Speeches and Articles by Former Consul General James R. Keith

Remarks by U.S. Consul General James R. Keith at the 35th Annual Dinner of the
Hong Kong Association of the Pharmaceutical Industry

Marriott Hotel, Hong Kong
February 9, 2004

(As prepared for delivery)

I am delighted and honored to have the opportunity to speak tonight to such a distinguished group, including CITB Permanent Secretary Francis Ho, Legislative Councilors Michael Mak and Chan Kwok-keung, the Hospital Authority's Chairman Dr. C.H. Leong, other members of both the Hong Kong and Macau SAR governments, and distinguished guests from the health sector, academia, and, of course, representatives of the world's most successful research-based pharmaceutical manufacturers. And I'd like to thank the Hong Kong Association of the Pharmaceutical Industry and its President - Alice Chin - for the kind invitation to join you here this evening and to make a few remarks.

Let me start off by noting that the Year of the Monkey is supposed to bring good fortune. Certainly the Monkey's attributes of ingenuity, energy, and agility are shared by the member firms of the Hong Kong Association of the Pharmaceutical Industry, so I am boldly predicting that this is going to be your year!

More seriously, allow me to recognize the work that HKAPI has done here in Hong Kong over the past three and half decades. In addition to representing the business interests of your member companies - more than a dozen of which I'm proud to say are U.S.-based firms - you have also spent much time and energy working to improve the standard of health care available to this community, not just by supplying the vast majority of prescription medicines consumed here, but also by your longstanding efforts to engage with Hong Kong's health service providers and the government to improve the system for delivering quality care to the community. In addition, HKAPI companies contribute directly to the Hong Kong economy by providing more than 2,000 highly paid jobs and tens of millions of Hong Kong dollars (HKD 80 million in '02) in R&D funding.

But beyond your economic contributions and your role in shaping Hong Kong's health care policy, there is something even more special about the companies represented by HKAPI that I want to recognize tonight. For over a hundred years now the pharmaceutical revolution has been supplying medicines that have allowed us to conquer malaria, polio, measles, and tuberculosis; medicines that help us fight off cancer and heart disease; and medicines that help hold AIDS, arthritis, and asthma at bay. Largely as a result of the amazing advances in your industry, life expectancy in the United States has risen from less than 50 years in 1900 to 77 years today. I don't know what the life expectancy of a person born in Hong Kong in 1900 was, but just since 1961 it has risen here from 67 years to almost 80. In short, your scientific prowess, creativity and commitment have made for longer and healthier lives for all with access to your products.

But of course the accomplishments of the past are not necessarily going to save us from the perils of the present, let alone the future. A quick look at the last few weeks of headlines from Hong Kong newspapers - for that matter, from newspapers around Asia and the world - makes it clear why the ongoing creativity and productivity of the pharmaceutical industry remains so vital to the global public good. In fact, the rapid mutation and transmission of new diseases like SARS and avian influenza in today's world means that the makers of medicines may play an even more critical role in the new century than in the last. As Hong Kong, the United States, and others across the globe grapple to contain new killer diseases, we will look to you and your colleagues to provide the tools that will eventually allow us to eliminate, or at least tame, these emerging threats to human health and life.

However, as almost everyone in this room knows far better than I, creating new life-saving or life-prolonging drugs is far easier said than done. Like all creative industries, yours depends to a large degree on the financial incentives provided by internationally recognized intellectual property rights, only more so. The pharmaceutical industry is unique in the amount of money, time, and bureaucratic processing that is required to first develop and then bring to market new products. As I understand it, only three out of ten drugs developed produce returns high enough to compensate for the R&D dollars expended in their development, and I understand that on average it takes almost 15 years and costs somewhere in the vicinity of US $1 billion to develop a single new drug. Fifteen years and US $1 billion -- those are staggering figures by any measure, in any market.

Once one appreciates both the importance to public health of a vital and innovative pharmaceutical industry as well as the huge sunk costs that each successful new drug represents, the need to effectively protect the intellectual property of research-based pharmaceutical companies becomes crystal clear. Since its founding, the United States has been committed to, in the words of the Constitution, "securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries," in order "to promote the progress of Science and useful Arts." We've even had a President, usually remembered as one of our greatest statesmen, namely Abraham Lincoln, patent an invention (a flotation system to help dislodge stranded riverboats from sandbars - it was never actually built). But in today's fast-moving technology-driven world, where the ease and profitability of producing and selling unauthorized copies or fakes have multiplied exponentially, a far more robust approach is required to safeguard intellectual property rights and thus the economic incentive to innovate.

Fortunately for the pharmaceutical industry and others as well, Hong Kong is one place where the protection of intellectual property rights is taken seriously. The Patents Ordinance here allows patent owners to seek civil remedies against alleged infringers, and commercial counterfeiting is a criminal offense that is enforced vigorously. More broadly, I think it fair to say that all interested business groups enjoy excellent access to the relevant Hong Kong Government officials, who always maintain both open doors and open minds. Nonetheless, even against this backdrop of Hong Kong's genuinely strong credentials, there remains room for further improvement in Hong Kong's IPR regime as it relates to the pharmaceutical industry, especially if Hong Kong is to advance as a regional leader in IPR protection and a hub for hi-tech, hi-value added creative industries.

One prominent vulnerability for Hong Kong is the Health Department's practice of approving the registration of generic drugs regardless of whether they violate valid patents. We know that the Government is working on changes to its drug registration certificates to inform applicants that Health Department approval does not relieve registrants of their legal obligations and liabilities under the Patents Ordinance. That is certainly good as far as it goes and is clearly a step in the right direction. But to my mind it simply does not seem right that the Health Department would approve generic drugs for marketing that violate valid patents. As I noted above, Hong Kong's Patents Ordinance allows rights owners to seek compensation from infringers, but history has demonstrated that civil remedies alone - which involve high legal fees and frequently result in low damages being awarded - are not sufficient to deter those who would like to capitalize on someone else's fifteen year, $1 billion investment. Establishing some form of linkage between the drugs registration process and the patent regime seems a common-sense solution to this problem that would significantly improve protection of pharmaceutical patents in Hong Kong.

Another area of concern is the sale of counterfeit medicines and parallel imports of real medicines unauthorized for sale in Hong Kong. In some senses, the former is the most serious intellectual property right violation, since there are life-threatening consequences to the consumer from unwittingly taking a placebo or diluted medicine, or sometimes even a toxic substance. While the Government has cracked down effectively on much counterfeiting activity in Hong Kong over the past several years, the problem has steadily grown in the pharmaceutical retail sector. I understand the HKAPI and the Hong Kong Customs and Excise Department launched last November a joint effort to combat the criminals who perpetrate these crimes. I applaud this cooperative effort and look forward to a drop in rates of counterfeiting and trademark violations as this campaign picks up steam.

Some critics misperceive the problem. There is a popular view to the effect that protecting IPR only benefits big multinationals at the expense of everyone else. I couldn't disagree more. Yes, establishing a pharmaceutical patent linkage and cracking down on counterfeit medicines and trademark violations will help compensate American and other research-based pharmaceutical manufacturers for their investments. But taking these actions would also serve Hong Kong's best interests by strengthening the economic incentive for the companies that make up HKAPI to continue making the massive R&D investments that are necessary for developing the next generation of innovative drugs that will save lives and improve public health not only in Hong Kong and the United States, but all over the world. Let's not forget -- a University of Hong Kong researcher was at the forefront of the discovery of the strain of corona virus that causes SARS last year. Given a business environment more conducive to fostering pharmaceutical creativity, who's to say that Hong Kong won't one day foster a company that invents a cure for SARS or any of a number of other serious threats to global prosperity and well-being. This is a cause I look forward to working with all of you here to help further advance in the coming year.

With that, let me wish all of you a very prosperous and successful Year of the Monkey.

Thank you.

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