GAO-12-897R Global Health 

August 1, 2012 

The Honorable G.K. Butterfield 

House of Representatives 

The Honorable Don Manzullo 

House of Representatives 

The Honorable Gregory W. Meeks 

House of Representatives 

The Honorable Dave Reichert 

House of Representatives 

Subject: Ensuring Drug Quality in Global Health Programs 

The United States supports global health programs primarily through the U.S. Agency for 

International Development (USAID) and the Centers for Disease Control and Prevention (CDC) 

and by providing contributions to the Global Fund to Fight AIDS, Tuberculosis and Malaria 

(Global Fund). USAID and CDC implement the President’s Emergency Plan for AIDS Relief 

(PEPFAR), which provides antiretroviral treatment to more than 3.9 million people, and the 

President’s Malaria Initiative (PMI), which has procured and distributed over 67 million malaria 

treatments. In addition, the Global Fund provides antiretroviral drugs to about 3.3 million people, 

has supported tuberculosis treatment for 8.6 million, and enabled treatment of 170 million 

malaria cases. 

Concerns have been raised about the potential for substandard drugs to enter the supply chains 

of global health programs. Substandard drugs, which may be caused by poor manufacturing 

practices, improper storage or distribution, or tampering, can have serious public health 

consequences. These include ineffective treatment of diseases, adverse reactions in patients, 

and drug resistant strains of pathogens. 

Given these concerns about substandard drugs, we were requested to review safeguards in 

place to ensure drug products procured with U.S. foreign aid funds are of assured quality.1

 We 

examined (1) the regulatory and policy requirements intended to ensure the quality of drugs 

 

1

This review was conducted in response to a 2010 request from Representative Gregory Meeks—then Chairman, 

House Financial Services Subcommittee on International Policy and Trade—to review the safety and effectiveness of 

prescription medicines being purchased by USAID. By 2012, other Members had joined on as requesters and we 

commenced the review when staff with the required skills were available. 

United States Government Accountability Office

Washington, DC 20548 

 
Page 2 GAO-12-897R Global Health 

procured with U.S. aid funds and (2) the systems in place to monitor drug quality in supply 

chains used by programs receiving U.S. foreign aid funds.

Scope and Methodology

Our work focuses on drugs and other commodities with pharmaceutical ingredients purchased 

by USAID, CDC, and the Global Fund for use in global health programs. To address our 

objectives, we reviewed relevant laws, regulations, agency policy guidance, and standard 

operating procedures relating to assurance of drug quality and supply chain monitoring, as well 

as reports on program implementation. We also interviewed USAID, CDC, and Global Fund 

officials knowledgeable about drug procurement and supply chain systems.

We conducted this performance audit from February 2012 to August 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.

We briefed congressional requesters’ staff on our findings on May 31, 2012. This report 

summarizes that briefing, which is reprinted in full as enclosure I.

Background

USAID, CDC and the Global Fund provide grants, contracts, or cooperative agreements to 

implementing partners, who execute health activities with drugs they procure from 

manufacturers or wholesalers. Implementing partners include host country governments, forprofit development assistance firms, nonprofit nongovernmental organizations, and United 

Nations organizations. Challenges to ensuring drug quality include the global pharmaceutical 

industry’s increasing reliance on foreign manufacturers, especially in India and China, and 

difficulties overseeing their production processes. Also, in developing countries, drug theft and 

diversion to informal markets can result in tampering, improper storage, and inappropriate use.

Results in Brief

U.S.-funded global health programs have put regulatory and policy requirements in place to help 

prevent procurement of substandard drugs. USAID, for example, reviews quality assurance 

information for all drugs before they are procured. Specifically, USAID requires implementing 

partners to obtain written approval from the agency before purchasing drugs. Through its 

approval process, USAID determines whether there is sufficient information available to assure 

that the drug is of acceptable quality. Although USAID’s review process varies for some drugs, 

the type of information USAID reviews generally includes prior FDA approval of the drug or 

approval by a comparable stringent regulatory authority, as well as results of prior testing of the 

drug by an independent laboratory. As an additional quality assurance measure, USAID 

prequalifies selected wholesalers to procure drugs for U.S.-funded global health programs 

based on factors such as site visits to the wholesaler’s facility and a review of the wholesaler’s 

quality assurance practices and procedures. According to CDC officials, CDC requires its 

implementing partners to follow program-specific quality assurance requirements. For example, 

CDC’s implementing partners must follow the same requirements as the USAID/PMI program 

when procuring malaria drugs and as the PEPFAR program when procuring antiretroviral drugs. 

The Global Fund requires grant recipients to procure antiretroviral, tuberculosis, and malaria 

drugs that are prequalified by the World Health Organization or authorized by a stringent 

regulatory authority. When there is only one drug available or no drug meeting these 
Page 3 GAO-12-897R Global Health 

requirements, grant recipients may procure drugs recommended for use by an independent 

expert review panel convened by the Global Fund.

Procedures for monitoring drug quality in supply chains used by global health programs vary 

based on the nature of the program and capacity of implementing partners. USAID takes a 

case-by-case approach to monitoring drug quality by considering factors such as the 

vulnerability of drugs to deterioration and the capacity of implementing partners to safeguard 

them. To monitor supply chains, USAID may maintain chain of custody until delivery, or conduct 

postshipment testing to verify the active ingredients of drugs. To help ensure drug quality, 

USAID may also provide assistance to implementing partners in host countries, such as 

technical assistance designed to improve management capacity. Officials told us CDC’s 

monitoring procedures vary based on the size and complexity of CDC’s agreement with an 

implementing partner. For example, for agreements covering large or multiple regions, CDC 

may require quarterly site-level reports on drug usage or on-site reviews of pharmacy records 

and storage. For smaller agreements, such as those covering a one-time purchase of drugs for 

a single country, CDC advises implementing partners on drug storage and usage. The Global 

Fund requires grant recipients to have quality assurance systems in place for procurement, 

warehousing, product testing, distribution, and monitoring of storage and distribution sites, and 

to ensure that drugs are randomly tested at different points in the supply chain. The Global 

Fund’s local agents verify these quality assurance practices before grant funds are disbursed.

A recent USAID initiative aims to increase drug procurement and supply by host governments 

and local organizations. However, as highlighted in recent reports, reliance on these 

implementing partners potentially introduces risks related to capacity and corruption. According 

to USAID global health officials, USAID is taking measures to mitigate theses risks by (1) 

conducting country assessments to identify risks to drug quality, program outcomes, and 

financial management and (2) taking steps to develop risk mitigation plans with implementing 

partners before funding malaria and reproductive health programs.

We are not making any recommendations in this report.

For additional information on the results of our review, see the briefing slides in the enclosure.

Agency Comments

We provided a draft of this report to USAID, CDC, and the Office of the Global AIDS 

Coordinator, and the Global Fund for review and comment. USAID and the Global Fund 

provided technical comments, which we incorporated as appropriate. USAID officials clarified 

that USAID provides administrative approval for antiretroviral drugs; only the U.S. Food and 

Drug Administration (FDA) has the regulatory authority to approve these drugs. All antiretroviral 

drugs procured by USAID meet FDA standards.
Page 4 GAO-12-897R Global Health 

We will send copies of this report to appropriate congressional committees, the Administrator of 

USAID, the Director of CDC, and the Global Fund liaisons at the Office of the Global AIDS 

Coordinator and the U.S. Mission in Geneva. In addition, this correspondence will be available 

at no charge on the GAO website at http://www.gao.gov. 

If you or your staff have any questions concerning this report, please contact David Gootnick at 

(202) 512-3149 or gootnickd@gao.gov or Marcia Crosse at (202) 512-7114 or 

crossem@gao.gov. Jim Michels (Assistant Director), Kay Halpern, Erika Navarro, and Chad 

Davenport made key contributions to this correspondence; Grace Lui and David Dayton 

provided technical support. Contact points for our Offices of Congressional Relations and Public 

Affairs are found on the last page of this report.

David Gootnick

Director

International Affairs and Trade

Marcia Crosse

Director

Health Care

Enclosure

(320925)
Page 5 GAO-12-897R Global Health 

Enclosure

Ensuring Drug Quality in Global 

Health Programs 

Briefing for 

Congressional 

Requesters 

For more information, contact David Gootnick at gootnickd@gao.gov Page 1

A community worker explains preventative malaria treatment to a pregnant 

woman in Mali. Copyright © UNICEF/MLIA2009-00123/Giacomo Pirozzi
Page 6 GAO-12-897R Global Health 

Overview

• Objectives and Scope

• Methodology

• Background

• Summary

• Drug Procurement 

Requirements

• Supply Chain Monitoring

• Looking Ahead

Page 2

A woman and her baby receiving medication at a Kenyan clinic.
Page 7 GAO-12-897R Global Health 

Objectives and Scope

In response to your concerns, we examined 

• the regulatory and policy requirements intended to ensure the 

quality of drugs procured with U.S. aid funds; and

• the systems in place to monitor drug quality in supply chains 

used by programs receiving U.S. aid funds. 

Scope

• Drugs and other commodities with pharmaceutical ingredients 

(e.g., test kits, hormonal contraceptives, vaccines) purchased 

by the U.S. Agency for International Development (USAID), 

the Centers for Disease Control and Prevention (CDC), and 

the Global Fund to Fight AIDS, Tuberculosis and Malaria 

(Global Fund) for use in global health programs.

Page 3
Page 8 GAO-12-897R Global Health 

Methodology

• We reviewed relevant laws, regulations, agency policy guidance, and standard 

operating procedures relating to assurance of drug quality and supply chain 

monitoring, as well as reports on program implementation. We also interviewed 

USAID, CDC, and Global Fund officials. 

• We conducted this performance audit from February 2012 through August 2012 

in accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions based 

on our audit objectives.

Page 4
Page 9 GAO-12-897R Global Health 

U.S. Support for Global Health Programs 

• The United States supports global health programs, 

primarily through USAID and CDC, and by providing 27 

percent of total contributions to the Global Fund. 

• President’s Emergency Plan for AIDS Relief (PEPFAR) 

provides antiretroviral treatment to more than 3.9 million 

people.

• President’s Malaria Initiative (PMI) has procured and 

distributed over 67 million malaria treatments.

• Global Fund provides antiretroviral drugs to about 3.3 million 

people, has supported tuberculosis treatment for 8.6 million, 

and enabled treatment of 170 million cases of malaria.

Page 5

Background
Page 10 GAO-12-897R Global Health 

Dangers and Causes of Substandard Drugs 

Substandard drugs can have serious public health consequences:

• Lead to ineffective treatment of diseases

• Cause adverse reactions in patients

• Promote drug resistant strains of pathogens

Causes of substandard drugs: 

• Poor manufacturing practices

• Improper storage or distribution

• Tampering

Page 6

Background
Page 11 GAO-12-897R Global Health 

Challenges to Ensuring Drug Quality 

• Global pharmaceutical industry’s increasing reliance on foreign 

manufacturers* creates oversight challenges for the U.S. Food 

and Drug Administration (FDA). 

• Risk of drug theft and diversion to informal markets is high in 

developing countries and can result in tampering, improper 

storage, and inappropriate use.

• Malaria drugs may be at particular risk for theft and diversion 

due to

• High demand because of common practice of treating all fevers in 

endemic areas with malaria drugs

• High price of certain new malaria drugs in informal markets in Africa 

Page 7

Background

*According to the FDA, the number of drug products manufactured at foreign establishments has 

more than doubled since 2002, with China and India accounting for the greatest shares of this growth.
Page 12 GAO-12-897R Global Health 

Entities Involved in U.S.-Supported Global 

Health Assistance Programs

• USAID, CDC, and Global Fund provide grants, contracts, or 

cooperative agreements to implementing partners, such as

• Host country governments (generally low and lower-middle 

income countries)

• For-profit development assistance firms

• Nonprofit, nongovernmental organizations

• United Nations organizations 

• Implementing partners execute health activities with drugs they 

procure from vendors, such as

• Manufacturers

• Wholesalers 

Page 8

Background
Page 13 GAO-12-897R Global Health 

Steps for Ensuring Drug Quality 

• Determining that regulatory bodies have assessed drug quality 

at the point of manufacture

• Conducting assessments of selected wholesalers 

• Monitoring the supply chain to verify that drug quality has not 

been compromised

• Methods used for one or more of these steps:

• Document review or on-site inspection to check 

conformance with standards

• Testing drug samples

• Monitoring patients for adverse reactions

• Other quality assurance procedures

Page 9

Background
Page 14 GAO-12-897R Global Health 

Summary 

• U.S.-funded global health programs have regulatory and policy 

requirements to help prevent procurement of substandard drugs.

• Procedures for monitoring drug quality in supply chains—through 

which goods travel from their point of origin to the point of 

consumption—vary based on nature of program and capacity of 

implementing partners. 

• Involving host countries in drug procurement and supply chains 

entails heightened risk. 

• Evaluations of U.S. and multilateral programs have 

highlighted this risk.

• A new U.S. initiative to increase host country role includes 

measures to mitigate risks.

Page 10
Page 15 GAO-12-897R Global Health 

USAID Reviews Quality Assurance Information 

for All Drugs Before They Are Procured

• Implementing partners must obtain written approval from USAID 

prior to procuring drugs.

• This approval is for a specific drug from a specific manufacturer 

and site, or from a specific procurement agent or other source.

• Through this process, USAID determines whether it has sufficient 

information available on the quality of a drug, such as 

• Prior approval by the FDA or a comparable Stringent 

Regulatory Authority (SRA)* 

• Results of prior product testing by independent laboratory

• Proposed use of drug, such as clinical use or field trials

Page 11

Regulatory and Policy Requirements

*As used in USAID guidance, an SRA is a drug regulatory body that closely resembles FDA in the 

standards it uses. SRAs include, for example, regulatory bodies in Japan, Europe, and Canada.
Page 16 GAO-12-897R Global Health 

USAID’s Review Process Varies for Some 

Drugs

• USAID’s review process varies 

depending on drug and 

program needs. For example:

• Malaria drugs are reviewed 

on a case-by-case basis 

due to their limited 

availability.

• For antiretroviral drugs and 

HIV test kits, USAID has 

created lists of approved 

products.

Page 12

Regulatory and Policy Requirements

Malaria medication and a positive test result lie on the paperwork 

of a child in Sierra Leone. Copyright © UNICEF/NYHQ2010-

1022/Olivier Asselin
Page 17 GAO-12-897R Global Health 

USAID Review Process for Malaria Drugs

According to USAID, under the malaria program

• USAID reviews and documents evidence of drug safety and 

quality, including

• FDA or SRA approval

• Prequalification by the World Health Organization (WHO)

• Inclusion in WHO malaria treatment guidance

• USAID arranges preshipment quality testing for any malaria drugs 

not approved by FDA or another SRA. 

• USAID has also developed special handling procedures for each 

type of malaria product, used as needed, including

• Postshipment testing for drugs 

• Postshipment inspection for diagnostic products

Page 13

Regulatory and Policy Requirements
Page 18 GAO-12-897R Global Health 

USAID Requirements for Antiretroviral Drugs 

and HIV Test Kits 

• Implementing partners can procure antiretroviral drugs and HIV 

test kits on USAID’s approved lists. 

• Drugs must have FDA approval or tentative approval,* or 

USAID approval, where USAID has information attesting to 

drug “safety, efficacy and quality.”

• Kits must have FDA or SRA approval, or must be evaluated by 

USAID to determine whether the kits meet documentation 

requirements and pass testing by CDC.

*As used in USAID guidance, FDA tentative approval means the drug meets FDA standards but 

may not be sold in the United States due to existing patents or data exclusivity agreements.

Page 14

Regulatory and Policy Requirements
Page 19 GAO-12-897R Global Health 

USAID Prequalifies Wholesalers

• In some cases, implementing partners purchase drugs from 

wholesalers instead of directly from manufacturers.

• USAID has prequalified selected wholesalers as an additional 

quality assurance measure, based on factors such as

• Site visit to wholesaler’s facility

• Review of quality assurance practices and procedures 

• Some prequalification requirements vary by program, such as

• Periodic, risk-based sampling/testing for HIV/AIDS and 

reproductive health drugs

• Possible audit of manufacturing sites and follow-up review and 

monitoring of wholesalers for reproductive health programs 

Page 15

Regulatory and Policy Requirements
Page 20 GAO-12-897R Global Health 

CDC’s Implementing Partners Follow the 

Requirements of Individual Aid Programs

According to CDC officials, 

• CDC provides funding to implementing partners to procure 

drugs for use in global health programs but does not generally 

procure drugs directly.

• CDC’s funding agreements with implementing partners 

reference program-specific quality assurance requirements. 

For example, implementing partners are to

• Follow the same requirements as USAID/PMI and 

PEPFAR programs for malaria drugs, and antiretroviral 

drugs and HIV test kits, respectively

• Require WHO pre-qualification for all vaccines and drugs 

for neglected tropical diseases 

Page 16

Regulatory and Policy Requirements
Page 21 GAO-12-897R Global Health 

Global Fund Requires Approval of Drugs 

Procured 

• Global Fund provides grants for procurement of antiretroviral, 

tuberculosis, and malaria drugs, which must be

• WHO prequalified or authorized by an SRA, or

• Recommended by an independent expert review panel, 

convened as needed* by the Global Fund

• Panel may review potential risks and benefits associated 

with use of the drug.

• Panel recommendation is valid for 12 months or until the 

drug is WHO-prequalified or authorized by an SRA.

Page 17

Regulatory and Policy Requirements

*The panel is convened when there are no drugs available that are WHO prequalified or 

authorized by an SRA, or if there is only one such drug available.
Page 22 GAO-12-897R Global Health 

USAID Monitoring of Drug Quality in Supply 

Chains Varies by Implementing Partner 

• USAID monitors drug quality in supply chains through 

implementing partners.

• USAID takes a case-by-case approach to monitoring drug quality 

in supply chains by considering factors such as 

• Vulnerability of drugs to deterioration and tampering

• Capacity of implementing partners, e.g., host country governments, to 

safeguard drugs and provide appropriate storage and distribution 

conditions

• USAID’s monitoring approach for specific programs and 

implementing partners includes

• Maintaining chain of custody until delivery to host country

• Postshipment testing to verify active ingredients of drugs or accuracy of 

diagnostic kits 

• Periodic product evaluations to ensure conformance to specifications

Page 18

Systems for Monitoring Supply Chains
Page 23 GAO-12-897R Global Health 

USAID Provides Assistance to Help Ensure 

Drug Quality 

• USAID has provided assistance intended to strengthen 

safeguards for ensuring drug quality in host countries.

• USAID has funded technical assistance designed to improve 

implementing partners’ management capacity. 

• In Zimbabwe, for example, USAID collaborated with the 

health ministry to streamline distribution of malaria and 

tuberculosis drugs to reduce stockouts and expired drugs.

• USAID has funded establishment of new supply chains.

• In Malawi, for example, USAID created its own, more 

secure supply system for malaria products due to concerns 

over diversion of malaria drugs.

Page 19

Systems for Monitoring Supply Chains
Page 24 GAO-12-897R Global Health 

CDC’s Monitoring of Drug Quality Varies by 

Implementing Partner Agreement

• According to CDC officials, CDC’s monitoring procedures vary 

based on size and complexity of implementing partner agreement. 

• For agreements covering large or multiple regions, CDC 

requires some or all of the following:

• Monthly, semiannual, and/or annual reports

• Quarterly site-level reports on drug usage

• On-site reviews of pharmacy records and storage

• Site visits and other interactions with implementing partners

• For simpler or smaller agreements,* CDC advises 

implementing partners on proper drug storage and usage.

Page 20

Systems for Monitoring Supply Chains

*For example, an agreement covering a one-time purchase of drugs for a single country.
Page 25 GAO-12-897R Global Health 

Global Fund Grant Recipients and Local Agents 

Monitor Supply Chains 

• Global Fund grant recipients are required to have quality 

assurance systems in place for procurement, central 

warehousing, product testing, distribution, and monitoring of 

storage and distribution sites.

• Grant recipients are required to ensure that drugs are randomly 

sampled and tested by qualified laboratories* at different points 

in the supply chain, from initial receipt to delivery to end users.

• Grant disbursements are contingent on verification of quality 

assurance practices by Global Fund’s local agents.** 

*Laboratories qualified by WHO or the International Organization for Standardization (ISO).

**Global Fund contracts with external organizations, such as PricewaterhouseCoopers and KPMG, to 

oversee grants.

Page 21

Systems for Monitoring Supply Chains
Page 26 GAO-12-897R Global Health 

Relying on Host Countries’ National Health 

Systems Can Be Risky, According to Reports

• Evaluations of U.S. malaria program and Global Fund have highlighted risks 

associated with host country management of drug supply chains. For example: 

• External review of the President’s Malaria Initiative* reported in 2011 that 

some host country malaria drug procurement, storage, and distribution 

systems were subject to large-scale theft and corruption.

• Independent review of Global Fund** reported in 2011 on quality assurance 

shortfalls by Global Fund grant recipients, typically host governments. 

• Recipients had not consistently complied with Global Fund 

requirements, increasing risk of patients receiving counterfeit or 

substandard products.

• Few had systematically tracked adverse patient reactions. 

Page 22

Looking Ahead

*External Evaluation of the President’s Malaria Initiative Final Report, prepared by J. Simon, K. Yeboah-Antwi, A. Schapira, M. 

Kabir Cham, R. Barber-Madden, and M. Ibrahim Brooks through the Global Health Technical Assistance Project, for review by 

the U.S. Agency for International Development, December 2011. 

**Turning the Page from Emergency to Sustainability, The Final Report of the High-Level Independent Review Panel on 

Fiduciary Controls and Oversight Mechanisms of the Global Fund to Fight AIDS, Tuberculosis, and Malaria, September 19, 

2011.
Page 27 GAO-12-897R Global Health 

New USAID Initiative to Increase Host Country 

Role Includes Measures to Mitigate Risks

• New USAID initiative aims to increase drug procurement and 

supply by host governments and local organizations.

• Reliance on these implementing partners potentially introduces 

risks related to capacity and corruption. 

• USAID is conducting country assessments to identify risks to 

• Drug quality

• Program outcomes

• Transparency, accountability, and communication

• Financial management

• USAID plans to work with implementing partners to develop risk 

mitigation plans before funding them for malaria and reproductive 

health programs.

Page 23

Looking Ahead
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