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Initiatives Have Potential, but Do Not Fully Address Weaknesses in Its 
Foreign Drug Inspection Program' which was released on April 22, 2008.

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Testimony: 

Before the Subcommittee on Oversight and Investigations, Committee on 
Energy and Commerce, House of Representatives: 

United States Government Accountability Office:
GAO: 

For Release on Delivery: 
Expected at 11:00 a.m. EDT: 
Tuesday, April 22, 2008: 

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: 

GAO-08-701T: 

GAO Highlights: 

Highlights of GAO-08-701T, a testimony before the Subcommittee on 
Oversight and Investigations, Committee on Energy and Commerce, House 
of Representatives. 

Why GAO Did This Study: 

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 FDAs 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 FDAs foreign drug 
inspection program (GAO-08-224T). This statement presents preliminary 
findings on how FDAs initiatives address the weaknesses GAO 
identified. GAO interviewed FDA officials and analyzed FDAs 
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. 

What GAO Found: 

Recent FDA initiativessome of which have been implemented and others 
proposedcould strengthen FDAs foreign drug inspection program, but 
these initiatives do not fully address the weaknesses that GAO 
previously identified. 

* GAO testified in November 2007 that FDAs 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 FDAs 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 FDAs 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 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-701T]. For more 
information, contact Marcia Crosse at (202) 512-7114 or 
crossem@gao.gov. 

[End of section] 

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.[Footnote 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.[Footnote 2] Our preliminary findings suggested that 
FDA had weaknesses in its databases, including conflicting information 
on the number of foreign establishments subject to inspection;[Footnote 
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 contaminant and had been manufactured at a Chinese 
establishment never inspected by FDA.[Footnote 4] 

Recently, FDA has begun or proposed initiatives to strengthen its 
foreign drug inspection program.[Footnote 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).[Footnote 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, (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, 
[Footnote 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 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. 

Background: 

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.[Footnote 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).[Footnote 9] These 
inspections are a critical mechanism in FDA's 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,[Footnote 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,[Footnote 11] including APIs used in finished drug products. 
These inspections are performed by investigators and, on occasion, 
laboratory analysts.[Footnote 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.[Footnote 13] These inspections occur following FDA's 
receipt of a new drug application (NDA) or an abbreviated new drug 
application (ANDA) and focus on the manufacture of a specific 
drug.[Footnote 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.[Footnote 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. 

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 risk-based 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.[Footnote 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. 

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-the-counter 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,[Footnote 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.[Footnote 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 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: 

Country: India; 
Number of inspections: FY2002: 11; 
Number of inspections: FY2003: 19; 
Number of inspections: FY2004: 38; 
Number of inspections: FY2005: 33; 
Number of inspections: FY2006: 34; 
Number of inspections: FY2007: 64; 
Number of inspections: Total: 199; 
Number of unique establishments inspected: 152; 
Number of establishments[A]: 410. 

Country: Germany; 
Number of inspections: FY2002: 24; 
Number of inspections: FY2003: 15; 
Number of inspections: FY2004: 35; 
Number of inspections: FY2005: 25; 
Number of inspections: FY2006: 19; 
Number of inspections: FY2007: 25; 
Number of inspections: Total: 143; 
Number of unique establishments inspected: 95; 
Number of establishments[A]: 199. 

Country: Italy; 
Number of inspections: FY2002: 17; 
Number of inspections: FY2003: 30; 
Number of inspections: FY2004: 26; 
Number of inspections: FY2005: 21; 
Number of inspections: FY2006: 18; 
Number of inspections: FY2007: 28; 
Number of inspections: Total: 140; 
Number of unique establishments inspected: 98; 
Number of establishments[A]: 150. 

Country: Canada; 
Number of inspections: FY2002: 29; 
Number of inspections: FY2003: 12; 
Number of inspections: FY2004: 17; 
Number of inspections: FY2005: 23; 
Number of inspections: FY2006: 23; 
Number of inspections: FY2007: 20; 
Number of inspections: Total: 124; 
Number of unique establishments inspected: 88; 
Number of establishments[A]: 288. 

Country: United Kingdom; 
Number of inspections: FY2002: 17; 
Number of inspections: FY2003: 21; 
Number of inspections: FY2004: 15; 
Number of inspections: FY2005: 18; 
Number of inspections: FY2006: 15; 
Number of inspections: FY2007: 16; 
Number of inspections: Total: 102; 
Number of unique establishments inspected: 84; 
Number of establishments[A]: 169. 

Country: China; 
Number of inspections: FY2002: 11; 
Number of inspections: FY2003: 9; 
Number of inspections: FY2004: 17; 
Number of inspections: FY2005: 21; 
Number of inspections: FY2006: 17; 
Number of inspections: FY2007: 19; 
Number of inspections: Total: 94; 
Number of unique establishments inspected: 80; 
Number of establishments[A]: 714. 

Country: France; 
Number of inspections: FY2002: 14; 
Number of inspections: FY2003: 15; 
Number of inspections: FY2004: 13; 
Number of inspections: FY2005: 12; 
Number of inspections: FY2006: 16; 
Number of inspections: FY2007: 24; 
Number of inspections: Total: 94; 
Number of unique establishments inspected: 71; 
Number of establishments[A]: 162. 

Country: Japan; 
Number of inspections: FY2002: 11; 
Number of inspections: FY2003: 13; 
Number of inspections: FY2004: 14; 
Number of inspections: FY2005: 21; 
Number of inspections: FY2006: 13; 
Number of inspections: FY2007: 22; 
Number of inspections: Total: 94; 
Number of unique establishments inspected: 82; 
Number of establishments[A]: 196. 

Country: Switzerland; 
Number of inspections: FY2002: 12; 
Number of inspections: FY2003: 12; 
Number of inspections: FY2004: 11; 
Number of inspections: FY2005: 17; 
Number of inspections: FY2006: 9; 
Number of inspections: FY2007: 17; 
Number of inspections: Total: 78; 
Number of unique establishments inspected: 50; 
Number of establishments[A]: 83. 

Country: Ireland; 
Number of inspections: FY2002: 11; 
Number of inspections: FY2003: 5; 
Number of inspections: FY2004: 11; 
Number of inspections: FY2005: 14; 
Number of inspections: FY2006: 3; 
Number of inspections: FY2007: 14; 
Number of inspections: Total: 58; 
Number of unique establishments inspected: 43; 
Number of establishments[A]: 61. 

Country: All other countries; 
Number of inspections: FY2002: 63; 
Number of inspections: FY2003: 38; 
Number of inspections: FY2004: 63; 
Number of inspections: FY2005: 61; 
Number of inspections: FY2006: 45; 
Number of inspections: FY2007: 83; 
Number of inspections: Total: 353; 
Number of unique establishments inspected: 276; 
Number of establishments[A]: 817. 

Country: Total; 
Number of inspections: FY2002: 220; 
Number of inspections: FY2003: 189; 
Number of inspections: FY2004: 260; 
Number of inspections: FY2005: 266; 
Number of inspections: FY2006: 212; 
Number of inspections: FY2007: 332; 
Number of inspections: Total: 1,479; 
Number of unique establishments inspected: 1,119; 
Number of establishments[A]: 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. 

[End of table] 

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. 

Recent Initiatives May Help FDA Select Foreign Establishments for 
Inspection, but Weaknesses in Its Foreign Drug Inspection Program Are 
Not Fully Addressed: 

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. 

FDA Initiatives Could Improve Its Data, but Will Not Ensure an Accurate 
Count of Foreign Establishments Subject to Inspection: 

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,[Footnote 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. 

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.[Footnote 
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 establishments[Footnote 21] and an active re- 
registration process.[Footnote 22] According to CDRH, as of early April 
2008, about half of the previously registered establishments have 
reregistered using the new system. While CDRH officials expect that 
this number will increase,[Footnote 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,[Footnote 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. 

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.[Footnote 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.[Footnote 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. 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.[Footnote 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 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.[Footnote 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 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.[Footnote 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.[Footnote 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.[Footnote 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 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.[Footnote 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.[Footnote 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 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. 

Concluding Observations: 

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 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. 

Contacts and Acknowledgments: 

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. 

[End of testimony] 

Footnotes: 

[1] GAO, Food and Drug Administration: Improvements Needed in the 
Foreign Drug Inspection Program, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?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, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?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, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?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. 

[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. 

[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. 

[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 high-quality products. See 21 C.F.R. pts. 210, 211 
(2007). 

[10] 21 U.S.C.  360(h). 

[11] A 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). 

[12] ORA 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. 

[13] When 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. 

[14] FDA 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. 

[15] In 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. 

[16] Customs brokers are private individuals, partnerships, 
associations, or corporations licensed, regulated, and empowered by CBP 
to assist in meeting federal requirements governing imports and 
exports. 

[17] This 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. 

[18] We updated information presented in our November 2007 testimony 
because that data did not include complete counts of inspections 
conducted in fiscal year 2007. 

[19] FDA 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. 

[20] GAO, Medical Devices: Challenges for FDA in Conducting 
Manufacturer Inspections, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-428T] (Washington, D.C.: Jan. 29, 2008). 

[21] 21 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. 

[22] CDRH 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. 

[23] According 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. 

[24] 21 U.S.C.  379i(8). 

[25] The 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. 

[26] The 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. 

[27] FDA 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. 

[28] In 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. 

[29] As a result of the inaccuracies in its data, FDA recognizes that 
this list does not provide an accurate count of establishments subject 
to inspection. 

[30] According to FDA budget documents, the agency dedicated about $43 
million to inspecting domestic drug manufacturers in fiscal year 2007. 

[31] According 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. 

[32] FDA also proposed a reinspection user fee in its fiscal year 2007 
and fiscal year 2008 budgets, but these proposals were not enacted. 

[33] See, for example, Food and Drug Administration, Revitalizing ORA: 
Protecting the Public Health Together In a Changing World (Rockville, 
Md.: Jan. 2008). 

[End of section] 

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