High price of oncology treatments creates cut-price drugs trade in Hong Kong

The high prices of pharmaceutical treatments in mainland China has led to a flourishing trade in cut-price drugs in Hong Kong, including prescription-free cancer and hepatitis C medicines, according to Bloomberg. Due to China's lengthy and complex regulatory approval process, shortage of some treatments, and patient concerns over drug safety and quality, an increasing number of consumers are travelling to Hong Kong, where some pharmacies sell high-cost drugs illegally.

Bloomberg journalists reportedly visited 40 pharmacies in Hong Kong – which has a separate regulatory and legal system from the mainland – and discovered "several" willing to sell treatments without prescription including AbbVie (US)'s Viekira Pak (paritaprevir + ritonavir + ombitasvir + dasabuvir), Roche (Switzerland)'s breast cancer drug Herceptin (trastuzumab), Gilead Sciences (US)'s hepatitis C treatment Sovaldi (sofosbuvir), Bayer (Germany)'s liver cancer treatment Nexavar (sorafenib), and Novartis (Switzerland)'s leukaemia drug Glivec (imatinib). 

The prices of drugs available in mainland China were often cheaper in Hong Kong. One pharmacy, for example, offered a full course of Sovaldi for approximately USD2,800, compared with its price tag of USD84,000 in the United States (although it could not be proven whether the drug was genuine). For drugs unavailable in China, prices followed those in the United States. 

The flourishing grey market in Hong Kong is due to several reasons, including mainland China's lengthy and complex drug approval process, which has raised concerns in the industry (see China: 9 December 2014: Multinational pharma firms warn greater regulation in China will cause drug approval delays).

In addition, pharmaceutical distribution chains in China are typically complicated systems involving multiple intermediaries, with mark-ups at various stages pushing up the drugs' final cost to the patient. As many prescription drugs are not covered by state insurance in China, patients often face extremely high costs for serious illnesses. At the same time, import duties in China can be as high as 17%, compared to 0% in Hong Kong. 

According to William Chui, president of the Society of Hospital Pharmacists of Hong Kong, around 90% of oncology treatment sales are to tourists from mainland China, as local residents typically receive their drugs from hospitals or physicians. At the same time, local pharmacies face high rent and other costs. "How can they survive and pay the salary of a pharmacist and the rental cost? ... You think they can get by just selling toilet rolls, formula powder, shampoo? Of course not," Chui was quoted as saying.

Company spokespeople contacted by Bloomberg had varied responses to the report. Roche's spokesperson said the main customers for the company's cancer drugs in Hong Kong are the Hospital Authority and oncologists. However, the company monitored market demand and would alert authorities to any "unusual activity". A Novartis representative said the company is "committed to preventing the diversion and counterfeiting of all our products to protect the safety of patients in all countries". Bayer's spokesman said, "We manufacture prescription drugs, ones that need to be prescribed by doctors." AbbVie said it expected pharmacies to dispense Viekira Pak only to patients with doctor's prescriptions; while Gilead said its drug has been available for prescription in Hong Kong since July, primarily through gastrointestinal specialists and hepatologists, and is working to receive market access in China.

Outlook and implications

The side trade in Hong Kong of otherwise costly medicines is a point of concern for pharmaceutical companies, patients, and the local authorities of both China and Hong Kong. Given China's soaring cancer rates due to population ageing and serious pollution – the country now accounts for 25% of all cases worldwide, according to the World Health Organization – demand for treatments is only expected to continue. As one patient put it, "This is life or death, so of course we will do all that it takes to get the best treatment."

For the pharmaceutical industry, the grey market in Hong Kong reflects frustrated demand among mainland Chinese patients, who companies are effectively prevented from meeting due to the sclerotic drug approval system. At the same time, the rush to buy cheaper drugs also reflects patient frustration over high drug prices, which have come under widespread attack in recent years. However, overall it is difficult to predict concrete measures that can be taken by pharmaceutical firms (other than lobbying) to stem the illegal sale of medication, as the issue is essentially one of law enforcement. Despite routine inspections by Hong Kong's Department of Health, the trade is flourishing as increasingly innovative drugs become available.

For patients, the availability of some pharmaceuticals in Hong Kong can be a godsend if they are otherwise unavailable in mainland China. However, despite belief to the contrary, the risk of counterfeit medication still exists in Hong Kong, particularly among the lower-tier, local outlets, which receive scant oversight. 

In terms of local authorities, China's Food and Drug Administration has stepped up efforts to reduce the country's drug lag and raise the standard of local manufacturers (see China: 18 August 2015: China to reform drug approval system to expedite authorisation of innovative drugs). However, the reforms are nevertheless taking time to have a real effect. Hong Kong is likewise facing challenging drug approval reforms (see Hong Kong: 1 September 2015: Hong Kong needs simpler drug approval system and drugmakers should share costs, experts say).