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After Heparin: Ensuring the Safety of the U.S. Drug Supply

John M. Taylor, III
Acting Principal Deputy Commissioner
Food and Drug Administration

The Pew Charitable Trusts Conference
March 14, 2011

It is a pleasure to be here today.  I would like to thank the PEW Charitable Trust and Allan Coukell for inviting me to be a part of this event.

I would like to take this opportunity to talk to you about the new realities of drug regulation brought about by increased globalization—realities that have redrawn the path food and medical products navigate to reach our homes, and have redefined the foundation of FDA’s product oversight as well.

As you know, the FDA is responsible for overseeing the safety and manufacturing quality of food, drugs, medical devices, vaccines and biologics, cosmetics, dietary supplements, animal drugs and food, radiation-emitting devices, and, for the first time in FDA’s history, tobacco products. This range of products accounts for between 20 and 25 percent of every consumer dollar spent in this country—and, with the exception of tobacco, they are products that people need and rely on in fundamental ways every day.

As you can see, our scope and responsibilities are enormous. But it hasn’t always been that way. As you can imagine, the world in which FDR created the modern FDA was very different from ours.

Back then, most products FDA regulated were domestically manufactured and the data supporting them came from US inspections. For years, when it came to importation of foreign products, our authority to ensure safety and quality and to protect public health focused on catching problems at the border and then utilizing limited overseas inspections. But times have changed.

The realities of global economic conditions, as well as innovations in technology, refrigeration, transportation, and communication, have enabled and spurred consolidation and globalization.  This has resulted in a striking rise in the imports of foods, pharmaceuticals, medical devices, and even, to some extent, biologics.  In addition, there has been a dramatic increase in the complexity of imported products.

Now, what we as Americans consider to be “our” products are, in reality, global commodities.  Every day, the percentage of imported products we consume continues to increase, and the distinction between domestic and foreign products becomes increasingly blurred.

This is an issue that must concern us all and one of Commissioner Hamburg’s top priorities. At the Agency, we have spent a lot of time grappling with increased Globalization.  It has major implications for consumers around the world and for FDA and the way we fulfill our mission to promote and protect the health of the American people.

And for that reason, I would like to communicate to you the scale of our challenge and the steps FDA must take to meet the unique public health challenges of our globalized world and to assure the health, safety, and security of our nation.

The safety of America’s food and medical products is under serious challenge in the current era of global supply chains, international trade, and the foreign sourcing and manufacture of regulated products. This is a challenge we share with many other countries…and it’s urgent that we address it collectively. And that we address it now.

Today, the world in which FDA-regulated products are discovered, developed, processed, and distributed is much bigger.  FDA’s traditional model of manufacturing site inspections and border examinations is simply not adequate in today’s transformed world.

To illustrate this point, FDA projects more than 20 million import lines of food, devices, drugs, and cosmetics arrived at U.S. ports of entry in FY 2010. That is more than a three-fold increase in regulated imports from a decade ago. Food products, representing the largest share by volume of import lines, have grown by an average of nearly 10% each year for at least 7 years. Today, there are more than 130,000 importers of record and more than 300 ports of entry in the United States. The array of regulated products comes from 300,000-plus facilities in more than 150 different countries.

At the same time, the supply chain from manufacturer to consumer has become more and more complex…involving a web of re-packagers and redistributors… making oversight significantly more difficult. And the internet has allowed consumers to purchase products more directly, bypassing traditional safeguards that exist.

These numbers are staggering. In the food realm, about 45 percent of fresh fruit and vegetables and more than 70 percent of seafood we eat in the United States come from other countries. And for medical products, a stunning 80 percent of the active pharmaceutical ingredients in our drugs come from outside our borders and about 40 percent of the drugs themselves.

In fact, FDA-regulated products now account for approximately 10% of all imports  While foods and medical devices have seen the largest volume of imports, all of FDA’s product groups have seen substantial import growth and will likely experience more.

In 2000, the U.S. imported $1.7 billion more in pharmaceutical products than it exported. By 2008, that discrepancy had grown ten-fold to $18 billion. And as I noted earlier,   even more than finished medications, the U.S. is increasingly relying on foreign producers for key components.

The number of medical device import lines has risen an average of 10% per year between 1998 and 2008.  Importation of medical devices is broad-based, spanning all major device types.  Today, imports represent more than 35% of the U.S. medical equipment market.

On the low end, some expect a 5-8% projected growth rate, slightly lower than the 10% growth rate of the past decade.  On the high end, there have been estimates that imports of FDA-regulated products will triple by 2015, corresponding to a 15% growth rate.  In either scenario, the growth in imported products is expected to outpace the growth of domestic products, leading to an even higher proportion of FDA regulated products in the U.S., coming from overseas.

Companies will not only be producing more FDA-regulated products abroad, but those products will follow complex paths through multi-step supply chains to reach the United States. The market for contract manufacturing outsourcing in pharmaceutical production is evidence of this trend, growing to an estimated $46 billion in 2010, more than double the size of the market 9 years ago.

Of course, much about this is positive…we can, for example, have fresh mangos and strawberries any time of the year…and it likely keeps drug and device costs down.  But there are also huge negative implications.

High-profile incidents – contaminated heparin from China, toothpaste from China containing Diethylene Glycol, counterfeit Lipitor from Central America, and diverted and counterfeit glucose monitor test strips from Europe and the Far East - have provided stark reminders of the important role that FDA plays in regulating products from around the world.  Weaknesses in the integrity of the global supply chain have led to the distribution of unsafe or ineffective products and harm caused by economic adulteration and intentional fraud.  As a result, the trend toward globalization has increased public awareness about the safety of products imported from abroad.

These examples provide tangible proof of how the challenges of Globalization may impede the prevention, detection, intervention, and response to food and medical product safety problems.

And, the world is poised for even further globalization.  There are macro trends at work that are impacting global commerce and our daily life and the cumulative effect of these trends will ensure that ten years in the future, the world will be a very different place. Therefore to understand the future of the drug and medical device industries, it is imperative to first have a perspective on these macro trends. The impact of these trends on the industries that FDA regulates has already been pronounced.  The manufacturers FDA regulates face intense pressure to lower costs and increase worker productivity, and government agencies are becoming even more active and influential stakeholders in the healthcare market.

Undoubtedly, the pressure to reduce costs and increase productivity will force companies to continue to move manufacturing activities to new and different locations, looking for cheaper sites and global supply chains to reduce production costs. These pressures will continue to drive more, as well as more complex, production abroad, dramatically increasing the already high volume of FDA-regulated products that are imported into the U.S.

For example, countries like China and India that already produce many of the foods and medical products that Americans use, will likely in the future not only produce these goods, but will also be important centers of innovation, inventing new, groundbreaking products that Americans will want to buy.

The value of local pharmaceutical production in 2012 in India and China will likely be 2.5 times what it was in 2006.  China already has the largest number of foreign, FDA-registered drug manufacturing establishments followed by India. The picture is similar for medical devices.  China has the fourth-highest volume of imports to the U.S. of medical equipment and is the leading supplier of sutures, sterile, surgical, and dental goods as well as mechano-therapy apparatus. In fact, China has the highest number of FDA-registered class II or class III manufacturing establishments of any country in the world outside the U.S.

Both India and China offer a number of cost advantages, most notably the cost of skilled labor.  India in particular trains six times the number of chemists annually that the U.S. produces and companies can access this talent for 10% of the cost of the same talent in America. In total, estimates indicate that bulk manufacturing in India can reduce costs for U.S. and European companies by 30 to 40 percent.

The cost advantage of skilled labor in India and China has increased the number of drugs developed in Asia.  Together, India and China have more than 30% of the world’s drug master files (DMF) and the number has been growing, due in part to the abundant supply of trained scientists and a significant cost differential for product development.  The cost of a developing DMF in India is one-quarter of the cost in the United States.  At the same time, China has tripled its annual R&D investment over the past 15 years and will likely have the largest R&D workforce in the world by 2015.

As these and other countries account for an increasing proportion of U.S. imports, FDA will need to deeply understand past non-compliance issues.  The agency will then need to take an integrated global view of product safety risk and align its resources with the greatest sources of future risk.

The bottom line is that the growing challenges of globalization have far outstripped the nation’s product safety inspection and quality monitoring resources and the exponential growth in imports will make seizing noncompliant products at the border more difficult in the future.

With so much movement across such large distances, businesses and regulators will face a difficult challenge to maintain visibility into the end-to-end process.  It will also become increasingly difficult to prevent and detect the intentional efforts by some importers to manipulate the system and avoid scrutiny.

As supply chains become more global and complex, they will also carry an increasing number of complicated, high-risk products to the U.S. from abroad.  As a consequence, it will become more difficult to distinguish the risk and complexity of a product based on where it is produced.

The bottom line is that as global product flows change around the world, increased access to the global marketplace will increase the specter of harm to consumers from economic adulteration, fraud, and counterfeiting.  In order to cope with the magnitude of the fundamental global shifts on the horizon, FDA will have to substantially revise its approach to global product safety.

Because the changes shaping the world of the future will be so large and so fundamental, FDA will need to substantially evolve its product safety model in order to keep ahead of the coming risks.  Import growth will accelerate at the same time that highly-sensitive production processes are moving to new geographies.  FDA has already begun working diligently to build relationships with partners and push for strong global safety standards.  However, the magnitude of the challenge will require faster progress towards this goal than we have seen in the past.

Consequently, at FDA, we have realized that, in order to protect American consumers we must work globally because the products our consumers use are no longer simply American products.  They are global products.  And we know that our counterparts face similar challenges for their citizens. A global problem requires a global solution and global responsibility on the part of FDA, our regulatory partners, and industry to leverage resources and ensure public health.

In order to achieve its mission of protecting the public health in a more Globalized world, FDA must address these challenges in a fundamental way and adapt its operating model to the new environment through a global product safety action plan.

This means that successfully addressing the challenges of globalization will require a paradigm shift. This paradigm shift is necessary because the border can no longer be the nation’s primary line of defense against unsafe import products.  Instead, over time, it should serve as a final checkpoint on preventive controls throughout the supply chain. For this very reason, the agency is engaged in initiatives aimed at creating an operational model and shifting the import paradigm to be more prevention-focused and global to meet today’s challenges and those that we know will come tomorrow. We look forward to working with our federal and international partners and all of you to achieve this critical goal but let me take some time to give you an idea of where we are headed.

FDA is one of the world’s oldest drug regulators with a reputation and a proven track record for being a leader in product safety.  However, as it looks to the future, FDA will no longer be able to rely on its historical tools and activities to regulate products.  FDA will have to realign and refocus its existing global safety resources and adopt a more strategic engagement with foreign counterparts to emphasize tangible steps to improve product safety.  The reality facing FDA is that its mission will become ever more difficult to fulfill given the breadth of industries that it regulates combined with available resources.  It is imperative, therefore, that FDA finds the most effective way to revise its approaches and utilize all tools at its disposal.

As I alluded to earlier, despite changes in the structure of FDA-regulated industries, the agency has relied on fundamentally the same oversight approach contemplated at its founding.  Throughout its existence, the FDA’s primary tools for global product safety have been facilities inspections and border inspections.  This has been supplemented over time with additional tools such as laboratory sample analyses for select product categories (e.g., foods) and product safety reporting systems that permit consumers and other interested parties to have a greater role in ensuring that products are safe.

However, traditionally, and with very few exceptions, FDA has used its own employees to perform all oversight activities. Alternative approaches including third-party inspection programs and international cooperation have not been the primary focus, although the new food safety legislation has provided new emphasis on these areas. Given the significant challenges that we face, FDA continues to identify ways to innovate in our oversight efforts and work with our domestic and international partners to develop the necessary tools and to secure support for the necessary authorities, but FDA has not made enough progress in transforming its oversight approach.

Despite significant effort and investment of resources, the FDA’s successes in adopting new oversight strategies and engaging foreign partners have not helped the agency substantially increase the coverage of its safety assurance activities. To date, the FDA has taken a range of different approaches to international collaboration ranging from training and capacity building to harmonization of highly technical safety standards to its recent admission into the PIC/S system of information sharing regarding pharmaceutical facility inspections. In addition, FDA has played a significant role in partnering with its foreign counterparts to combat counterfeit medical products. These interactions have been immensely helpful in building positive relationships with our counterparts and enhancing skills in a number of different countries and they have given the FDA valuable insight into the challenges that others have been facing.

However, the more complex, globalized environment predicted in the near future requires FDA to make faster progress toward meaningful collaboration and impactful output than some of the current programs are on pace to produce.  Some programs have begun to move the world toward strong, common safety standards, but the FDA has only used these as an acceptable alternative to its own standards in limited circumstances.  For example, at the current rate of progress and through the current mechanisms, it would take decades to reach a comprehensive set of common standards that could form the basis for FDA to leverage the work of public and private third parties both domestically and abroad but as described previously, the global safety risks on the horizon are present and increasing and warrant near-term, tangible output that cannot wait for existing programs alone to run their course.

For this reason, it is more critical than ever that we find better, more creative ways to meet these challenges—and assure the safety of medical products for the American people and we have many new strategies underway. This does not mean that some of FDA’s new and innovative approaches to enhance regulatory effectiveness have not been successful, but it does mean that there is a need to move beyond these efforts to demonstrate effectiveness on a limited scale, and to think strategically across the FDA and the network of regulators worldwide about what is needed to effect a substantial enhancement of global product safety.

The recent passage of the Food Safety Modernization Act has created mechanisms that promote a new level of accountability for all entities involved in the supply chain from the farm to the fork, and seeks to accelerate the mitigation of safety risks for food products, such as including provisions for electronic data sharing, provisions for the mutual recognition of inspection reports, and the training of foreign governments and food producers on U.S. requirements. While the legislation is not perfect—we do face challenges in regards to resources—it is a truly significant step in the right direction.  And last year, Congress introduced a similar bill for drugs that would bring sorely needed modernization to our authorities.

One might suppose that given that FDA’s operating model has served it well over the years, one option to meet the challenge of assuring product safety in a globalized world is to scale the current model.  Just to give you an example -- doing so by achieving a comparable average inspection frequency of foreign facilities would require a significant increase in resource levels that is simply not forthcoming.   An alternative approach -- one that relies on enhanced intelligence, information sharing, data-driven risk analytics, and the allocation of resources achieved through partnerships -- has the potential to achieve greater levels of assurance of product safety and do so with fewer, more targeted resources.

For example, FDA, its foreign regulatory partners, and industry must require more and better information at the source about product supply chains and follow this information throughout the product lifecycle. Regulatory standards need to foster corporate responsibilities to identify, protect, and control risks. FDA needs novel and updated enforcement tools, a greater global safety net that includes a global alliance of regulators, new authorities to allow for the creation of proactive tools for product safety, adequate funding to allow for inspections, examinations and sample collections and analysis, and updated systems, including IT support, to assist with the increased workload. This will entail more and better coordination between foreign, federal, and state counterparts to ensure that these corporate responsibilities are being fulfilled.

We need to know who is making our foods and drugs, where they are located, and we need to be sure these facilities are being inspected and are accountable for what goes into their products as well as the products they produce.  We need to create a global safety net.

Regrettably, another public health crisis like heparin seems inevitable unless we are able to truly forge changes in how we ensure the safety and quality of food and medical products for our citizens.  For that reason, the next several years are critical, as FDA transforms from a domestic safety agency operating in a globalized world to a truly global agency that is fully prepared for a regulatory environment in which national borders are less relevant to product safety than they have been in the past.  Doing so will allow FDA to meet the fundamental challenges that it faces and to more effectively deliver on its missions of protecting the public health.

That is why FDA is developing a global strategy and action plan that will allow FDA to oversee the safety of all products, both global and domestic, that reach U.S. consumers by building a global coalition of regulators; enhancing global information systems and data sharing; building capabilities in intelligence gathering and risk analytics; and leveraging public and private third parties to more effectively allocate FDA resources based on risk.
Specifically, the strategy has four primary components:

  • FDA will partner with foreign counterparts to create a global coalition of regulators focused on ensuring and improving global product safety
  • FDA will work to build a global data-information system and network and proactively share data with partners
  • FDA will build additional capabilities in intelligence gathering with an increased focus on risk analytics and a transformed IT capability
  • FDA will leverage the efforts of public and private sector third parties and industry and will effectively allocate FDA resources based on risk

In regards to partnering with our regulatory counterparts, what we envision for the future is a public health safety net for consumers around the world that is created, supported, and maintained by a global alliance of regulators.  As I have noted, some of this work is already underway and has been for several years, as regulators around the world have begun to collaborate in a more systematic manner.  But these efforts need to be taken to the next level.

This will mean working toward greater coordination and enforcement of regulatory standards across nations to ensure safety and quality regardless of where a product is produced.  We need not apply identical standards, but we all need to work together toward the common goals of product safety and quality.

FDA and its partners around the world have already taken steps to set the foundation for the work ahead. Interactions with foreign counterparts in the development of common standards and capabilities have been immensely helpful in building positive working relationships with a number of different countries.  The lessons and successes from FDA’s involvement in programs like Codex Alimentarius, ICH, and GHTF are critical building blocks for the collaboration envisioned in the FDA strategy.

As part of these efforts, regulatory authorities, especially those with the greatest experience and resources, must work together to help build regulatory capacity in those countries that have fewer resources and are still developing systems so that they can produce medical products that are safe and effective.  This is surely in America’s vested interest, but it will have broader benefits for public health and economic development within those countries as well.

In addition, FDA will build additional capabilities in intelligence gathering with an increased focus on risk analytics and a transformed IT capability.  Additional Intelligence capabilities will give FDA a more sophisticated understanding of the potential threats facing U.S. consumers with the ultimate goal of detecting and addressing risks before they materialize into public health harms.

Moreover, analytics capabilities will allow FDA to interpret and act on the intelligence that is gathered.  To enhance its analytics capabilities, FDA will work to provide advanced training to current analytics experts as well as bring in new employees with significant analytical talent and experience to fill needs not met by current staff.  To build the necessary support infrastructure, FDA will focus on creating IT tools that will allow experts to quickly access and analyze data across the various information resources available.  At the heart of FDA’s effort to be a smarter, more proactive safety agency lies the analytical horsepower to make timely, effective decisions.

We must also create a modern means to share data globally.  And, we must use those data and advanced analytics to proactively prevent and identify problems.  Detecting and preventing global problems demand global intelligence-sharing and data-mining.

Lastly, FDA will leverage efforts of public and private sector third parties and industry and will effectively allocate FDA resources based on risk. One of the most fundamental changes that FDA will undertake is a more effective deployment of its own global safety resources.  The agency will continue executing the broad range of intervention and enforcement activities that are its primary tools for preventing product-related harms.  As FDA evolves and continues to become a more intelligence-driven organization, these activities will be more directly aligned against a robust set of risk-based priorities, with agency staff spending a more significant share of their energies on the products and producers representing the greatest potential harm to public health.

At the same time, FDA will maintain broad-based oversight of the entire range of products within its purview by developing programs in each of its product categories, as well as each of the inspection programs within a product category, to have approved, public and private third parties conduct inspections and other oversight activities.  FDA will have to establish a review and audit infrastructure in order to verify the integrity of the information that it receives from third parties and to ensure that it can rapidly take follow-up enforcement activities where relevant.  In addition, industry’s own safety monitoring efforts will also be a critical support for a more comprehensive system of oversight.  By balancing its own resources with the additional capacity afforded by these public and private partners, we will all achieve greater coverage of the public health risks that exist and create the flexibility for FDA to quickly shift its attention to the most pressing dangers as they arise.

As the new food safety law recognizes and requires, we must also enlist public and private third parties, as well as industry and other organizations, to increase the global safety net.  We must do this for foods and medical products.  Regulators cannot do it alone.

Finally, we must create the momentum in the U.S. and in the global community to make these changes real—and sustainable.  These changes must begin now, but they will take time and the support of many people to fully implement.  A strong global safety net will be challenging to weave.  But, we can do it together.

This is a moment for leaders around the world to create a new vision of how we regulate.  We have a shared interest in and a shared responsibility for ensuring the safety and quality of the foods, drugs and medical products that our citizens rely on every day.  By working together to monitor and improve safety and quality globally, we will benefit all the citizens of the world.

So let us continue the conversation today and—as regulators, consumers, academics, industry leaders, and others with expertise—find new ways to ensure the safety and quality of medical products and to protect and promote the health and well-being of the American people and our fellow citizens around the globe.

These issues affect us all and we all must contribute to solutions. Thank you.

Thank you very much and now I am happy to take your questions.