United States Government Accountability Office

GAO Testimony 

Before the Subcommittee on Oversight 

and Investigations, Committee on Energy 

and Commerce, House of Representatives

DRUG SAFETY

Preliminary Findings 

Suggest Recent FDA 

Initiatives Have Potential, 

but Do Not Fully Address 

Weaknesses in Its Foreign 

Drug Inspection Program 

Statement of Marcia Crosse, Director 

Health Care 

For Release on Delivery

Expected at 11:00 a.m. EDT 

Tuesday, April 22, 2008

 

GAO-08-701T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 22, 2008

DRUG SAFETY

Preliminary Findings Suggest Recent FDA Initiatives

Have Potential, but Do Not Fully Address

Highlights of GAO-08-701T, a testimony Weaknesses in Its Foreign Drug Inspection Program 

before the Subcommittee on Oversight 

and Investigations, Committee on Energy 

and Commerce, House of Representatives

The Food and Drug Administration 

(FDA) is responsible for overseeing

the safety and effectiveness of 

human drugs that are marketed in

the United States, whether they are 

manufactured in foreign or 

domestic establishments. FDA 

inspects foreign establishments to

ensure that they meet the same

standards required of domestic 

establishments. Ongoing concerns 

regarding FDA’s foreign drug 

inspection program recently were

heightened when FDA learned that

contaminated doses of a common 

blood thinner had been 

manufactured at a Chinese

establishment that the agency had 

never inspected. FDA has 

announced initiatives to improve 

its foreign drug inspection 

program. 

In November 2007, GAO testified

on weaknesses in FDA’s foreign 

drug inspection program 

(GAO-08-224T). This statement 

presents preliminary findings on

how FDA’s initiatives address the 

weaknesses GAO identified. GAO

interviewed FDA officials and 

analyzed FDA’s initiatives. GAO

examined reports and proposals 

prepared by the agency, as well as

its plans to improve databases it 

uses to manage its foreign drug

inspection program. 

Recent FDA initiatives—some of which have been implemented and others 

proposed—could strengthen FDA’s foreign drug inspection program, but 

these initiatives do not fully address the weaknesses that GAO previously

identified. 

• GAO testified in November 2007 that FDA’s databases do not provide an 

accurate count of foreign establishments subject to inspection and do 

provide widely divergent counts. Through one recent initiative, FDA has 

taken steps to improve its database intended to include foreign 

establishments registered to market drugs in the United States. This 

initiative may reduce inaccuracies in FDA’s count of foreign 

establishments. However, these steps will not prevent foreign 

establishments that do not manufacture drugs for the U.S. market from 

erroneously registering with FDA. Further, to reduce duplication in its 

import database, FDA has supported a proposal that would change the 

data it receives on products entering the United States. However, the 

implementation of this proposal is not certain and would require action 

from multiple federal agencies, in addition to FDA. Efforts to integrate 

these databases have the potential to provide FDA with a more accurate 

count of establishments subject to inspection, but it is too early to tell. 

• GAO testified that gaps in information weaken FDA’s processes for 

prioritizing the inspection of foreign establishments that pose the greatest 

risk to public health. While FDA recently expressed interest in obtaining 

useful information from foreign regulatory bodies that could help it 

prioritize foreign establishments for inspections, the agency has faced 

difficulties fully utilizing these arrangements in the past. For example, 

FDA had difficulties in determining whether the scope of other countries’ 

inspection reports met its needs and these reports were not always readily

available in English. 

• GAO also testified that FDA inspected relatively few foreign 

establishments each year. FDA made progress in inspecting more foreign 

establishments in fiscal year 2007, but the agency still inspects far fewer 

of them than domestic establishments. FDA dedicated about $10 million 

to foreign drug inspections in fiscal year 2007 and plans to dedicate about 

$11 million to such inspections in fiscal year 2008.

• Finally, GAO testified that FDA faced certain logistical and staffing 

challenges unique to conducting foreign inspections. FDA is pursuing 

initiatives that could address some of the challenges that we identified as 

being unique to foreign inspections, such as volunteer inspection staff and 

lack of translators. FDA has proposed establishing a dedicated cadre of 

staff to conduct foreign inspections, but the timeframe associated with 

this initiative is unclear. FDA plans to open an office in China and is 

considering establishing offices in other countries, but the impact that this 

will have on the foreign drug inspection program is unknown. 

To view the full product, including the scope 

and methodology, click on GAO-08-701T. 

For more information, contact Marcia Crosse 

at (202) 512-7114 or crossem@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today as you consider the Food and Drug 

Administration’s (FDA) plans to improve its program for inspecting 

foreign drug manufacturers whose products are marketed in the United 

States. America has become increasingly dependent on drugs and drug 

ingredients manufactured in foreign countries. Ten years ago, we reported 

that FDA needed to improve its foreign drug inspection program.1

 Among 

other things, we noted that FDA had serious problems managing its 

foreign inspection data. We were also critical of the number of inspections 

FDA conducted at foreign manufacturers. In November 2007, we testified 

on the preliminary findings of our current work in which we identified 

weaknesses similar to those we found in our previous report.2

 Our 

preliminary findings suggested that FDA had weaknesses in its databases, 

including conflicting information on the number of foreign establishments 

subject to inspection;3

 had information gaps that weakened its process for 

selecting foreign establishments for inspection; conducted infrequent 

inspections of these establishments; and faced logistical and staffing 

challenges unique to foreign inspections. Recent developments involving 

heparin sodium, a commonly used blood thinner, have further heightened

concerns about the safety of drugs and drug ingredients and FDA’s ability 

to inspect foreign manufacturers of these products. In January 2008, FDA 

began an investigation after receiving reports of serious adverse events in 

people receiving this drug. The agency later learned that an active 

pharmaceutical ingredient (API) found in heparin sodium contained a 

 1

GAO, Food and Drug Administration: Improvements Needed in the Foreign Drug 

Inspection Program, GAO/HEHS-98-21 (Washington, D.C.: Mar. 17, 1998).

2

GAO, Drug Safety: Preliminary Findings Suggest Weaknesses in FDA’s Program for

Inspecting Foreign Drug Manufacturers, GAO-08-224T (Washington, D.C.: Nov. 1, 2007). 

We also recently testified about similar weaknesses that we identified in FDA’s program for 

inspecting foreign medical device manufacturers. GAO, Medical Devices: Challenges for 

FDA in Conducting Manufacturer Inspections, GAO-08-428T (Washington, D.C.: Jan. 29,

2008). 

3

FDA regulations define an establishment as a place of business under one management at

one general physical location. 21 C.F.R. § 207.3(a)(7) (2007). Drug firms may have more

than one establishment. 

Page 1 GAO-08-701T
contaminant and had been manufactured at a Chinese establishment never

inspected by FDA.4

Recently, FDA has begun or proposed initiatives to strengthen its foreign 

drug inspection program.5

 You asked us to assess whether FDA’s 

initiatives will improve its management of this program. My testimony 

today will focus on these initiatives and how they address the weaknesses 

we previously identified.

To obtain information about FDA initiatives and how they address 

weaknesses in its program for inspecting foreign drug manufacturers, we 

interviewed officials from FDA, including from its Center for Drug 

Evaluation and Research (CDER) and Office of Regulatory Affairs (ORA), 

which each have responsibilities for managing the foreign inspection 

program. We examined reports and proposals prepared by the agency on 

related initiatives. We also examined FDA’s plans to improve databases it 

uses to manage its foreign drug inspection program, including its Field 

Accomplishments and Compliance Tracking System (FACTS), Operational 

and Administrative System for Import Support (OASIS), and Drug 

Registration and Listing System (DRLS).6

 Our November 2007 testimony 

included the number of inspections from FACTS as of September 26, 2007. 

To provide information to update those preliminary findings, we obtained

FACTS data that contained information on fiscal year 2007 inspections 

conducted or entered into this database since our previous analysis. We 

also obtained fiscal year 2007 data from OASIS to determine the types of 

drug products manufactured in China and offered for entry into the United 

States. We assessed the reliability of these databases by (1) reviewing 

existing information about the data and the databases that produced them, 

 4

An API is any component that is intended to provide pharmacological activity or other 

direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease. FDA 

defines inactive ingredients as any component of a drug product other than the API, such

as materials that improve the appearance, stability, and palatability of the product. 

According to FDA officials, the agency typically only inspects establishments

manufacturing inactive ingredients on a for-cause basis. 

5

See, for example, Food and Drug Administration, Revitalizing ORA: Protecting the Public 

Health Together In a Changing World (Rockville, Md.: Jan. 2008).

6

We also previously examined the reliability of DRLS. We found that DRLS was reliable, to 

the extent that it accurately reflects information provided by foreign drug manufacturing 

establishments that register with FDA. However, we determined that these data do not 

necessarily reflect all foreign establishments whose drugs are imported into the United

States. We do not present new information from DRLS in this testimony. 

Page 2 GAO-08-701T
(2) interviewing agency officials knowledgeable about the data, and 

(3) performing electronic testing of required data elements. We found the 

data in the FACTS database reliable for our purposes. In addition, we 

found that while OASIS is likely to over-estimate the number of foreign 

establishments involved in the manufacture of those drugs because 

of uncorrected errors in the data, it provides sufficiently reliable 

information about the types of drugs offered for entry into the United 

States. The information we present represents the best information 

available and is what FDA relies on to manage its foreign drug inspection 

activities. Our ongoing work is focused on human drugs regulated by 

CDER and not on biologics,7

 medical devices, veterinary medicines, food, 

or other items or products for which FDA conducts inspections. However, 

we obtained information from the center responsible for medical devices, 

the Center for Devices and Radiological Health (CDRH), to learn about a 

recent change to one of its databases that addresses problems similar to 

those in DRLS. We shared the facts contained in this statement with FDA 

officials. They provided technical comments, which we incorporated as 

appropriate. We conducted the work for our November 2007 testimony 

from September 2007 through October 2007, and we conducted our work 

for this statement from March 2008 through April 2008. All of our work is 

being performed 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. 

In summary, recent FDA initiatives—some of which have been

implemented and others proposed—could strengthen FDA’s foreign drug 

inspection program, but these initiatives do not fully address the 

weaknesses that we previously identified. For example, we found that 

FDA’s databases do not provide an accurate count of foreign

establishments subject to inspection. FDA plans to implement electronic

registration for foreign establishments. Implementing such a process may 

reduce inaccuracies in FDA’s database of registered establishments. 

However, this will not prevent foreign establishments that do not 

manufacture drugs for the U.S. market from erroneously registering with 

 7

Biologics are materials, such as vaccines, derived from living sources such as humans,

animals, and microorganisms. Some biologics are regulated by CDER and inspections 

related to those products are included in our work. 

Page 3 GAO-08-701T
FDA. For example, in some foreign markets, foreign drug manufacturers 

may register with FDA because registration may appear to convey an 

“approval” or endorsement by the agency. To reduce duplication in FDA’s 

import database, FDA supported a proposal to create a unique 

governmentwide identifier for all establishments whose products are 

imported into the United States. However, the implementation of this 

identifier is not certain and would require action from multiple federal 

agencies in addition to FDA. Efforts to integrate these databases have the

potential to provide FDA with a more accurate count of establishments 

subject to inspection, but it is too early to tell. FDA has also taken steps 

that could help it select foreign establishments for inspection by obtaining

information from foreign regulatory bodies. However, the agency has not 

fully utilized arrangements with foreign regulatory bodies in the past that 

would allow it to obtain such information. FDA has also made progress in 

conducting more foreign inspections, but it still inspects relatively few 

establishments. FDA is pursuing initiatives that could address some of the 

challenges that we identified as unique to foreign inspections. For 

example, the agency has proposed establishing overseas offices, beginning

in China, but the impact that these offices will have on the foreign drug 

inspection program is unknown. To date, it is unclear whether the 

agency’s proposals will increase the frequency with which FDA inspects 

foreign establishments or the quality of information it uses to select 

establishments to inspect. 

FDA is responsible for overseeing the safety and effectiveness of human 

drugs that are marketed in the United States, whether they are

manufactured in foreign or domestic establishments.8

 Foreign 

establishments that market their drugs in the United States must register 

with FDA. As part of its efforts to ensure the safety and quality of imported 

drugs, FDA may inspect foreign establishments whose products are 

imported into the United States. Regular inspections of manufacturing 

establishments are an essential component of ensuring drug safety. 

Conducting testing of finished dosage form drug products cannot reliably 

determine drug quality. Therefore, FDA relies on inspections to determine 

an establishment’s compliance with current good manufacturing practice 

regulations (GMP).9

 These inspections are a critical mechanism in FDA’s 

Background 

 8

FDA regulations define manufacturing to include the manufacture, preparation,

propagation, compounding, or processing of a drug. 21 C.F.R. § 207.3(a)(8) (2007). 

9

GMPs provide a framework for a manufacturer to follow to produce safe, pure, and highquality products. See 21 C.F.R. pts. 210, 211 (2007). 

Page 4 GAO-08-701T
process of assuring that the safety and quality of drugs are not jeopardized 

by poor manufacturing practices. 

Requirements governing foreign and domestic inspections differ. 

Specifically, FDA is required to inspect every 2 years those domestic 

establishments that manufacture drugs marketed in the United States,10 but 

there is no comparable requirement for inspecting foreign establishments. 

FDA does not have authority to require foreign establishments to allow the 

agency to inspect their facilities. However, FDA has the authority to 

conduct physical examinations of products offered for import, and if there 

is sufficient evidence of a violation, prevent their entry at the border. 

Within FDA, CDER sets standards and evaluates the safety and 

effectiveness of prescription and over-the-counter drugs. Among other 

things, CDER requests that ORA inspect both foreign and domestic 

establishments to ensure that drugs are produced in conformance with 

federal statutes and regulations, including current GMPs. CDER requests 

that ORA conduct inspections of establishments that produce drugs in 

finished-dosage form as well as those that produce bulk drug substances,11

including APIs used in finished drug products. These inspections are 

performed by investigators and, on occasion, laboratory analysts.12 ORA 

conducts two primary types of drug manufacturing establishment 

inspections: 

• Preapproval inspections of domestic and foreign establishments are 

conducted before FDA will approve a new drug to be marketed in the 

United States.

13 These inspections occur following FDA’s receipt of a new 

drug application (NDA) or an abbreviated new drug application (ANDA) 

 1021 U.S.C. § 360(h). 

11A bulk drug substance is any substance that is represented for use in a drug that, when

used in the manufacturing, processing, or packaging of a drug, becomes an active 

ingredient or a finished drug product. 21 C.F.R. § 207.3(a)(4) (2007). 

12ORA investigators lead inspections. Investigators are responsible for performing or

overseeing all aspects of an inspection. ORA laboratory analysts are chemists or 

microbiologists and have expertise in laboratory testing. 

13When FDA receives an application for drug approval, officials review the inspection 

history of each establishment listed on the application. According to FDA officials, if an 

establishment listed on the application has received a satisfactory GMP inspection in the 

2 previous years and the agency has no new concerns, FDA will consider this inspection 

sufficient and will not perform a preapproval inspection of this establishment.

Page 5 GAO-08-701T
and focus on the manufacture of a specific drug.

14 Preapproval inspections 

are designed to verify the accuracy and authenticity of the data contained

in these applications to determine that the manufacturer is following 

commitments made in the application. FDA also determines that the 

manufacturer of the finished drug product, as well as each manufacturer 

of a bulk drug substance used in the finished product, manufactures, 

processes, packs, and labels the drug adequately to preserve its identity, 

strength, quality, and purity. 

• Postapproval GMP surveillance inspections are conducted to ensure 

ongoing compliance with the laws and regulations pertaining to the 

manufacturing processes used by domestic and foreign establishments in 

the manufacture of drug products marketed in the United States and bulk 

drug substances used in the manufacture of those products. These 

inspections focus on a manufacturer’s systemwide controls for ensuring 

that drug products are of high quality. Systems examined during these 

inspections include those related to materials, quality control, production, 

facilities and equipment, packaging and labeling, and laboratory controls. 

These systems may be involved in the manufacture of multiple drug 

products.15

FDA has established arrangements with regulatory bodies in other 

countries to facilitate the sharing of information about drug inspections. 

FDA has entered into arrangements related to GMP inspections with 

Canada, Japan, the European Union, and others. The scope of such 

arrangements can vary. Some arrangements may allow FDA to obtain 

reports of inspections conducted by other countries, for informational 

purposes. Other arrangements may involve more than the exchange of 

information. For example, FDA and another country may enter into an 

arrangement to work towards the mutual recognition of each other’s 

inspection standards or the acceptance of one another’s inspections, in 

lieu of their own. 

 14FDA must approve an NDA in order for a new drug to be marketed in the United States. 

FDA reviews scientific and clinical data contained in these applications as part of its

process in considering them for approval to be marketed. Approval for a generic drug is

sought through an ANDA. 

15In addition, FDA conducts for-cause inspections when it receives information indicating

problems in the manufacture of approved drug products, as well as when it follows up on

manufacturers that were not in compliance with GMPs during previous inspections. 

Page 6 GAO-08-701T
CDER uses a risk-based process to select some foreign and domestic 

establishments for postapproval GMP surveillance inspections. The 

process uses a risk-based model to identify those establishments that, 

based on characteristics of the establishment and of the product being 

manufactured, have the greatest public health risk potential should they 

experience a manufacturing defect. For example, FDA considers the risk 

to public health from poor quality over-the-counter drugs to be lower than

for prescription drugs. Consequently establishments manufacturing only 

over-the-counter drugs receive a lower score on this factor in the riskbased process than other manufacturers. Through this process, CDER 

annually prepares a prioritized list of domestic establishments and a 

separate, prioritized list of foreign establishments. 

FDA uses multiple databases to manage its foreign drug inspection 

program. 

• DRLS contains information on foreign and domestic drug establishments 

that have registered with FDA to market their drugs in the United States.

These establishments must also list any drugs they market in the United 

States. These establishments provide information, such as company name 

and address and the drug products they manufacture for commercial 

distribution in the United States, on paper forms, which are entered into 

DRLS by FDA staff. 

• OASIS contains information on drugs and other FDA-regulated products 

offered for entry into the United States, including information on the 

establishment that manufactured the drug. The information in OASIS is 

automatically generated from data managed by Customs and Border 

Protection (CBP). The data are originally entered by customs brokers 

based on the information available from the importer.16 CBP specifies an 

algorithm by which customs brokers generate a manufacturer 

identification number from information about an establishment’s name, 

address, and location. 

• FACTS contains information on FDA’s inspections of foreign and domestic 

drug establishments. FDA investigators and laboratory analysts enter 

information into FACTS following completion of an inspection. 

 16Customs brokers are private individuals, partnerships, associations, or corporations

licensed, regulated, and empowered by CBP to assist in meeting federal requirements 

governing imports and exports. 

Page 7 GAO-08-701T
According to DRLS, in fiscal year 2007, foreign countries that had the 

largest number of registered establishments were Canada, China, France, 

Germany, India, Italy, Japan, and the United Kingdom. These countries are 

also listed in OASIS as having the largest number of manufacturers 

offering drugs for entry into the United States. Specifically, according to 

OASIS, China had more establishments manufacturing drugs that were 

offered for entry into the United States than any other country. According 

to OASIS, in fiscal year 2007, a wide variety of prescription and over-thecounter drug products manufactured in China were offered for entry into

the United States, including pain killers, antibiotics, blood thinners, and 

hormones. 

In November 2007, we testified on preliminary findings that identified 

weaknesses in FDA’s program for inspecting foreign establishments 

manufacturing drugs for the U.S. market. Specifically, we found that, as in

1998, FDA’s effectiveness in managing the foreign drug inspection program 

continued to be hindered by weaknesses in its data on foreign 

establishments. FDA did not know how many foreign establishments were 

subject to inspection. FDA relied on databases that were designed for 

purposes other than managing the foreign drug inspection program. 

Further, these databases contained inaccuracies that FDA could not easily 

reconcile. DRLS indicated there were about 3,000 foreign establishments 

registered with FDA in fiscal year 2007,17 while OASIS indicated that about 

6,800 foreign establishments actually offered drugs for entry in that year. 

FDA recognized these inconsistencies, but could not easily correct them 

partly because the databases could not exchange information. Any 

comparisons of the data must be performed manually, on a case-by-case 

basis. 

We also testified that FDA inspected relatively few foreign 

establishments.18 Data from FDA suggested that the agency may inspect 

about 8 percent of foreign establishments in a given year. At this rate, it 

would take FDA more than 13 years to inspect each foreign establishment 

once, assuming that no additional establishments require inspection. 

However, FDA could not provide an exact number of foreign

 17This count includes foreign establishments that were registered to manufacture human

drugs, biologics, and veterinary drugs; FDA was unable to provide the number of registered

establishments specifically manufacturing human drugs. 

18We updated information presented in our November 2007 testimony because that data did 

not include complete counts of inspections conducted in fiscal year 2007. 

Page 8 GAO-08-701T
establishments that had never been inspected. From fiscal year 2002 

through fiscal year 2007, FDA conducted 1,479 inspections of foreign 

establishments, and three quarters of these inspections were concentrated

in 10 countries. (See table 1.) Because some establishments were 

inspected more than once during this time period, FDA actually inspected 

1,119 unique establishments. For example, of the 94 inspections that FDA 

conducted of Chinese establishments, it inspected 80 unique 

establishments across this six year period. The lowest rate of inspections 

in these 10 countries was in China, for which FDA inspected 80 of its 

estimated 714 establishments, or fewer than 14 establishments per year, on

average. 

Table 1: Number of FDA Inspections of Foreign Establishments Involved in the Manufacture of Drugs for the U.S. Market, by

Country for the 10 Most Frequently Inspected Countries, Fiscal Year 2002 through Fiscal Year 2007 

Number of inspections

Country FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Total

Number of unique

establishments

inspected

Number of 

establishmentsa

India 11 19 38 33 34 64 199 152 410

Germany 24 15 35 25 19 25 143 95 199

Italy 17 30 26 21 18 28 140 98 150

Canada 29 12 17 23 23 20 124 88 288

United Kingdom 17 21 15 18 15 16 102 84 169

China 11 9 17 21 17 19 94 80 714

France 14 15 13 12 16 24 94 71 162

Japan 11 13 14 21 13 22 94 82 196

Switzerland 12 12 11 17 9 17 78 50 83

Ireland 11 5 11 14 3 14 58 43 61

All other countries 63 38 63 61 45 83 353 276 817

Total 220 189 260 266 212 332 1,479 1,119 3,249

Source: GAO analysis of FDA data. 

a

This count represents the number of establishments FDA used to plan its fiscal year 2007 prioritized 

surveillance inspections. In preparing this list, FDA draws on information from DRLS. It also obtains 

information from previous inspections to help it identify establishments that are subject to inspection 

but are not required to register—such as the manufacturer of an API whose product is not directly 

imported into the United States. However, as a result of the inaccuracies in DRLS, FDA recognizes

that this list does not provide an accurate count of establishments subject to inspection. 

Page 9 GAO-08-701T
We testified that, while enforcing GMP compliance through surveillance 

inspections was FDA’s most comprehensive program for monitoring the 

quality of marketed drugs, most of FDA’s inspections of foreign 

manufacturers occurred when they were listed in an NDA or ANDA. The 

majority of these preapproval inspections were combined with a GMP 

surveillance inspection. Although FDA used a risk-based process to 

develop a prioritized list of foreign establishments for GMP surveillance 

inspections, few were completed in a given year—about 30 in fiscal year 

2007. The usefulness of the process was weakened by the incomplete and 

possibly inaccurate information on those foreign establishments that FDA 

had not inspected recently, as well as those that had never been the 

subject of a GMP surveillance inspection. 

We also testified that FDA’s foreign inspection process involves unique 

circumstances that are not encountered domestically. For example, FDA 

relies on staff that inspect domestic establishments to volunteer for 

foreign inspections. Unlike domestic inspections, FDA does not arrive 

unannounced at a foreign establishment. It also lacks the flexibility to 

easily extend foreign inspections if problems are encountered. Finally,

language barriers can make foreign inspections more difficult than 

domestic ones. FDA does not generally provide translators to its 

inspection teams. Instead, they may have to rely on an English-speaking 

representative of the foreign establishment being inspected, rather than an

independent translator. 

FDA has initiated several recent changes to its foreign drug inspection 

program, but the changes do not fully address the weaknesses that we 

previously identified. FDA has initiatives underway to reduce the 

inaccuracies in its registration and import databases that make it difficult 

to determine the number of foreign establishments subject to inspection,

although to date these databases still do not provide an accurate count of 

such establishments. FDA has taken steps that could help it select foreign

establishments for inspection by obtaining information from foreign 

regulatory bodies. However, the agency has not fully utilized arrangements 

with foreign regulatory bodies in the past that would allow it to obtain 

such information. FDA has made progress in conducting more foreign 

inspections, but it still inspects relatively few establishments. FDA is also 

pursuing initiatives that could address some of the challenges that we 

identified as being unique to foreign inspections, but implementation 

details and timeframes associated with these initiatives are unclear. 

Recent Initiatives May 

Help FDA Select 

Foreign 

Establishments for 

Inspection, but 

Weaknesses in Its 

Foreign Drug 

Inspection Program 

Are Not Fully 

Addressed 

Page 10 GAO-08-701T
FDA has initiatives underway to reduce inaccuracies in its databases, but 

actions taken thus far will not ensure that the agency has an accurate 

count of establishments subject to inspection. As we previously testified, 

DRLS does not provide FDA with an accurate count of foreign 

establishments manufacturing drugs for the U.S. market. For example, 

foreign establishments may register with FDA, whether or not they 

actually manufacture drugs for the U.S. market,19 and the agency does not

routinely verify the information provided by the establishment. Beginning

in late 2008, CDER plans to implement an electronic registration and 

listing system that could improve the accuracy of information the agency

maintains on registered establishments. The new system will allow drug 

manufacturing establishments to submit registration and listing 

information electronically, rather than submitting it on paper forms. FDA 

hopes that electronic registration will result in efficiencies allowing the 

agency to shift resources from data entry to assuring the quality of the 

databases. However, electronic registration alone will not prevent foreign 

establishments that do not manufacture drugs for the U.S. market from 

registering, thus still presenting the problem of an inaccurate count. 

FDA Initiatives Could 

Improve Its Data, but Will 

Not Ensure an Accurate 

Count of Foreign 

Establishments Subject to 

Inspection 

Recently, another FDA center implemented changes affecting the 

registration of medical device manufacturers, an activity for which we 

previously identified problems similar to those found in CDER.20 In fiscal 

year 2008, CDRH implemented, in addition to electronic registration, an 

annual user fee of $1,706 per registration for certain medical device 

establishments21 and an active re-registration process.22 According to 

CDRH, as of early April 2008, about half of the previously registered 

establishments have reregistered using the new system. While CDRH 

 19FDA officials pointed out that some foreign establishments register, for example, because 

registration may erroneously appear to convey an “approval” or endorsement by FDA in

foreign markets. 

20GAO, Medical Devices: Challenges for FDA in Conducting Manufacturer Inspections, 

GAO-08-428T (Washington, D.C.: Jan. 29, 2008). 

2121 U.S.C. §§ 379i(13); 379j(a)(3), (b), (h). The registration user fee is $1,706 in fiscal year 

2008 and will increase by 8.5 percent per year, to $2,364 in fiscal year 2012. Fees are 

available for obligation only to the extent and in the amount provided in annual 

appropriations acts. FDA’s authority to assess registration fees terminates on October 1, 

2012. 

22CDRH indicated that the center will deactivate the registrations of those establishments 

that fail to complete the annual registration. Officials noted that, in the past, many 

establishments that had previously registered had not updated those registrations in 

several years. 

Page 11 GAO-08-701T
officials expect that this number will increase,23 they expect that the 

elimination of establishments that do not manufacture medical devices for 

the U.S. market—and thus should not be registered—will result in a 

smaller, more accurate database of medical device establishments. CDRH 

officials indicated that implementation of electronic registration and the 

annual user fee seems to have improved the data so CDRH can more 

accurately identify the type of establishment registered, the devices 

manufactured at an establishment, and whether or not an establishment 

should be registered. According to CDRH officials, the revenue from 

device registration user fees is applied to the process for the review of 

device applications,24 including establishment inspections undertaken as 

part of the application review process. CDER does not currently have the 

authority to assess a user fee for registration of drug establishments, but 

officials indicated that such a fee could discourage registrations of foreign 

manufacturers that are not ready, are not actively importing, or have not 

been approved to market drug products in the United States. Officials also 

suggested that such fees could be used to supplement the resources 

available for conducting inspections. 

FDA has proposed, but not yet implemented, the Foreign Vendor 

Registration Verification Program, which could help improve the accuracy

of information FDA maintains on registered establishments. Through this

program, FDA plans to contract with an external organization to conduct 

on-site verification of the registration data and product listing information 

of foreign establishments shipping drugs and other FDA-regulated 

products to the United States. As of April 2008, FDA had solicited 

proposals for this contract but was still developing the specifics of the 

program. For example, the agency had not yet established the criteria it 

would use to determine which establishments would be visited for 

verification purposes or determined how many establishments it would 

verify annually. FDA currently plans to award this contract in May 2008. 

Given the early stages of this process, it is too soon to determine whether 

this program will improve the accuracy of the data FDA maintains on 

foreign drug establishments. 

 23According to CDRH, in April, the center will send letters to establishments that have

registered in the past but have not completed their registration for fiscal year 2008 advising 

them that they must register using the new system and must pay the registration fee, if 

applicable, to be considered registered. 

2421 U.S.C. § 379i(8). 

Page 12 GAO-08-701T
In addition to changes to improve DRLS, FDA has supported a proposal 

that has the potential to address weaknesses in OASIS, but FDA does not 

control the implementation of this change. As we previously testified, 

OASIS contains an inaccurate count of foreign establishments 

manufacturing drugs imported to the United States as a result of unreliable 

identification numbers generated by customs brokers when the product is

offered for entry.25 FDA officials told us that these errors result in the 

creation of multiple records for a single establishment, which results in 

inflated counts of establishments offering drugs for entry into the U.S. 

market. FDA is pursuing the creation of a governmentwide unique 

establishment identifier, as part of the Shared Establishment Data Service 

(SEDS), to address these inaccuracies.

26 Rather than relying on the 

creation and entry of an identifier at the time of import, SEDS would 

provide a unique establishment identifier and a centralized service to 

provide commercially verified information about establishments. The 

standard identifier would be submitted as part of import entry data where 

required by FDA or other government agencies. SEDS could thus eliminate 

the problem of having multiple identifiers associated with an individual 

establishment. The implementation of SEDS is dependent on action from 

multiple federal agencies, including the integration of the concept into a 

CBP import and export system currently under development and 

scheduled for implementation in 2010. In addition, once implemented by 

CBP, participating federal agencies would be responsible for bearing the 

cost of integrating SEDS with their own operations and systems. FDA 

officials are not aware of a specific timeline for the implementation of 

SEDS. Developing an implementation plan for SEDS is a recommendation 

of the Interagency Working Group on Import Safety’s Action Plan for 

Import Safety: A Roadmap for Continual Improvement. 

Finally, FDA is in the process of implementing additional initiatives to 

improve the integration of its current data systems, which could make it

easier for the agency to establish an accurate count of foreign drug 

manufacturing establishments subject to inspection. The agency’s Mission 

Accomplishments and Regulatory Compliance Services (MARCS) is 

intended to help FDA electronically integrate data from multiple systems. 

 25The algorithm currently used by customs broker to assign the manufacturer identification 

number does not provide for a number that is reliably reproduced or inherently unique. 

26The SEDS concept was developed by a working group with representatives from FDA, the

Environmental Protection Agency, and the departments of Agriculture, Commerce, 

Defense, and Homeland Security. 

Page 13 GAO-08-701T
It is specifically designed to give individual users a more complete picture

of establishments. FDA officials estimate that MARCS, which is being 

implemented in stages, could be fully implemented by 2011 or 2012.

However, FDA officials told us that implementation has been slow 

because the agency has been forced to shift resources away from MARCS

and toward the maintenance of current systems that are still heavily used, 

such as FACTS and OASIS. Taken together, electronic registration, the 

Foreign Vendor Registration Verification Program, SEDS, and MARCS 

could provide the agency with more accurate information on the number 

of establishments subject to inspection. However, it is too early to tell. 

FDA Initiatives to Obtain 

Information on Foreign 

Establishments May Have 

Limited Impact on Its 

Selection of 

Establishments to Inspect 

FDA has taken steps to help it select establishments for inspection by 

obtaining information on foreign establishments from regulatory bodies in

other countries, despite encountering difficulties in fully utilizing these 

arrangements in the past. FDA has recognized the importance of receiving

information about foreign establishments from other countries and has 

taken steps to develop new, or strengthen existing, information-sharing 

arrangements to do so. For example, according to FDA, the agency is 

enhancing an arrangement to exchange information with the Swiss drug 

regulatory agency. FDA officials have highlighted such arrangements as a 

means of improving the agency’s oversight of drugs manufactured in 

foreign countries. For example, they told us that in selecting 

establishments for GMP surveillance inspections, they sometimes use the 

results of an establishment inspection conducted by a foreign government

to determine whether to inspect an establishment.27 FDA told us that it 

received drug inspection information from foreign regulatory bodies six 

times in 2007. 

FDA has previously encountered difficulties which prevented it from 

taking full advantage of information-sharing arrangements with other 

countries. Obtaining inspection reports from other countries and using 

this information has proved challenging. In order for FDA to determine the 

value of inspection reports from a particular country, it must consider 

whether the scope of that country’s inspections is sufficient for FDA’s 

needs. Evaluation of inspections conducted by foreign regulatory bodies 

can be complex and may include on-site review of regulatory systems and 

audit inspections. Further, to obtain results of inspections conducted by 

 27FDA officials told us that they do not use the results of an inspection conducted by a 

foreign regulatory body to make decisions about whether to approve a new drug. 

Page 14 GAO-08-701T
its foreign counterparts, FDA must specifically request them—they are not 

automatically provided. While FDA has provided certain foreign regulatory

bodies access to its Compliance Status Information System—which 

provides information from the results of FDA’s inspections—foreign 

regulatory bodies have not established similar systems to provide FDA 

access to data about their inspections. FDA indicated that such systems 

are under development in some countries and FDA has been promised 

access when they are available. However, currently, FDA cannot routinely 

incorporate the results of inspections conducted by foreign regulatory 

authorities into its risk-based selection process.28 FDA officials stated that,

in the past, they encountered difficulties using inspection reports from

other countries that were not readily available in English. Consequently, 

the existence of such information-sharing arrangements alone may not 

help FDA systematically address identified weaknesses in its foreign 

inspection program. 

Arrangements that have the potential to allow FDA to formally accept the

results of inspections conducted by other countries have been 

prohibitively challenging to implement. Although these arrangements 

allow countries to leverage their own inspection resources, according to 

FDA officials, assessing the equivalence of other countries’ inspections 

and the relevance of the information available is difficult. They added that

complete reliance on another country’s inspection results is risky. The 

activities associated with establishing these agreements may be resource 

intensive, which may slow FDA’s implementation of them. For example, 

FDA told us that a lack of funding for establishing such an arrangement 

with the European Union effectively stopped progress. Although FDA has 

completed preliminary work associated with this arrangement, the agency

has concluded that it will be more beneficial to pursue other methods of 

cooperating with the European Union. The agency has no plans at this 

time to enter into other such arrangements. 

FDA’s current efforts to obtain more information from foreign regulatory 

bodies may help it better assess the risk of foreign establishments when 

prioritizing establishments for GMP surveillance inspections. However, 

most foreign inspections are conducted to examine an establishment 

referenced in an NDA or ANDA. The agency conducts relatively few 

 28In addition to challenges in obtaining inspection reports, FDA may also be limited by the

type of information available. For example, FDA may not be able to obtain inspection 

reports on API manufacturing establishments because other regulatory bodies may only

inspect finished-dosage manufacturers. 

Page 15 GAO-08-701T
foreign GMP surveillance inspections selected through its risk-based 

process. Therefore, these efforts may be of limited value to the foreign 

inspection program if the agency does not increase the number of such 

inspections. 

FDA Has Increased Its 

Inspections of Foreign 

Establishments, but Still 

Inspects Relatively Few 

FDA has made progress in conducting more foreign inspections, but it still 

inspects relatively few establishments. FDA conducted more foreign 

establishment inspections in fiscal year 2007 than it had in each of the 

5 previous fiscal years. However, the agency still inspected less than 

11 percent of the foreign establishments on the prioritized list that it used 

to plan its fiscal year 2007 GMP surveillance inspections.29 The agency also

still conducts far fewer inspections of foreign establishments than 

domestic establishments. Its budget calls for incremental increases in 

funding for foreign inspections. FDA officials told us that, for fiscal year 

2008, the agency plans to conduct more GMP surveillance inspections 

based on its prioritized list of foreign establishments. FDA officials 

estimated that the agency conducted about 30 such inspections in fiscal 

year 2007 and plans to conduct at least 50 in fiscal year 2008.

If FDA were to inspect foreign establishments biennially, as is required for

domestic establishments, this would require FDA to dedicate substantially 

more funding than it has dedicated to such inspections in the past. In fiscal 

year 2007, FDA dedicated about $10 million to inspections of foreign 

establishments.30 FDA estimates that, based on the time spent conducting 

inspections of foreign drug manufacturing establishments in fiscal year 

2007, the average cost of such an inspection ranges from approximately 

$41,000 to $44,000.31 Our analysis suggests that it could cost the agency 

$67 million to $71 million each year to biennially inspect each of the 

3,249 foreign drug establishments on the list that FDA used to plan its 

fiscal year 2007 GMP surveillance inspections. Based on these same 

estimates, it would take the agency $15 million to $16 million each year to

inspect the estimated 714 drug manufacturing establishments in China 

 29As a result of the inaccuracies in its data, FDA recognizes that this list does not provide 

an accurate count of establishments subject to inspection. 

30According to FDA budget documents, the agency dedicated about $43 million to

inspecting domestic drug manufacturers in fiscal year 2007. 

31According to FDA, the cost of conducting foreign inspections varies, depending on

whether the type of inspection was a preapproval or GMP surveillance inspection, by the

time spent at an establishment, by the number of FDA staff conducting the inspection, and 

by the costs associated with traveling to the country in which the establishment is located. 

Page 16 GAO-08-701T
every 2 years. According to FDA budget documents, the agency estimates 

that it will dedicate a total of about $11 million in fiscal year 2008 and 

$13 million in fiscal year 2009 to all foreign inspections. 

In its fiscal year 2009 budget, FDA proposed instituting a reinspection user 

fee.32 Reinspections are conducted to verify that corrective actions the 

agency has required establishments to take in response to previously 

identified violations have been implemented. FDA’s proposal to institute a 

reinspection user fee would allow it to charge establishments a fee when 

the agency determines a reinspection is warranted. However, as proposed, 

the reinspection user fee would be budget neutral, meaning that the other 

appropriated funds the agency receives would be offset by the amount of

collected reinspection fees. As a result, this proposal would not provide 

the agency with an increase in funds that could be used to pay for 

additional foreign inspections. 

FDA Initiatives May 

Address Some Challenges 

Unique to Foreign 

Inspections, but It Is Too 

Early to Determine Their 

Effectiveness 

FDA has recently announced proposals to address some of the challenges

unique to conducting foreign inspections, but specific implementation 

steps and associated time frames are unclear. We previously identified the

lack of a dedicated staff devoted to conducting foreign inspections as a 

challenge for the agency. FDA noted in its report on the revitalization of 

ORA that it is exploring the creation of a cadre of investigators who would

be dedicated to conducting foreign inspections.33 However, the report does 

not provide any additional details or timeframes about this proposal. In 

addition, FDA recently announced plans to establish a permanent foreign 

presence overseas, although little information about these plans is 

available. Through an initiative known as “Beyond our Borders,” FDA 

intends that its foreign offices will improve cooperation and information 

exchange with foreign regulatory bodies, improve procedures for 

expanded inspections, allow it to inspect facilities quickly in an 

emergency, and facilitate work with private and government agencies to 

assure standards for quality. FDA’s proposed foreign offices are intended

to expand the agency’s capacity for regulating, among other things, drugs, 

medical devices, and food. The extent to which the activities conducted by

foreign offices are relevant to FDA’s foreign drug inspection program is 

 32FDA also proposed a reinspection user fee in its fiscal year 2007 and fiscal year 2008 

budgets, but these proposals were not enacted. 

33See, for example, Food and Drug Administration, Revitalizing ORA: Protecting the 

Public Health Together In a Changing World (Rockville, Md.: Jan. 2008).

Page 17 GAO-08-701T
uncertain. Initially, FDA plans to establish a foreign office in China with 

three locations—Beijing, Shanghai, and Guangzhou—comprised of a total 

of eight FDA employees and five Chinese nationals. The Beijing office,

which the agency expects will be partially staffed by the end of 2008, will 

be responsible for coordination between FDA and the Chinese regulatory

agencies. FDA staff located in Shanghai and Guangzhou, who will be hired 

in 2009, will be focused on conducting inspections and working with 

Chinese inspectors to provide training as necessary. FDA has noted that 

the Chinese nationals will primarily provide support to FDA staff including 

translation and interpretation. The agency is also considering setting up 

offices in other locations, such as India, the Middle East, Latin America, 

and Europe, but no dates have been specified. While the establishment of 

both a foreign inspection cadre and offices overseas have the potential for

improving FDA’s oversight of foreign establishments and providing the 

agency with better data on foreign establishments, it is too early to tell 

whether these steps will be effective or will increase the number of foreign 

drug inspections. 

Agreements with foreign governments, such as one recently reached with 

China’s State Food and Drug Administration, may help the agency address 

certain logistical issues unique to conducting inspections of foreign 

establishments. We previously testified that one challenge faced by FDA 

involved the need for its staff to obtain a visa or letter of invitation to enter

a foreign country to conduct an inspection. However, FDA officials told us

that their agreement with China recently helped FDA expedite this process 

when it learned of the adverse events associated with a Chinese heparin 

manufacturer. According to these officials, the agreement with China 

greatly facilitated its inspection of this manufacturer by helping FDA send 

investigators much more quickly than was previously possible. 

Americans depend on FDA to ensure the safety and effectiveness of the 

drugs they take. The recent incident involving heparin underscores the 

importance of FDA’s initiatives and its steps to obtain more information 

about foreign drug establishments, conduct more inspections overseas, 

and improve its overall management of its foreign drug inspection 

program. FDA has identified actions that, if fully implemented, could 

address some, but not all, of the concerns we first identified 10 years ago 

and reiterated 5 months ago in our testimony before this subcommittee. 

Given the growth in foreign drug manufacturing for the U.S. market and 

the current large gaps in FDA’s foreign drug inspections, FDA will need to 

devote considerable resources to this area if it is to increase the rate of 

inspections. However, FDA’s plans currently call for incremental increases 

Concluding 

Observations 

Page 18 GAO-08-701T
that will have little impact in the near future to reduce the interval 

between inspections for these establishments. In addition, many of FDA’s 

initiatives will take several years to implement and require funding and 

certain interagency or intergovernmental agreements that are not yet in

place. Taken together, FDA’s plans represent a step forward in filling the 

large gaps in FDA’s foreign drug inspection program, but do little to 

accomplish short-term change. 

Mr. Chairman, this completes my prepared statement. I would be happy to

respond to any questions you or the other Members of the subcommittee 

may have at this time. 

For further information about this testimony, please contact 

Marcia Crosse at (202) 512-7114 or crossem@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found on

the last page of this testimony. Geraldine Redican-Bigott, Assistant 

Director; Katherine Clark; William Hadley; Cathleen Hamann; 

Julian Klazkin; Lisa Motley; Daniel Ries; and Monique B. Williams made 

key contributions to this testimony. 

Contacts and 

Acknowledgments 

(290701) Page 19 GAO-08-701T
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