DEATHS CAUSE HONG KONG GOVERNMENT TO REVIEW DRUG

C O N F I D E N T I A L SECTION 01 OF 04 HONG KONG 001687

SIPDIS

STATE FOR EAP/CM, PASS USTR FOR ALTBACH

E.O. 12958: DECL: 09/04/2019
TAGS: ECON EFIN EINV ETRD KIPR HK CH
SUBJECT: DEATHS CAUSE HONG KONG GOVERNMENT TO REVIEW DRUG
SAFETY OVERSIGHT

Classified By: A/DPO Martin Murphy for reasons 1.4 (b) and (d)


1. (SBU) Summary: A tainted locally manufactured generic drug
caused five deaths in March 2009 in Hong Kong and prompted
the government to initiate a sweeping review of its drug
safety oversight mechanisms. A review committee with a
special focus on generic pharmaceuticals will provide
specific recommendations for public comment by the end of
2009 to improve drug safety, efficacy and manufacturing
quality. Industry observers believe the committee will
recommend tighter manufacturing standards, more rigorous
testing procedures, and changes to pharmacy
registration/oversight to bring Hong Kong's drug safety
regulatory framework more in line with developed countries.
Private hospitals have banned the use of generic prescription
drugs for in-patients, due to safety concerns. This stands
in sharp contrast to the public hospitals, where generic
pharmaceuticals constitute approximately half of all drugs
consumed. End summary.


2. (C) Comment: The Hong Kong government (HKG) was
embarrassed by the recent generic drug-related deaths that
called into question the government's drug safety framework.
U.S. branded drug manufacturers such as Pfizer and Merck have
complained for years about Hong Kong's relatively loose
regulation (compared with the United States, European Union,
Australia and Japan) of its local generic drug manufacturers,
importers and distributors. The U.S. firms fully support the
government's review committee and look forward to playing an
active role in formulating the committee's recommendations.
They note that generic drugs will likely face increased
regulatory hurdles in testing, certification and
manufacturing oversight, thereby narrowing the generics'
price advantage versus branded pharmaceuticals. The HKG
clearly wants to move forward quickly with legislative
amendments designed to improve drug safety, while maintaining
the substantial cost savings that high-quality generic drugs
can provide. Health officials and members of the review
committee expect the committee's report to directly address
most areas of concern and lead to modernization of Hong
Kong's pharmaceutical-related laws and regulations. In the
meantime, safety concerns remain centered on unscrupulous
drug procurement practices by community-based pharmacies and
importers, drug dispensing by non-qualified individuals, and
the use of outmoded manufacturing and product testing
requirements for generic drugs. End comment.

Background
--------------


3. (U) The manufacture and sale of pharmaceutical products in
Hong Kong are regulated through the Pharmacy and Poisons
Ordinance (PPO) of 1964. Pursuant to the PPO,
pharmaceuticals sold in Hong Kong must be approved by the
Pharmacy and Poisons Board (PPB),a statutory body within the
Department of Health (DOH). The PPB determines whether a
pharmaceutical product may be registered and sold based
primarily on three criteria: safety, efficacy and
manufacturing quality. The PPB has approved 19,500 drugs for
sale in Hong Kong, of which almost 13,000 are imported.
Generic products account for approximately 30 percent of
total pharmaceutical sales here.

Deaths Prompt Generic Drug Regulation Review
--------------


4. (U) The effectiveness of the PPO and Hong Kong's drug
safety oversight mechanisms were called into question in
March 2009, when five Hong Kong residents died after
ingesting a locally produced generic drug that was
contaminated by a lethal fungus during its manufacture. Hong
Kong's Director of Health Lam Ping-yan confirmed that mold
had formed during a delay between the mixing of the drug's
granule powder and its compression into tablets by Europharm
Laboratories, one of Hong Kong's largest manufacturers of
generic pharmaceuticals. The DOH's subsequent testing of 41
other Europharm drugs found no similar contamination or other
health risks.


5. (SBU) The deaths prompted the HKG's Food and Health Bureau
(FHB) to establish a Review Committee on Regulation of
Pharmaceutical Products (Review Committee),chaired by FHB
Permanent Secretary Sandra Lee. The 20-member Review
Committee is comprised of individuals representing local and
international drug manufacturers, pharmacies, doctors,
hospitals and consumers. It will assess Hong Kong's generic
drug regulation system, quality control mechanisms,
legislation and the drug procurement procedures of the HKG's

HONG KONG 00001687 002 OF 004


public Hospital Authority (HA). In a related development,
the DOH established a working group to draft proposals
designed to strengthen the Good Manufacturing Practices (GMP)
certification requirement that plays a large role in Hong
Kong's generic drug approval process. The HKG expects the
Review Committee and working group to complete their
assessments by 2009 year-end, with the final report to be
published for public comment. FHB Principal Assistant
Secretary Shirley Lam told Econoff on August 27 that the
Review Committee's report will form the basis for legislative
amendments and new regulations governing drug safety. She
confirmed that the report will address "all areas of the drug
supply chain."

Views of Private Hospitals and Pharmacists
--------------


6. (C) The Hong Kong Private Hospitals Association (PHA)
represents 13 member hospitals that contained eleven percent
of Hong Kong's total hospital beds at 2008 year-end. PHA
Chairman Alan Lau is a member of the Review Committee. He
told Econoff on August 18 that his association is "concerned"
about generic drug safety in Hong Kong. He said the PHA
established a Code of Practice in July 2009 that bans the use
of generic drugs for in-patients at PHA hospitals; only
branded pharmaceuticals from the original manufacturer are
allowed. For out-patients, the PHA allows doctors to only
prescribe a narrow range of generic drugs to treat
non-life-threatening, temporary ailments such as headaches or
allergies. The PHA's policy stands in stark contrast to the
HA's continued efforts to save money by purchasing generics
instead of branded drugs. HA Chief Pharmacist Anna Lee told
Econoff on August 28 that "about 50 percent of HA's
pharmaceutical product purchases are generics." She
explained that, like other government-run providers of health
care around the world, the HA remains under "intense budget
pressure" and views the purchase of high-quality generic
drugs as an effective cost-saving measure. She was unaware
of the PHA's policy against generic drug use in its
hospitals.


7. (C) Practicing Pharmacists Association of Hong Kong
(PPAHK) members comprise a majority of Hong Kong's 1,785
government-registered pharmacists. PPAHK President Iris
Chang holds a pharmacy degree from St. John's University in
New York and is a member of the Review Committee. She
questioned whether the Review Committee's recommendations
will lead to substantive reforms and criticized the DOH's
drug safety efforts. Chang told Econoff on August 12 that
the HKG "wants to protect the interests of local generic drug
manufacturers, importers and distributors." She asked, "Why
are Hong Kong's drug safety efforts so far behind other
developed parts of the world? The DOH is under-staffed and
viewed by industry as a bird without wings." DOH Chief
Pharmacist Anthony Chan (Review Committee member and an
ex-officio member of the PPB) confirmed to Econoff on
September 2 that "the pharmaceutical-related operations of
DOH are under-funded." He said, "We hope the Review
Committee's work will lead to increased staffing and a bigger
budget for us."

Public Hospitals Overloading Local Drug Manufacturers?
-------------- --------------


8. (C) Pfizer Hong Kong Country Manager Stephen Leung told
Econoff on August 20 that the HA shifted its drug procurement
practices toward generics in 2007 to save money. He said,
"They're giving too many generic drug orders to local
manufacturers that cannot be safely filled; the manufacturers
are exceeding their production capacity." Leung added that
local drug producers source many of their pharmaceutical
ingredients from mainland China, thereby creating an
additional safety risk. "The quality assurance programs for
ingredients used by local generic drug producers are
insufficient and lack proper government oversight," he said.


"GMP Plus" and Bioavailability/Bioequivalence Testing
-------------- --------------


9. (C) The Hong Kong Association of the Pharmaceutical
Industry (HKAPI) represents the interests of 42 international
drug companies engaged in pharmaceutical research and
development. Companies without R&D programs, such as Hong
Kong-based generic drug manufacturers, are not allowed to
join the HKAPI. The organization's members together account
for approximately 70 percent of prescription medicines sold
in Hong Kong, and HKAPI Executive Director Sabrina Chan sits

HONG KONG 00001687 003 OF 004


on the Review Committee. Steven Hardacre, HKAPI President
and Managing Director of U.S. drug manufacturer Merck & Co.,
told Econoff on July 31 that Hong Kong's regulatory framework
governing generic drug manufacturing and certification must
be "overhauled." He described two "high priority" steps
needed to improve the safety of generic drugs here: stricter
manufacturing requirements compared with the current GMP
guidelines; and bioavailability/bioequivalence (BA/BE)
certification to ensure the efficacy of generic drugs
compared with their branded counterparts.


10. (C) The GMP standards enforced by the FHB are primarily
used in developing countries, according to Hardacre, and
should be "upgraded" to the stricter drug manufacturing
safety standards adopted by the United States, European
Union, Australia, Canada, Japan and Singapore. He said
several of Hong Kong's 39 licensed drug manufacturers produce
generic drugs under "less than advanced" conditions that may
compromise consumer safety. "Moving beyond GMP standards
would eliminate some smaller local generic drug
manufacturers, if they are unable to upgrade their
manufacturing processes and facilities to meet the new
government requirements," he said. FHB's Lam confirmed to us
that the HKG intends to use the Review Committee's report to
"significantly upgrade" Hong Kong's GMP standards. She said
FHB conducted "lots of surprise checks" of local generic drug
manufacturers in the wake of the Europharm-related deaths.
"Most of the companies" were in compliance with Hong Kong's
existing GMP standards, according to Lam.


11. (C) The GMP issue extends beyond drugs manufactured in
Hong Kong to those imported from China and other developing
countries. In his June 10 response to an inquiry from
Legislative Council (LegCo) member Andrew Cheng, FHB
Secretary York Chow confirmed that Hong Kong allows the sale
of drugs made in China, if they have a GMP certificate issued
by China's State Food and Drug Administration. Industry
observers generally consider the PRC's drug manufacturing
inspection and enforcement efforts to be less effective than
those of Hong Kong. Pfizer Legal Director Alex Cheung told
Econoff on August 10 that Hong Kong has approved for sale
several GMP-certified generic drugs manufactured in China,
Indonesia, India and the Philippines that have "questionable"
manufacturing quality and efficacy.


12. (SBU) BA/BE testing of generic drugs ensures that the
generic product possesses essentially the same efficacy,
active ingredient dosage delivery over time, and safety of
the branded drug it emulates. The United States, EU,
Australia and Singapore mandate BA/BE testing of generic
drugs as part of their respective pharmaceutical registration
processes. While the HA requires BA/BE certification of
generic drugs approved for use in public hospitals, the FHB
does not require BA/BE certification for generic drugs sold
in local pharmacies. Lam said FHB intends to phase in a
BA/BE certification mandate beginning next year for certain
critical drugs sold in pharmacies, such as those used to
treat cardiovascular or neurological disorders. She said
testing labs at several Hong Kong universities "need to be
upgraded to perform accurate and timely BA/BE testing" of
locally manufactured generic drugs. DOH's Chan confirmed
Lam's statements and added that BA/BE certification will be
mandated as of April 1, 2010 for drugs that treat epilepsy,
with other "highly sensitive" drug to follow.

Pharmacists "Tools" of Unscrupulous Pharmacy Owners
-------------- --------------


13. (C) Chang said the ownership structure of Hong Kong's
numerous non-chain pharmacies also diminishes drug safety;
most local pharmacies are owned by non-pharmacists. She
cited several examples of pharmacy owners stocking
counterfeit, expired or illegally procured pharmaceuticals,
often unbeknownst to the pharmacist employed in the shop.
The pharmacist faces prosecution when Hong Kong Customs raids
the pharmacy. Chang said, "I advise internationally trained
pharmacists to avoid working in Hong Kong. They are often
used as tools by pharmacy owners and then held criminally
liable for the owners' shenanigans." Chang wants the HKG to
emulate the UK, Canada and Australia in requiring
community-based pharmacies to be majority-owned by registered
pharmacists. To help address the problem of inventory
manipulation by unscrupulous pharmacy owners, Lau said the
Review Committee may recommend rules requiring pharmacists
to: sign off on each drug procurement; use only licensed
importers and distributors; and certify the legal compliance
of their respective pharmacy's drug inventory. HA's Lee
said, "We advise our patients who visit community-based

HONG KONG 00001687 004 OF 004


pharmacies to ask to see the pharmacist and get their drugs
directly from him or her." DOH's Chan told Econoff that the
pharmacy ownership issue will not be addressed by the Review
Committee. He said, "The government attaches great
importance to free trade and tries not to get in the way of
who owns what."

No Separation of Prescribing and Dispensing
--------------


14. (C) While many developed economies require out-patient
prescription drugs to be sold through regulated pharmacies,
doctors in Hong Kong are allowed to prescribe, sell and
dispense pharmaceuticals from their offices and clinics.
This leads to patient injuries and occasional deaths,
according to HA's Lee, when untrained employees in doctors
offices or clinics misunderstand a doctor's verbal or written
instructions and provide a patient with an incorrect medicine
or dosage. Lee said many of Hong Kong's medical doctors
significantly boost their earnings through drug sales to
patients, and the doctors' "political clout" has stymied the
HKG's repeated efforts to abolish the practice. She said the
Review Committee "is not going to touch" the issue. In
addition to the safety concerns generated when
non-pharmacists dispense prescription drugs, U.S.
manufacturers complain that the practice hurts sales of
branded pharmaceutical products. Lee acknowledged that
"doctors in Hong Kong prefer to sell generic drugs whenever
possible, because their sales margin is bigger."
MARUT