Drug Safety: FDA Faces Challenges Overseeing the Foreign Drug Manufacturing Supply Chain
Published: 2011-09-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Globalization has placed increasing demands on the Food and Drug Administration (FDA) in ensuring the safety and effectiveness of drugs marketed in the United States. The pharmaceutical industry has increasingly relied on global supply chains in which each manufacturing step may be outsourced to foreign establishments. As part of its efforts, FDA may conduct inspections of foreign drug manufacturing establishments, but there are concerns that the complexity of the drug manufacturing supply chain and the volume of imported drugs has created regulatory challenges for FDA. FDA has begun taking steps to address some of these concerns, such as the establishment of overseas offices. This statement discusses (1) FDA's inspection of foreign drug manufacturing establishments, (2) the information FDA has on these establishments, and (3) recent FDA initiatives to improve its oversight of the supply chain. The statement presents findings based primarily on GAO reports since 2008 related to FDA's oversight of the supply chain. These reports include Food and Drug Administration: Overseas Offices Have Taken Steps to Help Ensure Import Safety, but More Long-Term Planning Is Needed ( GAO-10-960 , Sept. 30, 2010) and Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress Is Needed ( GAO-10-961 , Sept. 30, 2010). GAO supplemented this prior work with updated information obtained from FDA in August and September 2011.
section_title: What GAO Found
paragraphs: Inspections of foreign drug manufacturers are an important element of FDA's oversight of the supply chain, but GAO's prior work showed that FDA conducts relatively few such inspections. In 2008, GAO reported that in fiscal year 2007 FDA inspected 8 percent of foreign establishments subject to inspection and estimated that, at that rate, it would take FDA about 13 years to inspect all such establishments. GAO recommended that FDA increase the number of foreign inspections it conducts at a frequency comparable to domestic establishments with similar characteristics. FDA subsequently increased the number of foreign establishment inspections. FDA's inspection efforts in fiscal year 2009 represent a 27 percent increase in the number of inspections it conducted, when compared to fiscal year 2007--424 and 333 inspections, respectively. However, FDA officials acknowledged that FDA is far from achieving foreign drug inspection rates comparable to domestic inspection rates--the agency inspected 1,015 domestic establishments in fiscal year 2009. Also, the types of inspections FDA conducts generally do not include all parts of the drug supply chain. Conducting inspections abroad also continues to pose unique challenges for the agency. For example, FDA faces limits on its ability to require foreign establishments to allow it to inspect their facilities. Furthermore, logistical issues preclude FDA from conducting unannounced inspections, as it does for domestic establishments. GAO previously reported that FDA lacked complete and accurate information on foreign drug manufacturing establishments--information critical to understanding the supply chain. In 2008, GAO reported that FDA databases contained incorrect information about foreign establishments and did not contain an accurate count of foreign establishments manufacturing drugs for the U.S. market. FDA's lack of information hampers its ability to inspect foreign establishments. GAO recommended that FDA address these deficiencies. FDA has taken steps to do so, but has not yet fully addressed GAO's concerns. Given the difficulties that FDA has faced in inspecting and obtaining information on foreign drug manufacturers, and recognizing that more inspections alone are not sufficient to meet the challenges posed by globalization, the agency has begun to implement other initiatives to improve its oversight of the drug supply chain. FDA's overseas offices have engaged in a variety of activities to help ensure the safety of imported products, such as training foreign stakeholders to help enhance their understanding of FDA regulations. GAO recommended that FDA enhance its strategic and workforce planning, which FDA agreed it would do. FDA has also taken other positive steps, such as developing initiatives that would assist its oversight of products at the border, although these are not yet fully implemented. Finally, FDA officials identified statutory changes that FDA believes it needs to help improve its oversight of drugs manufactured in foreign establishments. For example, in place of the current requirement that FDA inspect domestic establishments every 2 years, officials indicated the agency would benefit from a risk-based inspection process with flexibility to determine the frequency with which both foreign and domestic establishments are inspected. In light of the growing dependence upon drugs manufactured abroad and the potential for harm, FDA needs to act quickly to implement changes across a range of activities in order to better assure the safety and availability of drugs for the U.S. market.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the Food and Drug  Administration’s (FDA) oversight of the nation’s drug supply chain.  Globalization has placed increasing demands on FDA, which is  responsible for the oversight of drugs marketed in the United States,  regardless of whether they are manufactured in foreign or domestic  establishments. While Americans once used drugs that were mostly  manufactured domestically, this is no longer the case. According to 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. In addition, the pharmaceutical industry  has increasingly relied on global supply chains in which each  manufacturing step may be outsourced to foreign establishments. The  complexity of the drug supply chain, the volume of imported drugs, and  the number of foreign establishments producing these drugs have created  regulatory challenges for FDA. The danger associated with an insecure  supply chain was highlighted in January 2008, when FDA responded to a  crisis involving the contamination of the active pharmaceutical ingredient  (API) used to manufacture heparin, a medication used to prevent and  treat blood clots. The contaminated heparin, which was associated with  numerous adverse events—including deaths—came from a facility in  China. During its investigation, FDA determined that some manufacturers  were not adequately safeguarding their heparin supply chains.
In recent years we have reported on several aspects of FDA’s ability to  protect Americans from unsafe and ineffective drugs entering our supply  chain. Amidst growing concerns with the increasing demands placed on  the agency, including its ability to ensure the quality of drugs  manufactured overseas, we added FDA’s oversight of medical products  to our High-Risk Series. FDA has acknowledged that globalization has  fundamentally changed the environment for regulating pharmaceutical  products and the agency has begun taking steps to address some of  these concerns, such as the establishment of overseas offices.
My remarks today will focus primarily on information collected for several  reports we issued since 2008 that specifically cite concerns we identified  related to FDA’s oversight of the manufacturing side of the supply chain  for drugs produced by overseas establishments for marketing in the  United States. Specifically, I will discuss (1) FDA’s inspections of foreign  drug manufacturing establishments, which are intended to assure that the  safety and quality of drugs are not jeopardized by poor manufacturing  practices; (2) the information FDA has on these establishments; and   (3) recent FDA initiatives to improve its oversight of the supply chain.
For our work reviewing FDA’s inspections of foreign drug manufacturing  establishments, we obtained and analyzed FDA data on foreign and  domestic drug manufacturing establishment inspections conducted from  fiscal years 2007 to 2009. We also examined methods used by FDA to  select establishments for inspection. For our work examining how FDA  responded to the heparin crisis, we reviewed actions FDA took during the  crisis period, which FDA defined as January 2008 through May 2008. We  also interviewed FDA officials and drug manufacturers and reviewed FDA  documents, such as inspection reports and internally produced  summaries (e.g., a time line of events related to the crisis).
For our work reviewing the information FDA has on foreign drug  manufacturing establishments, we obtained data from FDA’s registration  database on the number of establishments registered to market their  drugs in the United States. We also obtained data from FDA’s import  database on the number of establishments that have manufactured drugs  that were shipped to the United States. We reviewed FDA’s initiatives  for improving the accuracy of the agency’s data on foreign establishments  contained in these databases, which are both used to manage the foreign  drug inspection program.
For our work reviewing recent FDA initiatives intended to improve the  agency’s oversight of foreign drug manufacturing establishments, we  reviewed documentation and interviewed FDA officials from each of  FDA’s five overseas offices to learn about their activities, challenges,  accomplishments, and strategic and workforce planning. For three of the  overseas offices—China, India, and Latin America—we interviewed office  staff and others, such as officials from FDA’s foreign regulatory  counterparts, during on-site visits in February and March 2010. We also  reviewed documents related to the agency’s efforts to augment its  existing information on foreign drug establishments, such as information  obtained from foreign regulatory authorities. We supplemented that prior  work with updated information that we received from FDA in August and  September 2011.
We conducted the work for the performance audits on which this  statement is based from September 2007 to September 2008, June 2009  to September 2010, and from August to September 2011 for selected  updates. Our work was conducted 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.
subsections: section_title: Background
paragraphs: As part of its efforts to ensure the safety and quality of imported drugs,  FDA may conduct inspections of foreign establishments manufacturing  drugs, including APIs, that are imported into the United States. FDA relies  on these establishment inspections to determine compliance with current  good manufacturing practice regulations (GMP). The purpose of these  inspections is to ensure that foreign establishments meet the same  requirements as domestic establishments to ensure the quality, purity,  potency, safety, and efficacy of drugs marketed in the United States.
Requirements governing FDA’s inspection of foreign and domestic  establishments differ. Specifically, FDA is required to inspect every   2 years those domestic establishments that manufacture drugs in the  United States, but there is no comparable requirement for inspecting  foreign establishments that market their drugs in the United States.  However, drugs manufactured by foreign establishments that are offered  for import may be refused entry to the United States if FDA determines— through the inspection of an establishment, a physical examination of  drugs when they are offered for import at a point of entry, or otherwise— that there is sufficient evidence of a violation of applicable laws or  regulations.
FDA conducts two primary types of drug manufacturing establishment  inspections. Preapproval inspections of domestic and foreign  establishments may be conducted before FDA will approve a new drug to  be marketed in the United States. In addition, FDA conducts GMP  inspections at establishments manufacturing drugs already marketed in  the United States to determine ongoing compliance with laws and  regulations.
section_title: FDA Conducts Relatively Few Inspections of Foreign Drug Establishments
paragraphs: Although inspections of foreign drug manufacturing establishments— which are intended to assure that the safety and quality of drugs are not  jeopardized by poor manufacturing practices—are an important element  of FDA’s oversight of the supply chain, our previous work has shown that  FDA conducts relatively few inspections of the establishments that it  considers subject to inspection. Specifically, in our 2008 report, we  estimated that FDA inspected 8 percent of such foreign drug  establishments in fiscal year 2007. At this rate, we estimated that it would  take FDA about 13 years to inspect all foreign establishments the agency  considers subject to inspection. In 2010, we reported that FDA had  increased its inspection efforts in fiscal year 2009. We estimated that FDA  inspected 11 percent of foreign establishments subject to inspection and  it would take FDA about 9 years to inspect all such establishments at this  rate. FDA’s inspection efforts in fiscal year 2009 represent a   27 percent increase in the number of inspections the agency conducted  when compared to fiscal year 2007—424 and 333 inspections,  respectively. In contrast, FDA conducts more inspections of domestic  establishments and the agency inspects these establishments more  frequently. For example, in fiscal year 2009, FDA conducted 1,015  domestic inspections, inspecting approximately 40 percent of domestic  establishments. We estimated that at this rate FDA inspects domestic  establishments approximately once every 2.5 years. To address these  discrepancies, we recommended that FDA conduct more inspections to  ensure that foreign establishments manufacturing drugs currently  marketed in the United States are inspected at a frequency comparable to  domestic establishments with similar characteristics. FDA agreed that  the agency should be conducting more foreign inspections, but FDA  officials have since acknowledged that the agency is far from achieving  foreign drug inspection rates comparable to domestic inspection rates  and, without significant increases to its inspectional capacity, the  agency’s ability to close this gap is highly unlikely.
In addition to conducting few foreign drug manufacturing inspections, the  types of inspections FDA conducts generally do not include all parts of  the drug supply chain. For example, FDA officials told us during our  review of the contaminated heparin crisis that the agency typically does  not inspect manufacturers of source material—which are not required to  be listed on applications to market drugs in the United States—and  generally limits its inspections to manufacturers of the finished product  and APIs. Furthermore, once FDA conducts an inspection of a foreign  drug manufacturer, it is unlikely that the agency will inspect it again, as  the majority of the foreign inspections FDA conducts are to inform  decisions about the approval of new drugs before they are marketed for  sale in the United States.
Despite increases in foreign drug establishment inspections in recent  years, FDA continues to face unique challenges conducting inspections  abroad. Specifically, as we identified in our 2008 report on FDA’s foreign  drug inspections, FDA continues to experience challenges related to  limits on the agency’s ability to require foreign establishments to allow the  agency to inspect their facilities. For example, while inspecting  establishments in China during the heparin crisis, Chinese crude heparin  consolidators refused to provide FDA full access during inspections—in  particular, one consolidator refused to let FDA inspectors walk through its  laboratory and refused FDA access to its records. As a result, FDA  officials said they focused on the manufacturers’ responsibilities to ensure  that these establishments could trace their crude heparin back to qualified  suppliers that produce an uncontaminated product and requested that  manufacturers conduct their own investigations of any heparin products  for which they received complaints or that did not meet specifications.  Furthermore, FDA faces other challenges conducting foreign inspections,  such as logistical issues that necessitate the agency notifying the  manufacturer of the agency’s intention to inspect the establishment in  advance. In contrast to domestic inspections which are conducted without  prior notice, FDA contacts foreign manufacturers prior to inspection to  ensure that the appropriate personnel are present and that the  establishment is manufacturing its product during the time of the  inspection. In some cases, FDA must obtain permission from the foreign  government of the country in which an establishment is located in order to  conduct an inspection. FDA officials report that inspections may be  conducted several months after an establishment has been notified of  FDA’s intent to conduct an inspection due to the need to obtain visas and  other delays. As a result of such advance notice, FDA staff conducting  inspections may not observe an accurate picture of the manufacturer’s  day-to-day operations.
section_title: FDA Lacks Complete Information on Foreign Drug Establishments
paragraphs: Our previous reports indicated that FDA has experienced challenges  maintaining complete information on foreign drug manufacturing  establishments. This lack of information, which is critical to understanding  the supply chain, hampers the agency’s ability to inspect foreign  establishments. In 2008, we reported that FDA did not maintain a list of  foreign drug establishments subject to inspection, but rather the agency  relied on information from their drug establishment registration and import  databases to help select establishments for inspection. However, we  found that these databases contained incorrect information about foreign  establishments and did not contain an accurate count of foreign  establishments manufacturing drugs for the U.S. market. For example, in  our 2008 report, we identified that for fiscal year 2007, FDA’s registration  database contained information on approximately 3,000 foreign drug  establishments that registered with FDA to market drugs in the United  States, while the import database contained information on about 6,800  foreign establishments that offered drugs for import into the United  States. Some of the inaccuracies in the registration database reflected  the fact that, despite being registered, some foreign establishments did  not actually manufacture drugs for the U.S. market. Additionally, the  inaccurate count of establishments in the import database was the result  of unreliable manufacturer identification numbers generated by customs  brokers when a drug is offered for import. As a result of these  inaccuracies, FDA did not know how many foreign establishments were  subject to inspection. To address these inaccuracies, we recommended  that FDA enforce the requirement that establishments manufacturing  drugs for the U.S. market update their registration annually and establish  mechanisms for verifying information provided by the establishment at the  time of registration.
Since then, FDA has taken steps to address these deficiencies and  improve the information it receives from both the registration and import  databases, though these efforts have not yet fully addressed the  concerns we raised in 2008. For example, in June 2009, FDA began  requiring all drug establishments marketing their products in the United  States to submit their annual registration and listing information  electronically, rather than submitting the information on paper forms to be  entered into the registration database. FDA indicated that, as of  September 2011, the implementation of this requirement has eliminated  the human error that has been associated with the transcription of  information from paper forms to electronic files. As part of electronic  registration, FDA has also requested the each establishment provide a  unique identification number—a Dun and Bradstreet Data Universal  Numbering System (D-U-N-S®) Number—as a way to help avoid  duplications and errors in FDA’s data systems. In addition, in  September 2011, FDA officials reported that the agency had begun to  take steps to enforce its annual registration requirement. They indicated  that FDA will now conduct outreach to establishments that have not  submitted an annual registration to confirm that they are no longer  producing drugs for the U.S. market or to ensure they register, as  required, if they are continuing to manufacture drugs for the U.S. market.  They said that if an establishment does not respond to FDA’s outreach, it  is to be removed from the registration database. To further address  concerns with the import database, FDA has an initiative underway to  eliminate duplicate information by taking steps to identify and remove all  duplicate drug establishment records from existing import data over the  next few years.
section_title: Recent FDA Initiatives to Improve Oversight of the Supply Chain
paragraphs: Given the difficulties that FDA has faced in inspecting and obtaining  information on foreign drug manufacturers, and recognizing that more  inspections alone are not sufficient to meet the challenges posed by  globalization, the agency has begun to explore other initiatives to improve  its oversight of the drug supply chain. We reported that FDA’s overseas  offices had engaged in a variety of activities to help ensure the safety of  imported products. These included establishing relationships with foreign  regulators, industry, and U.S. agencies overseas; gathering information  about regulated products to assist with decision making; and, in China  and India, conducting inspections of foreign establishments. Although  we noted that the impact of the offices on the safety of imported products  was not yet clear, FDA staff, foreign regulators, and others pointed to  several immediate benefits, such as building relationships. However, they  also described challenges related to some of their collaborations with  domestic FDA offices and the potential for increasing demands that could  lead to an unmanageable workload. We reported that FDA was in the  process of long-term strategic planning for the overseas offices, but had  not developed a long-term workforce plan to help ensure that it is  prepared to address potential overseas office staffing challenges, such as  recruiting and retaining skilled staff. We recommended that FDA enhance  its strategic planning and develop a workforce plan to help recruit and  retain overseas staff and FDA concurred with our recommendations. In  September 2011, FDA indicated that it had developed a 2011 to 2015  strategic plan and was in the process of updating it, and it had initiated a  workforce planning process.
FDA has also implemented collaborative efforts with foreign regulatory  authorities to exchange information about planned inspections as well as  the results of completed inspections. In December 2008, FDA, along with  its counterpart regulatory authorities of the European Union and Australia,  initiated a pilot program under which the three regulators share their  preliminary plans for and results of inspections of API manufacturing  establishments in other countries. For example, FDA could receive the  results of inspections conducted by these regulatory bodies and then  determine if regulatory action or a follow-up inspection is necessary. FDA  contends that prospectively sharing this information could allow these  regulatory bodies to more efficiently use their resources by minimizing the  overlap in their inspection plans. According to agency officials, the agency  had used inspection reports from the other regulators to improve its  knowledge of a small number of API manufacturing establishments, most  of which had not been inspected in the last 3 years, but that it was  interested in inspecting due to a pending drug application.
FDA has also taken other steps to improve the information that the  agency maintains on foreign establishments shipping drugs to the United  States. In August 2008, FDA contracted with two external organizations to  implement the Foreign Registration Verification Program. Through this  program, contractors conduct site visits to verify the existence of foreign  establishments that are registered with FDA and confirm that they  manufacture the products that are recorded in U.S. import records.  According to FDA officials, establishments that are new to the U.S.  market or are importing products not typically manufactured at the same  establishment are considered candidates for the verification program.  For example, FDA officials told us about an establishment that was  selected for the program because, according to agency records, it was  offering for import into the United States pickles and an API—two  products not normally manufactured at the same establishment. As of  September 2011, the contractors had visited 142 foreign drug  establishments located in Asia, Australia, Africa, Canada, and Europe, 27  of which did not appear to exist at the address provided by the  establishments at the time of registration. According to FDA, the agency  uses the information obtained from the contractors as screening criteria to  target drug products from those establishments for review at the border.
FDA is also developing initiatives that would assist its oversight of  products at the border. For example, FDA is in the process of establishing  its Predictive Risk-based Evaluation for Dynamic Import Compliance  Targeting (PREDICT) import screening system. The system is intended to  automatically score each entry based on a range of risk factors and  identify high-risk items for review. FDA piloted this system on seafood  products in the summer of 2007. FDA determined that the system  expedited the entry of lower-risk products, while identifying a higher rate  of violations among products that were tested when they were offered for  import. The agency planned to have the system implemented in all  locations and for all FDA-regulated products by June 2011, although its  deployment has been delayed. According to FDA, full deployment of  PREDICT is currently slated for December 2011.
FDA also identified statutory changes that would help improve its  oversight of drugs manufactured in foreign establishments. These include  authority to (1) suspend or cancel drug establishment registrations to  address concerns, including inaccurate or out-of-date information;   (2) require drug establishments to use a unique establishment identifier;  and (3) implement a risk-based inspection process, with flexibility to  determine the frequency with which both foreign and domestic  establishments are inspected, in place of the current requirement that  FDA inspect domestic establishments every 2 years.
section_title: Concluding Observations
paragraphs: Globalization has fundamentally altered the drug supply chain and  created regulatory challenges for FDA. In our prior reports we identified  several concerns that demonstrate the regulatory difficulties that FDA  faces conducting inspections of, and maintaining accurate information  about, foreign drug establishments. While inspections provide FDA with  critical information, we recognize that inspections alone are not sufficient  to meet all the challenges of globalization. FDA should be credited for  recent actions, such as collaborating with and exchanging information on  drug establishments with foreign governments, that represent important  initial steps toward addressing these challenges. However, as the agency  has acknowledged, there are additional steps that it still needs to take.  We have previously made recommendations to address some  challenges, such as poor information and planning, and the agency has  identified additional authorities that could provide it with necessary  enforcement tools. In light of the growing dependence upon drugs  manufactured abroad and the potential for harm, FDA needs to act  quickly to implement changes across a range of activities in order to  better assure the safety and availability of drugs for the U.S. market.
Chairman Harkin, Ranking Member Enzi, and Members of the  Committee, this concludes my prepared statement. I would be pleased to  respond to any questions you may have at this time.
section_title: GAO Contact and Staff Acknowledgments
paragraphs: 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. GAO staff who made key contributions to  this testimony include Geraldine Redican-Bigott, Assistant Director;  William Hadley; Cathleen Hamann; Rebecca Hendrickson; and Lisa  Motley.
section_title: Related GAO Products
paragraphs: High-Risk Series: An Update. GAO-11-278. Washington, D.C.: February  2011.
Food and Drug Administration: Response to Heparin Contamination  Helped Protect Public Health; Controls That Were Needed for Working  With External Entities Were Recently Added. GAO-11-95. Washington,  D.C.: October 29, 2010.
Drug Safety: FDA Has Conducted More Foreign Inspections and Begun  to Improve Its Information on Foreign Establishments, but More Progress  Is Needed. GAO-10-961. Washington, D.C: September 30, 2010.
Food and Drug Administration: Overseas Offices Have Taken Steps to  Help Ensure Import Safety, but More Long-term Planning Is Needed.  GAO-10-960. Washington, D.C.: September 30, 2010.
Food and Drug Administration: FDA Faces Challenges Meeting Its  Growing Medical Product Responsibilities and Should Develop Complete  Estimates of Its Resource Needs. GAO-09-581. Washington, D.C.:   June 19, 2009.
High-Risk Series: An Update. GAO-09-271. Washington, D.C.: January  2009.
Drug Safety: Better Data Management and More Inspections Are Needed  to Strengthen FDA’s Foreign Drug Inspection Program. GAO-08-970.  Washington, D.C.: September 22, 2008.
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Drug Safety: Preliminary Findings Suggest Recent FDA Initiatives Have  Potential, but Do Not Fully Address Weaknesses in Its Foreign Drug  Inspection Program. GAO-08-701T. Washington, D.C.: April 22, 2008.
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