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United States Government Accountability Office: 
GAO: 

Testimony: 

Before the Committee on Health, Education, Labor, and Pensions, U.S. 
Senate: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Wednesday, September 14, 2011: 

Drug Safety: 

FDA Faces Challenges Overseeing the Foreign Drug Manufacturing Supply 
Chain: 

Statement of Marcia Crosse:
Director, Health Care: 

GAO-11-936T: 

GAO Highlights: 

Highlights of GAO-11-936T, a testimony before the Committee on Health, 
Education, Labor, and Pensions, U.S. Senate. 

Why GAO Did This Study: 

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) FDAs 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 FDAs 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. 

What GAO Found: 

Inspections of foreign drug manufacturers are an important element of 
FDAs oversight of the supply chain, but GAOs 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. FDAs 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 establishmentsinformation 
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. FDAs 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 GAOs 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. FDAs 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. 

View [hyperlink, http://www.gao.gov/products/GAO-11-936T]. For more 
information, contact Marcia Crosse at (202) 512-7114 or 
crossem@gao.gov. 

[End of section] 

Chairman Harkin, Ranking Member Enzi, and Members of the Committee: 

I am pleased to be here today to discuss the Food and Drug 
Administration's (FDA) oversight of the nation's drug supply chain. 
[Footnote 1] 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.[Footnote 2] 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,[Footnote 3] 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.[Footnote 4] 

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.[Footnote 5] 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.[Footnote 6] 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.[Footnote 7] 

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.[Footnote 8] 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.[Footnote 9] 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.[Footnote 
10] 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. 

Background: 

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). 
[Footnote 11] 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. 
[Footnote 12] 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.[Footnote 13] 

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. 

FDA Conducts Relatively Few Inspections of Foreign Drug Establishments: 

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.[Footnote 14] 
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.[Footnote 15] 
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.[Footnote 16] 

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[Footnote 
17]--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. 
[Footnote 18] 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. 

FDA Lacks Complete Information on Foreign Drug Establishments: 

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.[Footnote 19] 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.[Footnote 20] 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.[Footnote 21] 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.[Footnote 22] 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[Footnote 
23]--as a way to help avoid duplications and errors in FDA's data 
systems.[Footnote 24] 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. 

Recent FDA Initiatives to Improve Oversight of the Supply Chain: 

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.[Footnote 25] 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.[Footnote 26] 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. 
[Footnote 27] 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.[Footnote 
28] 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.[Footnote 29] 

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. 

Concluding Observations: 

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. 

GAO Contact and Staff 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. GAO staff who made key contributions 
to this testimony include Geraldine Redican-Bigott, Assistant 
Director; William Hadley; Cathleen Hamann; Rebecca Hendrickson; and 
Lisa Motley. 

[End of section] 

Related GAO Products: 

High-Risk Series: An Update. [hyperlink, 
http://www.gao.gov/products/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. [hyperlink, 
http://www.gao.gov/products/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. [hyperlink, http://www.gao.gov/products/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. 
[hyperlink, http://www.gao.gov/products/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. [hyperlink, 
http://www.gao.gov/products/GAO-09-581]. Washington, D.C.: June 19, 
2009. 

High-Risk Series: An Update. [hyperlink, 
http://www.gao.gov/products/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. [hyperlink, 
http://www.gao.gov/products/GAO-08-970]. Washington, D.C.: September 
22, 2008. 

Medical Devices: FDA Faces Challenges in Conducting Inspections of 
Foreign Manufacturing Establishments. [hyperlink, 
http://www.gao.gov/products/GAO-08-780T]. Washington, D.C.: May 14, 
2008. 

Drug Safety: Preliminary Findings Suggest Recent FDA Initiatives Have 
Potential, but Do Not Fully Address Weaknesses in Its Foreign Drug 
Inspection Program. [hyperlink, 
http://www.gao.gov/products/GAO-08-701T]. Washington, D.C.: April 22, 
2008. 

Medical Devices: Challenges for FDA in Conducting Manufacturer 
Inspections. [hyperlink, http://www.gao.gov/products/GAO-08-428T]. 
Washington, D.C.: January 29, 2008. 

Drug Safety: Preliminary Findings Suggest Weaknesses in FDA's Program 
for Inspecting Foreign Drug Manufacturers. [hyperlink, 
http://www.gao.gov/products/GAO-08-224T]. Washington, D.C.: November 
1, 2007. 

Food and Drug Administration: Improvements Needed in the Foreign Drug 
Inspection Program. [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-98-21]. Washington, D.C.: March 
17, 1998. 

[End of section] 

Footnotes: 

[1] Drugs are defined to include, among other things, articles 
intended for use in the diagnosis, cure, mitigation, treatment, or 
prevention of disease, and include components of those articles. 21 
U.S.C.  321(g)(1)(B), (D). 

[2] FDA regulations define manufacturing to include the manufacture, 
preparation, propagation, compounding, or processing of a drug. 21 
C.F.R.  207.3(a)(8) (2011). In addition, 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) (2011). Drug 
manufacturers may have more than one establishment. 

[3] An API includes any component of a drug that is intended to 
provide pharmacological activity or other direct effect in the 
diagnosis, cure, mitigation, treatment, or prevention of disease. See 
21 C.F.R.  210.3(b)(7) (2011). In this statement, we refer both to 
drug products--drugs in their finished dosage form--and to APIs as 
"drugs." 

[4] The heparin supply chain starts with a raw source material, 
primarily derived from the intestines of pigs, that is processed into 
crude heparin. Thousands of small pig farms in Chinese villages 
extract and process pig intestines in small workshops called casing 
facilities. Consolidators collect different batches of heparin from 
various workshops and sell these batches to manufacturers, who further 
refine the crude heparin into heparin API, the active ingredient used 
in heparin drug products and heparin containing devices. More than 
half of the finished heparin products in the United States and 
globally are made from Chinese-sourced materials. 

[5] See the Related GAO Products page at the end of this statement. 

[6] GAO, High-Risk Series: An Update, [hyperlink, 
http://www.gao.gov/products/GAO-11-278] (Washington, D.C.: February 
2011). We first added FDA's oversight of medical products to our High-
Risk Series in January 2009. 

[7] In late 2008 and early 2009, FDA established overseas offices 
comprised of staff covering particular countries or regions. FDA has 
staff located overseas in Beijing, Shanghai, and Guangzhou, China; New 
Delhi and Mumbai, India; San Jose, Costa Rica; Mexico City, Mexico; 
and Santiago, Chile. In June 2011, FDA also located staff in Amman, 
Jordan and Pretoria, South Africa. 

[8] GAO, Drug Safety: Better Data Management and More Inspections Are 
Needed to Strengthen FDA's Foreign Drug Inspection Program, 
[hyperlink, http://www.gao.gov/products/GAO-08-970] (Washington, D.C.: 
Sept. 22, 2008); GAO, Food and Drug Administration: Overseas Offices 
Have Taken Steps to Help Ensure Import Safety, but More Long-Term 
Planning Is Needed, [hyperlink, 
http://www.gao.gov/products/GAO-10-960] (Washington, D.C.: Sept. 30, 
2010); GAO, Drug Safety: FDA Has Conducted More Foreign Inspections 
and Begun to Improve Its Information on Foreign Establishments, but 
More Progress Is Needed, [hyperlink, 
http://www.gao.gov/products/GAO-10-961] (Washington, D.C.: Sept. 30, 
2010); and GAO, Food and Drug Administration: Response to Heparin 
Contamination Helped Protect Public Health; Controls That Were Needed 
for Working With External Entities Were Recently Added, [hyperlink, 
http://www.gao.gov/products/GAO-11-95] (Washington, D.C.: Oct. 29, 
2010). 

[9] Domestic and foreign establishments that manufacture drugs for the 
U.S. market are required to register annually with FDA. 21 U.S.C.  
360(b), (i)(1). 

[10] FDA's import database 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. 

[11] GMPs provide a framework for a manufacturer to follow to produce 
safe, pure, and high-quality drugs. See 21 C.F.R. pts. 210, 211 
(2011). See also International Conference on Harmonisation of 
Technical Requirements for Registration of Pharmaceuticals for Human 
Use, ICH Harmonised Tripartite Guideline: Good Manufacturing Practice 
Guide for Active Pharmaceutical Ingredients Q7 (Geneva, Switzerland: 
Nov. 10, 2000). 

[12] See 21 U.S.C.  360(h), (i)(3). 

[13] See 21 U.S.C.  381(a). 

[14] FDA attributes this increase in fiscal year 2009 foreign drug 
inspections to staffing changes--the creation of a drug inspection 
cadre and the placement of investigators overseas--and increased 
resources dedicated to these types of inspections. 

[15] See [hyperlink, http://www.gao.gov/products/GAO-08-970]. 

[16] We noted in our September 2010 report that, in response to our 
inquiries and those of congressional staff, FDA had undertaken a 
review to determine the appropriate inspection frequency for foreign 
and domestic drug establishments. However, as of September 2011, this 
review had not been completed. 

[17] For example, in the case of the heparin supply chain, the source 
material is primarily derived from the intestines of pigs, which is 
processed into the crude heparin that is refined into heparin API. 

[18] See [hyperlink, http://www.gao.gov/products/GAO-08-970]. 

[19] See [hyperlink, http://www.gao.gov/products/GAO-08-970]. 

[20] In our 2010 report, we indicated that, in fiscal year 2009, FDA's 
import database contained information for about 7,000 foreign 
establishments, compared with the approximately 3,200 foreign drug 
establishments that were registered with FDA in that year. See 
[hyperlink, http://www.gao.gov/products/GAO-10-961]. 

[21] Such establishments may have gone out of business, but not 
informed FDA, or the establishments may not actually ship drugs to the 
United States. Some foreign establishments may register with FDA, but 
never ship drugs to the United States. FDA officials told us that such 
foreign establishments may register because, in foreign markets, 
registration may erroneously convey an "approval" or endorsement by 
FDA. 

[22] As we reported in 2010, the algorithm used by customs brokers to 
assign the manufacturer identification number does not provide for a 
number that is reliably reproduced or inherently unique. Consequently, 
according to FDA officials, multiple records may be created for a 
single establishment, resulting in an inflated count of the number of 
establishments. See [hyperlink, 
http://www.gao.gov/products/GAO-10-961]. 

[23] The D-U-N-S Number is a unique nine-digit sequence recognized as 
the federal government's universal standard for identifying and 
keeping track of business entities. Submitting the site-specific 
number for an entity would provide, by reference to the number, 
certain business information for that entity that is otherwise 
required for drug establishment registration. 

[24] Additionally, FDA, in conjunction with 20 of the nearly 50 
federal agencies involved in the oversight of products imported into 
the United States, supports efforts for Customs and Border Protection--
which control the implementation of this proposal--to adopt unique 
establishment identifiers for all establishments whose products, 
including drugs, are imported into the United States. 

[25] We also reported that FDA overseas officials had started to 
provide training, responses to queries, and other assistance to 
foreign stakeholders to help them improve their regulatory systems and 
better understand FDA regulations. 

[26] According to FDA officials, the Foreign Registration Verification 
Program covers establishments manufacturing all FDA-regulated products. 

[27] To select establishments for the Foreign Registration 
Verification Program, FDA uses information from its import database to 
determine the products that establishments are shipping to the United 
States and to identify establishments that are importing a variety of 
products. 

[28] According to FDA, the agency has engaged contractors to conduct 
at least 125 more such visits of foreign drug manufacturing 
establishments during the coming year. 

[29] In our 2010 report, we noted that FDA had taken action against 2 
of the establishments that appeared not to exist by deactivating their 
registration and alerting FDA import staff so that they could detain 
any products offered for import by these establishments, thus 
preventing these products from being imported into the United States. 

[End of section] 

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