RECOMMENDATIONS

The FDA should:

>

Clarify and strengthen its legal authority to take regulatory action against firms
that do not return Compliance Verification Reports.

If FDA does not have authority, it should seek this through regulatory change.
In addition, FDA should seek legislative authority to assess penalties against
noncomplying firms to cover enforcement costs.

Clarify data requirements for industry.

This could be done by revising the drug listing forms and instruction booklet.

Develop internal quality control procedures for manual data processing.

A first step could be to make a complete set of operating procedures available
for all staff.

Ensure that maximum benefits result from the new computer software systems.

While the conversion of drug files is in the design stage, consideration could be
given to (1) keying drug data early in the processing chain, (2) minimizing
manual processing errors through computer applications, and (3) planning for
future enhancements.


TABLE OF CONTENTS

EXECUTIVE SUMMARY

INTRODUCTION

FINDINGS

The drug file is not complete or totally accurate ... 2.6.2.0... eee ee eee eee

Drug firms do not always supply the required data ............. eee eens

Deficiencies at FDA also cause or compound

drug file errors

The FDA is taking steps to improve the drug file ..............-. 0 ee eee

RECOMMENDATIONS ..... 2.0.06 c cee eee eee eee

APPENDIX: COMMENTS FROM PUBLIC HEALTH SERVICE ...........

1


FINDINGS

THE DRUG FILE IS NOT COMPLETE OR TOTALLY ACCURATE.
As of March 1990, the file contained 39,000 products. Based on our analysis:

> We estimate more than 8,000 additional products were on the market but
missing from the file.

As mentioned previously, we took a random sample of 200 products from the universe
of 15,200 products in the private file but not in FDA’s file. Of the 200 sampled
products, 104 (or 52 percent) were actually marketed, according to the drug firms.
Applying this error rate to the universe, we estimate about 7,900 products are missing
from FDA’s file (90 percent confidence interval, 6,982 - 8,801).

From the 1,500 products handled by firms listed in the private file only, we found
another 350 products (representing 37 drug firms) were marketed but missing from
FDA’s file. If all the identified missing products (7,900 + 350) were listed in FDA’s
file, it would increase by 21 percent.

> We estimate 1,400 products in the file were off the market.

As mentioned previously, we took a random sample of 200 products from the universe
of 5,500 products in FDA’s file but not in the private file. Out of the sample, 52
products (or 26 percent) were off the market, according to the drug firms. They
should not have been listed in FDA’s active file. Applying this error rate to the
universe, we estimate 1,400 products (4 percent of the file) are inaccurately listed (90
percent confidence interval, 1,135 - 1,699).

DRUG FIRMS DO NOT ALWAYS SUPPLY THE REQUIRED DATA.

We examined FDA’s files to determine if the 165 drug firms in our two sample groups
of randomly selected products were submitting the required forms and Compliance
Verification Reports. We found that:

> Drug firms had not submitted listing forms for about three-fourths (74 percent)
of the sampled products which were missing or inaccurately listed. As noted in
the previous finding, 104 products were missing and 52 products were
inaccurately listed.

> Forty-five (27 percent) of the 165 sampled firms did not submit Compliance
Verification Reports.

> Sixty-six (55 percent) of the 120 firms that submitted Compliance Verification
Reports left one or more products off the report.


Drug file data is submitted to FDA by the drug industry. It includes, but is not limited
to, trade name, ingredients, dosage form, and strength. New product information is
supplied on forms, while data on changed or discontinued products is on forms or on
Compliance Verification Reports.

Compliance Verification Reports are computer printouts generated from the drug file
and mailed to drug firms. Each report contains a particular firm’s product data as it
appears in the file. The firm’s responsibility is to verify the information and mail the
report back to FDA, along with additional data on new, changed, or discontinued
products.

Before any data is keyed into the drug file, it is processed manually. Numerous staff
members handle the forms and Compliance Verification Reports in a complicated
process of sorting, researching, and adding information.

Private database files

The drug file is not the only source of prescription drug data. Private companies also
maintain drug databases. The private files have different uses than the FDA file.
They contain pricing information and are sold to States and other entities involved
with drug pricing issues.

Drug firms voluntarily provide information to these private databases so that their
prices will be available to buyers of the files.

National Drug Codes (NDCs)

Each drug product has a unique 10-digit number known as an NDC. The NDC
identifies: (1) the firm that manufactures or distributes the product; (2) the product
(specific strength, dosage form, and formulation); and (3) the package size.

The NDC is the basis for all third-party reimbursement. The FDA uses it as an access
code for various computer databases and as a hard copy filing number for drug listing
forms and Compliance Verification Reports. In our study, NDCs were a key for
determining the accuracy and completeness of the drug file.


INTRODUCTION

PURPOSE

This report describes the completeness and accuracy of the prescription drug file in
the Food and Drug Administration’s (FDA) Drug Registration and Listing System
(DRLS). A companion report describes FDA’s computer support for all DRLS files
(OEI-03-90-02301).

BACKGROUND
The DRLS and its uses

The Drug Listing Act of 1972 (P.L. 92-387), as set forth in 21 CFR, Part 207, requires
the drug industry to provide FDA with data on all drug firms and drugs manufactured,
prepared, propagated, compounded, or processed for commercial distribution in the
United States. The FDA maintains this information in a database called the DRLS.

The DRLS has many uses. As a catalog of drug firms and products, it was used in
recent generic drug investigations and in the Defense Department’s Operation Desert
Storm. In the latter case, FDA staff identified products containing antidotes for
poison gas and their manufacturers. During episodes of product tampering, staff
located sites where affected products were manufactured and distributed (e.g., when
Tylenol capsules were laced with cyanide in the 1980s).

In recent years, the DRLS assisted the Health Care Financing Administration (HCFA)
in a search for products that are not effective for their intended uses and, therefore,
not reimbursable. In connection with new Medicaid drug rebate regulations, HCFA
relied on the DRLS for a list of prescription drug manufacturers in each State.

Other DRLS users include the Drug Enforcement Agency, Federal Bureau of
Investigation, offices of poison control, school nurses, and physicians. The DRLS is
also the basis for The National Drug Code Directory which is used by third party
reimbursement programs to identify drug products.

The DRLS has two major components. The registration component contains files on
drug firms, while the drug listing component is divided into three drug product files:
prescription, over-the-counter, and bulk products. The prescription file is the most up-
to-date of the product files, according to FDA.

This report focuses on the prescription file and its 39,000 active products as of March
1990. We refer to that file in this report by the shorter term "drug file."

Drug file data


Group 3: 200 products randomly selected from the universe of 5,500 products
which were listed only in FDA’s file, but which were
manufactured/distributed by firms in both files.

We contacted every drug firm (about 300) with products in these three sample groups
to determine whether the products were actually on the market.

From sample groups 1 and 2, we identified products that were on the market but
missing from FDA’s file. From sample group 3, we identified products that were off
the market and still in FDA’s file. We did not sample the 8,500 products
manufactured/distributed by firms listed in FDA’s file only. While a review of this
category may have identified additional products that were off the market but still in
FDA’s file, it would also have indicated which products were missing from the private
file and that was not our purpose.

To identify causes of drug file errors, we examined FDA’s files of drug listing forms
and Compliance Verification Reports for all products in our three sample groups. We
also examined the hard copy filing system for these documents and related
correspondence, and conducted on-site interviews with FDA staff who handle the drug
data.


Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL

THE FDA PRESCRIPTION DRUG FILE

NOVEMBER 1991



Some staff use printed Federal regulations for guidance, and all refer to the DRLS
Instruction Booklet. The booklet, however, was designed for industry’s use. While it
describes how firms should report product information to FDA, it does not contain
procedures for researching product data, processing incoming forms, or handling
special cases and problems.

Inadequate software system

The computer software system for DRLS drug files is inadequate for FDA’s needs,
according to computer experts. The system does not allow for entering and modifying
data at different stages in the manual processing chain. This contributes to the
previously mentioned inaccessibility of product data.

Another shortcoming of the system is that drug files cannot be viewed on computer
monitors. Staff use cumbersome printouts of drug data to look up information. These
printouts resemble oversized telephone directories and are used in much the same
way.

Under this system, over 3,000 product entries were lost in 1987 and 1988. According
to FDA staff, the loss occurred during the transmittal of data from terminal files to
the mainframe computer where the DRLS is housed.

Insufficient staff, space, supplies, and equipment

Since 1986, full time staffing has been reduced from 26 to 22. During the same time,
workload has increased. New work for staff includes (1) determining if new drug
listings from manufacturers are for unapproved drugs, (2) cataloging less-than-effective
drugs, and (3) cataloging drugs that are identical, related, or similar to less-than-
effective drugs.

Overcrowded conditions in the file room make filing and retrieving difficult. Forms
are tightly packed on shelves in a small area, increasing the risk of damage and loss.

A shortage of office supplies and equipment contributes to inefficiency. Staff lack the
most basic supplies like file folders and date stamps, and there are only two personal
computers. Work involving accounting, bookkeeping, and report writing is still done
with paper and pen. Thus, time is spent on numerous manual tasks that could be
done more quickly and accurately with computers.

THE FDA IS TAKING STEPS TO IMPROVE THE DRUG FILE.

The FDA is aware of the deficiencies noted in the previous finding and has been
taking some steps to address them.

Improving drug listing instruction


DEFICIENCIES AT FDA ALSO CAUSE OR COMPOUND DRUG FILE
ERRORS.

Through on-site observation, document reviews, and staff interviews, we found the
deficiencies described below. Many of these are interrelated.

Uncertainty of legal authority

While Compliance Verification Reports are not explicitly mentioned in 21 CFR
207.22(b), FDA treats the non-return of these reports as violations of this section of
the CFR. The section states that firms must update their product data on Form FDA-
2657. There is some question as to whether this CFR section requires industry to
submit data on Compliance Verification Reports.

Inadequate forms and instruction booklet

Drug listing forms are confusing and inadequate. One form, for example, which
provides data on a product’s private label distributors, does not require the
distributors’ addresses. Without the addresses, FDA cannot mail Compliance
Verification Reports to those firms. Consequently, any errors in the data will not be
caught and corrected.

The DRLS Instruction Booklet is difficult to understand and does not contain all the
information drug firms need. For example, the booklet lacks an explanation of the
Compliance Verification Report. This missing information is significant because FDA
interprets an unreturned Compliance Verification Report as a violation of Federal
regulations.

Lack of quality control in data processing

Product information is inaccessible for many weeks. No record is made of any data
from the time a form arrives at FDA until it reaches the end of a long and
complicated manual processing chain. Furthermore, forms cannot be located while
they are in the chain. This creates an environment where individuals who handle the
forms are not held accountable for errors or loss of data.

In the case of Compliance Verification Reports, staff lack a systematic and reliable
way to track how many and which firms return them on time, late, or not at all. Even
when staff know which firms have not returned Compliance Verification Reports, they
do not routinely mail delinquent notices.

Incomplete procedural guides
A complete set of procedural guides does not exist. Piecemeal guides are in writing

for some aspects of data processing. But most interviewed staff did not know of their
existence. They rely primarily on custom to execute their jobs.


Prior Office of Inspector General studies

In 1989, we used the FDA drug file for two studies of Medicaid program compliance
with prescription drug regulations.’ At that time, we noticed three discrepancies
between data in the drug file and State Medicaid programs: (1) some NDCs that
were identical in the drug file and State lists represented different products; (2) some
NDCs in the State lists were missing from the drug file; and (3) some NDCs in the
drug file represented more than one product. These discrepancies were the impetus
for the current study.

SCOPE AND METHODOLOGY

The study was conducted between March 1990 and April 1991, and it focused on the
March 1990 status of the active drug file. We did not examine other DRLS files.

To determine if products were missing from the drug file and if products in the file
were off the market, we: (1) compared FDA’s file with a private file used by many
State Medicaid programs, and (2) contacted drug firms about the status of their
products. We did not evaluate the private file for completeness and accuracy. It was
used only to identify additional NDCs.

First, we compared all the NDCs in both files in order to identify ones that did not
match. The nonmatching NDCs fell into the following categories:

> 16,700 Products in private file only
15,200 Products manufactured/distributed by firms listed in both files
1,500 Products manufactured/distributed by firms listed in private file
only
> 14,000 Products in FDA’s file only
5,500 Products manufactured/distributed by firms listed in both files
8,500 Products manufactured/distributed by firms listed in FDA’s file
only

Next, we developed three sample groups for further inspection.

Group 1: 200 products randomly selected from the universe of 15,200 products in
the private file only, but which were manufactured/distributed by firms
listed in both the FDA and private files.

Group 2: All 1,500 products which were listed only in the private file, and which

were manufactured/distributed by firms (129) listed only in the private
file.

'The report numbers are A-03-89-00220 and A-03-89-00213.


> Quality control is lacking, and the computer software system is inadequate.
> There is a shortage of staff, space, supplies, and equipment.
The FDA is taking steps to improve the drug file.

Drug listing instructions are being improved; quality control is being addressed; and a
new computer system designed.

RECOMMENDATIONS
The FDA should:

> Clarify and strengthen its legal authority to take regulatory action against firms
that do not return Compliance Verification Reports.

> Clarify data requirements for industry.
> Develop internal quality control procedures for manual data processing.

> Ensure that maximum benefits result from the new computer software system.

COMMENTS FROM PUBLIC HEALTH SERVICE (PHS)

The PHS concurs with the report’s findings and recommendations. The full text of
comments from PHS appears in the appendix.


APPENDIX A

COMMENTS FROM PUBLIC HEALTH SERVICE (PHS)

The PHS concurs with our report’s findings. It also concurs with our
recommendations and has taken, or is taking, action to implement them.

The full text of comments from PHS are included in this appendix.


EXECUTIVE SUMMARY

PURPOSE

This report describes the completeness and accuracy of the prescription drug file in
the Food and Drug Administration’s (FDA) Drug Registration and Listing System
(DRLS). A companion report describes FDA’s computer support for all DRLS files
(OEI-03-90-02301).

BACKGROUND

The Drug Listing Act of 1972 (P.L. 92-387) requires drug firms to provide FDA with
data on all commercially distributed drugs. This information is maintained in the files
of a computer database called the DRLS. Products are listed in the drug file by their
National Drug Code (NDC).

The DRLS has many uses. As a catalog of drug firms and products, it was used in
recent generic drug investigations and in the Defense Department’s Operation Desert
Storm. In the latter case, staff identified products containing antidotes for poison gas
and their manufacturers.

This report focuses on the DRLS prescription drug file of 39,000 products and its
status as of March 1990.

METHODOLOGY

We (1) compared NDCs in the drug file with those in a private database file, (2)
analyzed random samples of nonmatching NDCs in each file, (3) called drug firms
about the market status of these products, (4) examined documents submitted to FDA
by drug firms, and (5) interviewed FDA staff on site.

FINDINGS

The drug file is not complete or totally accurate.

We estimate more than 8,000 additional products were on the market but missing
from the file. Approximately 1,400 products were in the file but off the market.

Drug firms do not always supply the required data.
Deficiencies at FDA also cause or compound drug file errors.
» Legal requirements for industry to return Compliance Verification Reports are

unclear.
> Data requirements for industry are unclear.


OFFICE OF INSPECTOR GENERAL

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as
amended, is to protect the integrity of the Department of Health and Human Services’ (HHS)
programs as well as the health and welfare of beneficiaries served by those programs. This
statutory mission is carried out through a nationwide network of audits, investigations, and
inspections conducted by three OIG operating components: the Office of Audit Services, the
Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs
the Secretary of HHS of program and management problems and recommends courses to
correct them.

OFFICE OF AUDIT SERVICES

The OIG’s Office of Audit Services (OAS) provides all auditing services for HHS, either by
conducting audits with its own audit resources or by overseeing audit work done by others.
Audits examine the performance of HHS programs and/or its grantees and contractors in
carrying out their respective responsibilities and are intended to provide independent
assessments of HHS programs and operations in order to reduce waste, abuse, and
mismanagement and to promote economy and efficiency throughout the Department.

OFFICE OF INVESTIGATIONS

The OIG’s Office of Investigations (OI) conducts criminal, civil, and administrative
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of
unjust enrichment by providers. The investigative efforts of OI lead to criminal convictions,
administrative sanctions, or civil money penalties. The OI also oversees State Medicaid fraud
control units which investigate and prosecute fraud and patient abuse in the Medicaid program.

OFFICE OF EVALUATION AND INSPECTIONS

The OIG’s Office of Evaluation and Inspections (OEI) conducts short-term management and
program evaluations (called inspections) that focus on issues of concern to the Department,
the Congress, and the public. The findings and recommendations contained in these inspection
reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability,
and effectiveness of departmental programs.

This report was prepared by the Philadelphia regional office under the direction of Joy Quill,
Regional Inspector General and Robert A. Vito, Deputy Inspector General. Project Staff:

Isabelle Buonocore

Saralynn Greene

Donna M. Millan

Cynthia R. Hansford

Mary Beth Clarke (Headquarters)
Wm. Mark Krushat

Brian Ritchie


To reduce drug industry errors on listing forms, FDA staff led five instructional
seminars for industry professionals during 1990. In March 1991, clearer directions
were drafted for a reprint of the DRLS instruction booklet.

Drafting operating procedures

Operating procedures for certain data processing staff were in draft as of February
1991.

Addressing quality control issues

As of December 1990, a staff person was assigned to review new product forms before
keyers enter data into the computer. This individual checks for obvious errors or
omissions on the forms.

Two tracking systems are being developed. One will track forms during manual
processing. The other will track industry’s return of Compliance Verification Reports.

Converting the software system

In 1990, FDA began converting DRLS files to a new computer software system which
has many on-line services. While the registration files are almost fully converted, the
drug files are still in the old system.

A design for the drug file conversion is now in the planning stage, and it is not yet
known what effect the conversion will have on manual data processing. Some on-line
drug data became available for selected staff late in 1990. If the number of staff
performing the conversion remains the same, all drug files may be in the new system
by the end of 1992.