasts Series, pp15-34. http://www.bmiresearch.com/. Accessed August 17, 2015.
2. IMS Market Prognosis 2014-2018, Hong Kong. (2014). IMS Health.
3. Tsang, A. (2015). “Medical & Healthcare Equipment Industry in Hong Kong”. HKTDC Research. http://hong-kong-economy-research.hktdc.com/businessnews/ article/Hong-Kong-Industry-Profiles/Medical-Healthcare-Equipment- Industry-in-Hong Kong/hkip/en/1/1X000000/ 1X00409R.htm. Accessed August 21, 2015.
4. Hong Kong Pharmaceuticals and Healthcare Report Q4 2015. Op. cit. pp73-76.
5. IMS Market Prognosis 2014-2018, Hong Kong. Op. cit.
6. “Healthcare finance reforms debated again”. (2015). Economist Intelligence Unit.
7. Ibid.
8. IMS Market Prognosis 2014-2018, Hong Kong. Op.cit.
9. “Progress of the General Outpatient Clinic Public-Private Partnership Programme”, briefing paper. (2015). 1st ed. Hong Kong: Legislative Council Panel on Health Services. http://www.legco.gov.hk/ yr14-15/.../hs/papers/ hs20150316cb2-993-5-e.pdf. Accessed August 28, 2015.
10. Ibid.
11. IMS Market Prognosis 2014-2018, Hong Kong. Op. cit.
12. Tsang, A. (2015). Op.cit.
13. IMS Market Prognosis 2014-2018, Hong Kong. Op. cit.
14. Hong Kong Pharmaceuticals and Healthcare Report Q4 2015. Op.cit. pp49-65.
15. Ibid, pp15-34.
16. IMS Market Prognosis 2014-2018, Hong Kong. Op. cit.
17. Hong Kong Pharmaceuticals and Healthcare Report Q4 2015. Op.cit. pp15-34.
18. Ibid.
19. IMS Market Prognosis 2014-2018, Hong Kong. Op. cit.
20. Ibid.
21. Hong Kong Pharmaceuticals and Healthcare Report Q4 2015. Op. cit. pp49-65.
22. Ibid.


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