Hong Kong's negative pharmaceutical trade balance is forecast to widen over the next five years. The main drivers are increased imports of affordable generic medicines from mainland China at the expense of local production and moderation of demand for expensive patented drugs from abroad. Through to 2014, BMI projects compound annual growth rates (CAGRs) in pharmaceutical imports and exports of 8.86% and 9.11% respectively.
According to UN Comtrade, the value of Hong Kong's pharmaceutical imports reached US$1.08bn in 2008. This was a 17.3% increase on the previous year and more than double the 2004 figure of US$488mn. The majority of Hong Kong's medicine imports are patented products from developed states, such as Switzerland, Ireland, the US and Belgium.
However, it is important to note that mainland China - which specialises in the manufacture of cheap off-patent drugs - is the Special Administrative Region (SAR)'s third-largest import partner. The total value of Hong Kong's pharmaceutical imports at ex-manufacturer prices will reach US$2.09bn by 2014.
The Port of Hong Kong is one of the world's busiest harbours in terms of container transportations. Therefore, a significant proportion of the medicines imported are swiftly exported again. In 2008, the value of medicine re-exported from Hong Kong reached US$820mn, equating to 75% of the total imports. BMI calculates that imports for domestic consumption were US$389mn in 2008.
Hong Kong is renowned for its industrial manufacturing capabilities and pharmaceuticals are no exception. Removing the impact of re-exports, the value of domestic production destined abroad was US$259mn in 2008. The leading destination was China, which received medicines with a value of US$715.7mn.
Over the medium term, BMI believes this practice will decline, as multinationals establish production facilities in mainland China. Other leading export destinations include Australia (US$156.3mn), Macao (US$77.0mn) and Vietnam (US$21.1mn). The total value of Hong Kong's pharmaceutical exports at ex-manufacturer prices will reach US$1.83bn by 2014.
Under the Import and Export Ordinance of the Laws of Hong Kong, all pharmaceutical products and medicines trade must be covered by import and export licences issued by the Trade and Industry Department. Transhipment cargo may be exempted from licensing requirements under certain conditions.
The definition of 'pharmaceutical products and medicines' is any substance or mixture of substances manufactured, sold, supplied or offered for sale or supply for use in: the diagnosis, treatment, mitigation, alleviation or prevention of disease or any symptom thereof; the diagnosis, treatment, mitigation or alleviation of any abnormal physical or physiological state or any symptom thereof; and altering, modifying, correcting or restoring any organic function in human beings or in animals.
Except for 5 controlled medicines (ephedrine, ergotamine, ergometrine, pseudoephedrine and phenylpropanolamine), import licences for pharmaceutical products and medicines must be completed in quadruplicate, while applications for export licences must be completed in triplicate. Submissions are made to the Pharmaceuticals Registration and Import/Export Control Section of the Department of Health.
There is no charge for licences, but the import and export application forms have respective fees of HKD26 (US$3.34) and HKD16 (US$2.06) for each pad of 20 sets. If an individual attempts to circumvent the pharmaceutical trade regulations, they will be fined HKD500,000 (US$64,000) and sent to prison for two years. A digression that involves the aforementioned controlled medicines carries an HKD1mn (US$129,000) fine and a 15-year jail term.