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Following is the speech (English only) by the Acting Chief Executive, Mrs Anson Chan, at the 31st annual dinner of the Hong Kong Association of the Pharmaceutical Industry tonight (Tuesday):

Ms Chin, distinguished guests, ladies and gentlemen,

When I was asked by the association to speak tonight I looked back at the speech that I gave to members of this association some seven years ago to see if I could glean any useful information. Well that proved to be a quick search - because the last time I spoke was about the new airport and of course since then the airport has been built and I am glad to say that it is now operating wonderfully well, and I hope you all agree. So to prepare for tonight I did a little research on the history of the pharmaceutical industry. I have now formulated my own theory on the history of medicine, which I will now like to share with you all for the first time.

In 2000 B.C., when a man went to the local witch doctor complaining of an earache, the witch doctor would say: "Here, eat this root." A thousand years later, the tribal healer would proclaim: "Roots are unholy, you must pray to the gods." By 1850, doctors were saying: "Prayers are superstitious. Drink this tonic." In the 1940's, the general practioner would say: "Tonics are snake oil. Swallow this pill." By 1985, the family physician advised: "That pill is ineffective, take this antibiotic." Nowadays, of course, patients are told: "Antibiotics are artificial. Here, eat this root!"

So we move from 2000 B.C. to 2000 A.D. and I would like first of all to wish everybody a happy, healthy and prosperous New Year. The fact that the lights are on, the elevators are working and mobile phones are still ringing is proof enough that Hong Kong has crossed the Y2K threshold with flying colours. But then again, Hong Kong was among the best prepared in the world, in terms of Y2K compliance and Y2K contingency plans. On New Year's Eve, on New Year's Day and yesterday, the first working day, thousands of civil servants and health sector workers were on duty monitoring the Y2K rollover and were ready to respond to any difficulties that may have arisen. Thankfully, there were virtually no problems. We owe a large debt of gratitude to all of those who worked very hard over the past few years - and in the past few days - to ensure that the Y2K rollover turned out to be just another day on the computer calendar. It seems that the new millennium has gotten off to a good start.

I hope we can keep that positive momentum going throughout the year as we embark upon wide-ranging reforms that will affect many of you here, and they are reforms in the health and welfare systems in Hong Kong.

Various proposals in each sector have generated considerable public comment and input. But one thing is clear: there is a consensus on the need to reform both our health and welfare systems in two crucial areas: service delivery, and financing.

In the past century, indeed the past decade, there have been tremendous achievements in the medical field. People today are healthier and live longer, because of these advances in medicine and medical technology. Over the decades, Hong Kong's health care system has coped remarkably well in making health care available to all those who need them.

But, as you all know, our health system is under considerable stress. And a system under stress will eventually become a sick system. That is why it is essential that we start this new millennium with a far-reaching reform of the health system in Hong Kong. The challenge that we have to face is to satisfy community expectations for accessible, affordable, sustainable and quality health care.

Within the next few months, the government will issue a Green Paper on the future of public health care in Hong Kong. This next step forward follows closely on from the comprehensive Harvard Report released in April last year and, subsequently, more than 2,200 written submissions relating to that report and health care reform generally. Naturally, a subject as vitally important as our long-term health policy has involved widespread consultations by the government with the many stake-holders in the reform process.

There are, in our view, four key areas that need to be addressed.

First of all, we must make sure that our health care system is cost effective. We will need to improve the interface, between different levels of care and between the public and private sectors. One way to do so is to make better use of information technology, to streamline the transfer of patients and patient information. Another way would be to standardise clinical protocols. In the longer term we should gradually change the mix of hospital-based and community-based health care, to provide patients with a balance of preventive, promotive, ambulatory and inpatient services in a seamless manner.

Secondly, we must take prompt action to ensure the long-term financial viability of our health care system. This was a central theme addressed in the Harvard Report. Regardless of the means of patients, as you know, we are currently subsidising 97% of the costs of public hospital patients. The questions that have to be asked is should those patients with means pay a more realistic share for their treatment in the public health system? Should subsidies be directed to the most appropriate services and the most needy? Should we discourage inappropriate use and misuse of services; and should a safety net be provided for those who cannot afford to pay. Do we continue to provide accident and emergency services free of charge, given that semi-urgent and non-urgent cases now account for about three-quarters of the Accident and Emergency case load? If patients are required to pay, how can we ensure that patients are not deterred from seeking treatment in genuinely urgent cases? Do we do the same for drugs and new technology to foster more appropriate use and reduce waste?

In the longer term, we need to broaden and diversify healthcare funding, and we need to do that in a way that suits local circumstances. The Harvard Report's recommendation for a mandatory social insurance scheme has not been well received by the public and healthcare professionals. But it has led to considerable discussion on alternative financing options such as medical savings schemes and voluntary insurance. There is no perfect solution; because each one of these solutions involves trade-offs.

Thirdly, we need a more proactive public health system. In this regard, we are looking to the Department of Health to assume an expanded role as the government's health adviser. The department will maintain close co-ordination with other departments whose activities have a bearing on community health. The department will also develop a Public Health Information System to effectively track emerging disease and public health trends. This will lead to better use of resources and help prioritise public health programmes.

Fourthly, we must do more in terms of quality assurance. A system of continuing medical education will help our medical practitioners to keep abreast of the rapid advances in medicines and technologies. A system of clinical audit and accreditation will include peer review, self regulation, risk management and regular clinical audit to ensure standards of care are consistent and effective. And, we need a patient redress system that is credible, transparent, user-friendly and meets public expectations.

The Green Paper will outline our further thoughts and our proposed way forward on these difficult issues, with a proposed timetable for the implementation of different reform measures based on priority and urgency. I urge everyone in the medical fraternity to participate actively in the next round of consultations.

This year we must also press ahead with a much-needed reform of our social welfare system. Like the reform of our health care system, this will not be easy. It will require close co-operation and liaison between the government and the social welfare sector, mainly the NGOs which receive government subsidies.

We have to tackle several issues. In particular, we need to rein in the recent rapid growth in recurrent welfare spending, which has jumped from $7 billion in 1992/93 to $29.1 billion in 1999/2000. Direct subsidies to welfare NGOs have jumped from $2.6 billion five years ago to $6.2 billion in the current fiscal year. We need a system which provides the most cost-effective use of finite resources. We need a system which is more flexible and can respond more quickly to changing community needs.

From April this year, competitive bidding will be gradually introduced for welfare service units which have yet to be allocated to service providers. The bidding process will be based on quality and on price. This will be a more open and transparent system and allow NGOs to propose innovative service delivery systems. It will start to allow the private sector to participate more in the provision of public welfare services, particularly in areas in which they are already active such as meals, residential accommodation and day nurseries.

We are discussing with the welfare sector proposals to change the present funding system which is based primarily on rigid input funding parameters, on which has been constructed considerable input controls. This has created a bureaucratic process which inhibits flexible deployment of resources by NGOs to meet changing needs. The system also generates disincentives for efficiency and has stifled innovation. We intend to introduce a new "lump-sum" funding arrangement for NGOs between April this year and April 2002, which will give NGOs greater flexibility to utilise resources to meet agreed service outputs and quality standards. For the first time, NGOs will have total management responsibility for their resources. The new financial flexibility should lead to greater innovation, more cost-effective service delivery and greater accountability for the use of public funds. This will be an integral part of a total package which will more clearly define the relationship between the Government and the NGOs.

These changes will make for a fairer and more efficient welfare sector - a sector with a greater responsibility to link results with actual expenditure. These changes, as I said, will not be easy because they will require a fundamental change in the culture of the subvented welfare sector. But I am confident that NGOs, their management and frontline staff, will work with the government to take these changes forward. We have to work together to ensure the long-term development, sustainability and effectiveness of welfare services in Hong Kong. We simply cannot afford to maintain the status quo.

Our welfare system not only deals with organisations that help those in need, it also deals with individuals in need. This we do mainly through Comprehensive Social Security Assistance, or CSSA. Throughout the past decade, we have seen an increasing dependence on CSSA - expenditure rose from $3.4 billion in 1994/95 to $13 billion in 1998/99 which now accounts for 7.8 per cent of government's total recurrent expenditure, compared to only 2 per cent in the early 1990's.

CSSA spending will increase in the coming years, due to an aging population and a high - at least by Hong Kong standards - unemployment rate. As a government, and as a society, we have a duty to provide for those in need. But providing for those in need does not simply mean providing them with money and nothing else.

We need to help people help themselves. And this we are doing through the Support for Self-reliance Scheme introduced in June last year. The objective is to provide additional assistance and encouragement to help unemployed CSSA recipients find work.

We are encouraged by the initial results. CSSA case loads and expenditure have stabilised in recent months. The number of active unemployment cases is on a downward trend - in fact they have dropped by about 11 per cent since the scheme was introduced. This has reinforced our strong belief that CSSA is only a temporary assistance for the unemployed who should be encouraged to become self-reliant and independent. By offering services and training that helps recipients rejoin the workforce we are addressing the cause of the problem, rather than trying to remedy the consequences. We will step up our efforts to help employable CSSA recipients overcome barriers to work and to maximise their chances for employment. Ultimately, this will take them outside the CSSA net.

Finally, I would like to talk briefly about the development of Chinese medicine, because I know this is an area of great interest to your industry. The commercialisation of Chinese medicine brings us full circle back to my earlier analogy about tonics and tree roots. Except with Chinese medicine it is an evolution from tree roots to tonics. Who knows what medicinal marvels await discovery in the bark and fungus and herbs that have been regularly dispensed for thousands of years by the practitioners of traditional Chinese medicines. We are taking a step-by-step approach to unlock those secrets.

The Chinese Medicine Ordinance, enacted in July last year, provides the regulatory framework under which the Chinese Medicine Council will work. The Council's most immediate task will be to draw up subsidiary legislation that will pave the way for the registration of Chinese medicine practitioners. We hope to begin the registration process in the next few months. A code of practice setting out the guidelines for the professional conduct of Chinese medicine practitioners is also being drawn up by the Council.

In conjunction with this, we will begin licensing the traders and manufacturers of Chinese medicines. The registration of proprietary Chinese medicines will be introduced in phases starting this year. The safety, efficacy and quality of proprietary medicines will be assessed before they can be registered. Similarly, the dispensation, storage and labelling of Chinese herbal medicines will also be regulated.

These initial steps will pave the way for a more systematic and focused development of Chinese medicine in Hong Kong. We expect the new regulatory framework will help improve standards in the local Chinese medicine industry and the quality of Chinese medicine based products. We are looking into how the Government can, in line with our free market philosophy, support and facilitate private sector initiatives in manufacturing, research and development. Our long term aim is to help broaden Hong Kong's medical science and technology base and facilitate the commercialisation and export of Chinese medicinal products.

I am certain that members of HKAPI will play a leading role in not only this endeavour, but also in helping us take forward our reforms of the health care system in Hong Kong. We very much welcome your involvement and look forward to working closely with you all in raising the standards of health care in Hong Kong.

Thank you.

Photo: The Acting Chief Executive, Mrs Anson Chan, attended the 31st Annual Dinner of the Hong Kong Association of Pharmaceutical Industry. Picture shows Mrs Chan delivering a speech.

End/Tuesday, January 4, 2000

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