"Sex and drugs and rock and roll"

Mr Pelzel, Distinguished Guests, Ladies and Gentlemen:

I am very happy to be here with you this evening, even though I had indeed assumed that the question of funding might come up. That is something you get used to when you are the Financial Secretary. I had told my colleagues that I would be allowed to say anything I liked this evening, and one suggested that I take as my theme "Sex and drugs and rock and roll". Well, I think we have been having too much rock and roll on the stock markets lately, and sex is a private matter, so that leaves drugs, which you know far more about than I do. So, I'm entirely happy to talk a bit about healthcare funding, especially since I find myself at one with much of what Carl has just said.

My colleagues and I are very well aware of the damage that ill considered cost cutting measures can do, not simply to the pharmaceutical industry, but to rational, cost effective health care for the community. I want to assure you that we are not in the business of imposing any such measures for fiscal reasons. We have an economy and a fiscal position that, in the felicitous words of one recent commentator, is running "like an energiser battery bunny". Nor are we about to impose cost cuts for ideological reasons.

What has prompted the review announced in the Chief Executive's Policy Address is, on one hand, exactly those points set out by Carl a few moments ago - the increasing economic burden of health care for the elderly; rising public expectations; the growing costs of new technologies and options for treatment. On the other hand, it is the knowledge that our present structure of health care financing is badly balanced. Of the 4.8 per cent of GDP spent on health care, only half goes to the public sector, which treats over 70 per cent of patients. That says something about the efficiency of the public sector, but it says a great deal, too, about the price structure. Hong Kong does have poor people, who need subsidised health care, but I haven't heard anyone seriously suggesting they make up 70 per cent of the population, or even near that!

One of the most striking characteristics of Hong Kong over the last few decades has been the growth in the size and affluence of the middle class, people well able to afford to pay, or to insure against their medical costs, rather than to receive the heavy public subsidy needed to give decent levels of care to the poor.

The aim of our review then is not to cut costs, but to ensure - as you have advocated - that Hong Kong should have a sensible financing structure for its healthcare system, a structure that will respond flexibly and efficiently with changing patterns of demand; a structure that will, as far as possible, give individuals in the community the dignity of being treated like customers - able to choose the services they need at the costs they can afford - rather than having to take whatever level of service the bureaucrat and politician is able to persuade the tax payer to subsidise.

Giving choice and opportunity, and keeping tax and subsidy low so that people can make their choices rationally and efficiently, are reasons why Hong Kong has prospered so well in the past, and reasons why I'm confident that Hong Kong will adjust quickly and recover rapidly from the recent shake-up on the stock and property markets.

Another reason I am confident about Hong Kong is industries like yours : a sound business that is steadily developing to bring lasting benefit.

The history of the Pharmaceutical industry provides a very good illustration of a process from which Hong Kong benefits greatly, a process to which we have to pay close attention if we are to continue to maintain our economic strengths. That process is the upgrading of industry, not just through the discovery of new products, but through constant

refinement in technology, upgrading of productivity and improvement in marketing. It is a process that depends on education and specialisation.

Let me elaborate.

So far as we know, the first record of a pharmaceutical product comes from the 'herbals' of the Emperor Shen Nun, dated around 2735 BC, which describes a product known as 'Ch'ang Shang', which is now known to contain anti-malarial alkaloids. That puts your industry in place almost from the dawn of writing, but it is clear from the historical record that there was little systematic development of the preparation and use of drugs for many hundreds of years. In 200 AD, the Roman doctor, Galen, noted the importance of maintaining purity in the preparation of drugs, but again, no code of practice or attempt to introduce standards and promote research took place until the sixteenth century, when the first pharmacopoeia - detailed descriptions of drugs, their uses and instructions for making them - were published in Nuremberg, and the Society of Apothecaries was established in London. As education and specialist training spread, experimentation began to increase. By the early nineteenth century, as new forms of factory developed, the whole scale of production of drugs for medical use changed. In 1841, the Pharmaceutical Society was set up to advance this new industry. In the 1850s, aniline dyes were developed; by the 1890s, Aspirin, barbiturates and Salvarsan were discovered, to be followed in this century by an every increasing torrent of new treatments - penicillin, sulfa drugs, controlled release drugs, bio-engineered vaccines and much more.

This crescendo of improvement illustrates the beneficial effect of improving education and increasing specialisation to the development of business. New technology may take away old, time consuming jobs, but it creates new employment in other fields. Better research and marketing not only helps develop and sell old products, but finds new products and new markets as well.

Here in Hong Kong we are investing heavily in education and training, investing heavily in institutions and infrastructure that will help to boost productivity, improve research and deepen the pool of talent on which business can draw.

In your field, we now have more than 1,000 registered pharmacists and over 30 more graduate each year. Our six universities produce over 1,000 graduates a year in bio-technology related disciplines. The planning that is under-way to provide for professional registration of traditional Chinese medicine practitioners, and to set standards for the teaching and development of this approach to medical care provides an exciting new area for your industry to build on.

I am encouraged that you have been making use of the support services that Government has made available. Since the establishment of the Industrial Support Fund in 1994, one third of all the projects it finances have been directly related to biotechnology, pharmaceuticals, or Traditional Chinese Medicine development; two of the six projects in the Co-operative Applied Research and Development Scheme - under which Hong Kong businesses and researchers can collaborate with researchers in Mainland China - have come from the pharmaceutical industry, as have two projects in the local Applied Research and Development Scheme.

Whether the next big developments in your industry will come from the research that is being funded, or from breakthroughs in production technology, or from Hong Kong's efficiency as a point for distribution and financing of your products, I cannot predict and will not dictate. What I can do is assure you that on every front, we are working to make Hong Kong work better for you. It is the enduring enterprise of businesses like yours that is at the heart of Hong Kong's prosperity, not speculation on property or stocks.

So I take very great pleasure in thanking you, not just for the invitation to be with you tonight, but for the contribution that you make to Hong Kong in your many different ways. I am glad to have this opportunity to wish you all continuing success in all the business that you do in Hong Kong and through Hong Kong, for many, many years to come.

Thank you.