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Pharmaceutical Good Manufacturing Practices (GMPs)

Statement of

Sharon Smith Holston
Deputy Commissioner for External Affairs
Food and Drug Administration
Department of Health and Human Services


the Subcommittee on Oversight and Investigations
House Committee on Commerce

October 2, 1998


Mr. Chairman and members of the Committee:

I am Sharon Smith Holston, Deputy Commissioner for External Affairs for the Food and Drug Administration (FDA or the Agency). I am pleased to appear before you today to discuss the Sectoral Annex for Pharmaceutical Good Manufacturing Practices (the Annex) of the Agreement on Mutual Recognition between the United States of America and the European Community (MRA). Accompanying me today is Walter M. Batts, Director Office of International Affairs and lead negotiator of the Annex, and several other colleagues who contributed to development of the Annex's provisions.

I will begin by describing the challenge FDA faces with respect to foreign drug products imported into the United States. I also will describe what we have been doing to address this situation with available resources, provide an overview of the mutual recognition agreement with the European Community (EC) and how it was achieved, and point out the key safeguards achieved in the MRA to assure our ability to promote and protect public health.


Under the Federal Food, Drug, and Cosmetic Act (the Act), FDA is charged with, among other things, assuring that drugs marketed in the U.S. are safe and effective, and are manufactured in accordance with current Good Manufacturing Practices (GMPs). The Act applies to any drug for which marketing is sought or which currently is marketed in the U.S., regardless of where it is manufactured. FDA also is responsible for implementing the provisions of the Public Health Service Act (PHS Act) applicable to vaccines, allergenic products, and biological therapeutic products licensed for marketing in the U.S., regardless of their place of manufacture. (These biological products are also within the scope of the agreement we will be discussing today.) Thus, FDA carries out inspections of manufacturing facilities, both domestically and in foreign countries, before a product is approved for marketing, and periodically after approval for marketing. FDA also does a limited number of GMP inspections of foreign facilities that produce drugs not requiring pre-market approvals. For domestic drug manufacturers, the Act requires registration and biennial inspections. No such statutory inspection requirement exists for foreign drug manufacturers and a registration requirement was imposed only last year in the Food and Drug Administration Modernization Act of 1997 (FDAMA). The PHS Act does not make distinctions between the requirements for foreign and domestic manufacturers of biological products.


The demands of product regulation have changed as a result of the increasingly global economy. Therefore, FDA has been compelled to develop an international strategy that addresses the fact that an increasing proportion of the products we regulate originate outside our borders, from numerous locations all around the globe. What we have had to do is devise practical approaches to this reality that uphold our central mission, which is to provide a high level of consumer protection to our citizens.

To facilitate this mission, in the early 1990s, FDA began to devote an increasing amount of its inspectional resources to inspections of foreign pharmaceutical firms. Through this effort, FDA has more than doubled the number of foreign drug inspections that it carries out each year. In 1997, FDA personnel inspected a total of 390 foreign firms, including human and veterinary drug, and biological products facilities.

But in spite of the increases in foreign inspections, the reality is that FDA simply does not have the capacity needed to inspect foreign firms at the optimum rate. Yet, the need to obtain information about foreign drug manufacturing practices through inspections is great.


FDA recognized as long ago as the 1970s, that we could not increase foreign inspections at a pace that would keep up with the rapidly growing number of imported products. This led the Agency to seek new ways to cooperate with foreign partners. Since that time, the Agency repeatedly has reaffirmed the value of agreements with our foreign counterparts to help fulfill our mission, and the desirability of seeking out such agreements.

FDA's 1995 Compliance Policy Guide on International Memoranda of Understanding (MOU) set forth the Agency's overall policy for developing, initiating, and monitoring MOUs with agencies of foreign governments or international organizations:

"It is the policy of FDA to pursue the development of MOUs that will further the Agency's domestic public health mission. MOUs between the FDA and an agency of a foreign government or an international organization should be designed to:

1. Enhance FDA's ability to ensure that regulated products are safe, effective, of good quality, and properly labeled;

2. Allow FDA to utilize its resources more effectively or efficiently, without compromising its ability to carry out its responsibilities; and

3. Improve communication between FDA and foreign officials concerning FDA-regulated products.

Further, before accepting the procedures and activities, including enforcement methods, of foreign governments as equivalent to its own, FDA will seek assurance that such activities provide the same level of product quality, safety and effectiveness that is provided under the FFDCA; the Fair Packaging and Labeling Act; the Public Health Service Act; and any other relevant law of the U.S. FDA may find it necessary to confirm by on-site review or other appropriate means that the foreign government agency has the necessary authorities, product standards, capabilities, and infrastructure to successfully achieve the proposed terms of the MOU, and, therefore, that a determination of equivalence can be made."

FDA currently has approximately 50 agreements with its counterparts in other countries. These agreements cover all FDA product areas, and vary in their purposes. The Agency publishes these agreements in the Federal Register (21 CFR 10.90(d), 20.108), and also has issued a compilation of all such agreements, through November 1996, in a volume known as the FDA International Cooperative Agreements Manual.

Three of these already-existing agreements concern pharmaceutical GMP inspections:

o Exchange of Letters with Switzerland (1968);

o Memorandum of Understanding with Sweden (1972); and

o Agreement of Cooperation with Canada (1973).


In 1995, FDA established the Foreign Inspection Working Group to examine the strengths and weaknesses of its foreign inspection and import monitoring programs and determine how these programs could be improved. The Working Group's Summary Report noted that a high percentage of significant GMP problems had been observed at foreign manufacturers, compared with domestic facilities. In order to address these concerns, the Working Group proposed, where appropriate, using risk-based criteria for prioritizing the foreign firms that will be inspected. Based on the risks associated with the product and the inspectional history of the facility, resources available for foreign inspections can be targeted to the areas where those resources can be most effective, or where the risks are greatest.

Risk-based inspectional strategies are an important mechanism for targeting limited foreign inspection resources in the face of increasing imports. In addition, the Foreign Inspection Working Group noted that:

Developing more effective international agreements with foreign regulatory counterparts would help to maximize FDA's limited inspection and surveillance resources. Appropriate foreign regulatory peers can share the responsibility for assuring the safety of products offered for entry to the U.S. from companies under their jurisdiction. Greater confidence in the validity of product certifications and inspection reports produced by foreign inspectors can assist FDA with its public health protection responsibilities and optimize FDA's constantly dwindling resources. Therefore, FDA's most important criterion for such agreements must be determining the equivalence of foreign government regulatory programs to FDA's programs (i.e., that they each afford the same level of consumer protection) . . . .

International agreements, such as the MRA, can be a helpful tool for determining where foreign inspection resources can be most effective. Relying on the expertise of competent counterpart agencies abroad can provide inspectional coverage in their respective areas and provide information to FDA to allow the Agency to determine whether GMPs are being adhered to by foreign manufacturers which are exporting products to the U.S. This information will complement FDA's activities to observe manufacturing facilities directly and enhance public health protection.


It is important to note that, in the recently enacted Food and Drug Administration Modernization Act of 1997 (FDAMA), FDA is required to "support the Office of the United States Trade Representative, in consultation with the Secretary of Commerce, in efforts to move toward the acceptance of mutual recognition agreements relating to the regulation of drugs, biological products, devices, foods, food additives, and color additives, and the regulation of good manufacturing practices, between the European Union and the United States" (to be codified at 21 U.S.C. 383(c)(2)).

In addition, FDAMA incorporates into FDA's mission the concept of developing agreements with other countries. The law directs the Agency to "participate through appropriate processes with representatives of other countries to reduce the burden of regulation, harmonize regulatory requirements, and achieve appropriate reciprocal arrangements" (to be codified at 21 U.S.C. 903(b)(3)).

FDAMA also requires that FDA develop and make public a plan establishing "a framework for achieving mutual recognition of good manufacturing practices inspections." This plan, which is broadly applicable and not restricted to the EC, has been developed and was posted on the FDA Internet Home Page in May. A copy is attached to my testimony.

In the FDAMA plan, FDA defined mutual recognition agreement as follows:

A "mutual recognition agreement" is an agreement between two countries which provides for a reciprocal reliance upon facets of each other's regulatory systems, to the degree specified in the agreement. The requirements being met are those of the importing country, i.e., in the case of the United States, the FFDCA, the Public Health Service Act, and FDA implementing regulations.

The concept embodied in this definition was used by FDA in negotiating the pharmaceutical GMP annex with the EC. As you know, the Annex focuses on GMP inspections, not review of product applications or approval of such applications.


It is important to note that the idea of an agreement with the EC on pharmaceutical GMPs is not a new concept. FDA has had bilateral meetings with representatives of the European Commission (Directorate-General III (DG-III), which covers Industrial Products, Pharmaceutical, Medical Devices, and Processed Foods units) who are responsible for most of the products we regulate and have been since 1989. Discussions of a possible MOU, similar to the bilateral MOUs mentioned above, began in this context in the early 1990s. It was necessary to hold these discussions with the European Commission because the Member States could not negotiate on these issues independently under EC rules.

Although the U.S. Trade Representative (USTR) or the Department of Commerce is in a better position to discuss more details, suffice it to say that in 1993, the EC embarked on an ambitious plan to expand market access for regulated goods through a number of Mutual Recognition Agreements with major trading partners. The EC's goal was (and in the long term still is) to conclude agreements which provide that products approved under European regulations would be accepted without further scrutiny by regulators of importing countries and vice versa. Directorate-General I (DG-I), which for the EC fulfills the combined roles of USTR and the trade functions of the Departments of State and Commerce, has responsibility for carrying out this plan. For negotiations with the U.S., the negotiating mandate under which DG-I is operating includes both the pharmaceutical and medical device sectors. [The inclusion of these sectors in the scope of the MRA mandate superseded DG-III's authority to pursue the MOU directly with FDA.] FDA determined that we could maintain control of our issues and accomplish our objectives, despite changes in the authority of our European counterparts, and we continued our negotiations in the new context. FDA's objectives for the MRA, as developed in our internal discussions, were to:

1. Enhance FDA's ability to ensure that the health and safety of American consumers are protected;

2. Obtain the information necessary to determine whether the EC Member State regulatory systems for GMPs are equivalent to FDA's;

3. Establish enhanced communications between FDA and the Member State regulatory authorities concerning the quality of pharmaceutical products exported to the U.S.; and

4. Eliminate unnecessary regulatory burdens on industry.


The MRA includes an "umbrella agreement" describing a framework for the functioning of all of the MRA's annexes. Several provisions of the umbrella agreement affect FDA's operation under the sectoral annex on pharmaceuticals. Examples of such provisions include the provision establishing the Joint Committee (Article 14 of the umbrella) and the provision regarding confidentiality (Article 17 of the umbrella). Other provisions in the umbrella agreement will not apply to FDA's activities under the pharmaceutical GMP annex. For example, umbrella provisions concerning conformity assessment bodies do not apply to the pharmaceutical annex, because that annex does not utilize such bodies.

The MRA includes several sectoral annexes covering various products, two of which cover products regulated by FDA: pharmaceuticals and medical devices. The pharmaceutical GMP annex covers human drugs regulated by the Center for Drug Evaluation and Research (CDER), animal drugs regulated by the Center for Veterinary Medicine (CVM), and certain biological products regulated by the Center for Biologics Evaluation and Research (CBER). In so doing, the Annex applies to post- and pre-approval good manufacturing practice (GMP) inspections for the stated products. The Annex describes procedures under which the participating parties and regulatory authorities will exchange information and how the equivalent authorities will regard information they receive from one another. In no way does the MRA or any of its annexes change current FDA requirements for these product areas.

The stated purpose of the Annex is to

"govern the exchange . . . and normal endorsement . . . of official Good Manufacturing Practices (GMP) inspection reports after a transitional period aimed at determination of the equivalence of the regulatory systems of the Parties . . . ." (Article 2)

Toward this end, the Annex describes activities and processes that will occur during two distinct periods: the transitional period and the operational period. FDA's participation in these activities and processes will lead to exchange and possible "normal endorsement" of pharmaceutical GMP inspection reports.

A 3-year transition period will begin immediately after the MRA enters into force. For FDA, preparations for entry into force have included publishing a proposed rule on the MRA for notice and comment. Although FDA was committed to conducting this negotiation with the maximum possible transparency, which included holding two public meetings, meeting with relevant stakeholders, and speeches in appropriate fora, it was determined that informal notice and comment rulemaking was appropriate for the final agreement. The MRA was published in the Federal Register as a proposed regulation on April 10, 1998. The Agency has reviewed the comments received in response to the proposed rule and is preparing a final regulation for publication in the near future.

During the transitional period, FDA will participate in equivalence assessment activities with its counterpart pharmaceutical regulatory authorities in the EC Member States. As specified in the Annex, activities will include information exchange, joint training, and joint inspections (Article 6). These activities will enable FDA to assess the equivalence of its counterpart regulatory authorities and to enable those authorities to assess the equivalence of FDA. FDA and Member State regulatory authorities will assess equivalence according to certain criteria specified in the Annex (Appendix 4).

According to the Annex, "equivalence" means that

"regulatory systems are sufficiently comparable to assure that the process of inspection and the ensuing inspection reports will provide adequate information to determine whether respective statutory and regulatory requirements of the authorities have been fulfilled. 'Equivalence' does not require that the respective regulatory systems have identical procedures." (Article 1)

At the end of the 3-year transition period, FDA will assess the information it obtained through the transition period. The EC regulatory authorities that carried out equivalence assessment activities will, likewise, assess the information they obtained. Representatives from FDA and the EC then will meet in the Joint Sectoral Committee (JSC) to discuss which regulatory authorities will be determined to be equivalent. FDA will make available for public review the complete record on which each equivalence assessment and determination is based.

Provisions concerning the role and composition of the JSC are found in Article 17 of the Annex. The JSC will be co-chaired by a representative of FDA and a representative from the EC. Each representative will have one vote for each matter before the JSC, and decisions in the JSC will be taken by unanimous consent. Thus, an EC regulatory authority can not be determined to be equivalent to FDA unless FDA agrees that it is equivalent. The JSC's functions include monitoring activities under the Annex, determining equivalence of the authorities at the end of the transition period (as discussed above), developing and maintaining a list of equivalent authorities, and consideration of suspension of an authority listed as equivalent (Article 16).

During the operational period, pre- and post-approval GMP inspection reports for products covered under this Annex will be transmitted to the regulatory authority requesting such report. Once an authority receives an inspection report from an equivalent authority (post- or pre-approval reports), the receiving authority will "normally endorse" the report. Normal endorsement will occur "except under specific and delineated circumstances," and will be "based on the determination of equivalence in light of the experience gained" (Article 12). This language allows FDA to make final determinations as to compliance with U.S. GMP requirements. FDA expects to be able to accept most findings in inspection reports received from authorities listed as equivalent. The Annex provides, however, that "under specific and delineated circumstances," including "serious concern in relation to product quality or consumer safety," the regulatory authority of the importing party may seek more information regarding an inspection report and, if not satisfied, carry out its own inspection.

The Annex contains several other provisions governing its operation. For example, during the transitional period, the authorities will develop an alert system, and will develop means of exchanging information on confirmed problem reports, corrective actions, recalls, rejected import consignments and other regulatory and enforcement problems for products subject to the Annex (Article 20).

In addition, the Annex contains a number of provisions that FDA negotiated to provide safeguards to ensure or enhance FDA's ability to provide consumer protection. I'd like to highlight some of those provisions.

Once the agreement becomes operational, equivalent authorities will participate in activities to monitor equivalence, including review of inspection reports, a limited number of joint inspections, and common training sessions (Article 15). In addition, the Annex requires that the Parties and the regulatory authorities "inform and consult" each other on changes affecting their pharmaceutical GMP inspection programs.

Further, a crucial provision affirming the regulatory authorities' role in protecting the public health recognizes that regulatory authorities may fulfill their "legal responsibilities by taking actions necessary to ensure the protection of human and animal health." The authorities may take such actions in accordance with the level of protection they consider appropriate (Article 21).

The Annex also provides that the equivalence determination of a regulatory authority can be contested, and the equivalence decision ultimately suspended, if necessary. Such issues are to be discussed within the JSC and may be referred to the Joint Committee of the MRA. In addition to the provisions contained in the Annex, FDA has taken steps to assure that the Agency will remain in charge of the equivalence determination process throughout the life of the agreement. FDA and USTR have entered into a MOU which provides that FDA will speak for and vote on behalf of the U.S. government when health and safety issues which are the responsibility of FDA under the Act, the PHS Act, and related statutes, are discussed in the Joint Committee. FDA likewise speaks for and votes on behalf of the U.S. in the JSC on all issues related to the Annex.


I spoke earlier about the roles of the negotiators and regulators on the EC side of this negotiation. Perhaps it would be useful to discuss the roles and relationships between the agencies on the U.S. side.

As you know, the Office of the U.S. Trade Representative has the responsibility for conducting trade negotiations on behalf of the U.S. government. During the early part of the MRA negotiation, however, the Department of Commerce (International Trade Administration, Office of Europe) was responsible for U.S. interagency coordination.

As noted above, both sides recognized and agreed that the regulators would have to negotiate the sectoral annexes. FDA was in full control of its sectoral negotiations, including the negotiating objectives and the parameters of the negotiation. There were clearly times during the negotiation when DG-I negotiators operated under the assumption that trade issues were paramount in the negotiation. It was made clear to them, however, that for legal and policy reasons health and safety issues would govern. The U.S. trade agencies respected FDA autonomy in all matters. For its part, as is usual in our relations with the trade agencies, FDA focused on achieving its goals of protecting public health and safety while taking into account the broad trade objectives of the U.S. government.

Within FDA, the negotiating process was a collective effort. A steering committee, with representatives of all FDA components with any stake in the outcome, was the vehicle for preparing FDA positions and negotiating strategies. We felt it was important that such an undertaking be approached from a basis of total inclusion, and that it was necessary to expend whatever resources were necessary to accomplish that objective.


There is no escaping the fact that negotiating and implementing this MRA does have significant resource implications for FDA. While a long-range objective of the MRA is to leverage FDA resources through cooperation with our counterparts in Europe, we must acknowledge that there are costs not only on the "front-end" but also throughout the life of the MRA. We have absorbed, and will continue to absorb, these costs using our currently available resources. The constraints of those resources may dictate that the equivalence process will not be done sufficiently rapidly to meet the expectations of the European Commission or of the Transatlantic industry. We will, however, pursue the process to its completion.

In addition, FDA made clear to the EC our concerns about the adequacy of our resources to conduct equivalence assessment determinations for all EC Member States, and committed to implementing the MRA on a resources-available basis. (Article 7)


To summarize, we believe that entering into this MRA will, in the long run, facilitate FDA's mission to ensure safe and effective drugs in the U.S. marketplace. The MRA provides a unique opportunity to take a close look at European regulatory systems, to determine which are equivalent to FDA's, and, once equivalence has been determined, to normally endorse the results of foreign GMP inspections. Inspections by equivalent authorities would provide additional assurance that imported pharmaceutical products are manufactured in compliance with GMPs.

Given the intertwined nature of the pharmaceutical industry in the U.S. and Europe, cooperation with our European counterparts will enhance our ability to protect the public health and is fully consistent with FDA's mission, particularly as recently expanded and articulated in FDAMA. FDA is committed to implementing the mandates of the FDAMA in relation to this MRA. We recognize concerns regarding the availability of resources to fully implement the agreement, and I want to assure you that we will continue to be sensitive to this in our implementation planning. I hope you now understand the steps that FDA has taken to ensure our ability to make independent decisions in the interest of public health at all stages of this process. We are committed to maintain our vigilance throughout the life of this Agreement, to ensure that we continue to have this independence and full control of our sector of the Agreement at all times.