The US Food and Drug Administration (FDA) inspects drug manufacturers whose product enters the US regardless of location. In 2012, Congress instructed FDA to increase foreign inspections, added § 501(j) to the statute to permit FDA to deem a manufacturing site out of compliance with current Good Manufacturing Practices (cGMP) based solely on refusal to permit or limiting a reasonably scheduled inspection; and amended § 704(a) to authorize FDA to request documents in advance or in lieu of inspection. Our analysis shows that FDA has increased its focus on foreign production sites’ Current Good Manufacturing Practices (cGMP) and used its new tool of “refusing inspections” to shut down or impose import alerts on foreign production sites (particularly in Asia). These actions have the effect of eliminating these facilities’ products from US entry. This trend suggests that US companies that source product or raw materials from Asia or other low cost production sites may want to reconsider use, or be pro-active in ensuring compliance, of foreign suppliers. As the leading cross-border firm with offices throughout Asia, Baker McKenzie can assist companies in ensuring the compliance and training of their suppliers.
Foreign Warning Letters Increase Substantially
In the first two months of 2017, there have been twenty Warning Letters addressed to manufacturers’ violations of cGMP. Of these, eleven were issued to foreign drug sites: five in China, two in India, two in Japan, one in the United Kingdom, and one in Italy. The number of FDA’s warning letters for the same cause in the first six months of 2016 was ten. This projects to an almost 7-fold increase.
Use of "Refusal to Inspect" Increases Substantially
The use of § 501(j) has increased. FDA issued one Warning Letter to a foreign establishment in 2014 and five in 2016 with this observation. In the first month of 2017, FDA has already issued one. This projects to a doubling. The citations include a manufacturer who refused to provide documents to FDA citing trade secret protection; not providing requested information in a timely manner; misleading or deceiving the agency during an inspection and thereby causing delay to the investigator’s access to accurate and truthful information; and failing or delaying production of records per FDA’s request in advance or in lieu of the inspection. In this Warning Letter, the only citations were the refusal and limitation of inspection. In another, investigators were barred from entry into a warehouse but observed numerous drums with the company’s label through a window. The following day, many of the drums had been removed and were not available for inspection.
Use of Import Alerts Increases Substantially
In addition to issuing a Warning Letter, FDA may simultaneously issue an Import Alert. FDA can automatically detain and then refuse the admission of drugs until the manufacturer complies. FDA will generally not consider lifting the Import Alert until all Warning Letter issues have been addressed to FDA’s satisfaction. Nippon Fine Chemical Co., Ltd., is an example of an Import Alert based solely on refusal of an inspection. FDA cited § 501(j) because the manufacturer: (1) barred access to production areas; (2) refused to provide copies of documents; and (3) limited photography. In the Warning Letter, FDA stated that the manufacturer’s managers created a human barricade, refused to provide copies of complaint records, and prevented FDA’s investigator from taking photographs of production equipment.
FDA’s trend to conducting inspections in foreign production sites is shown by the growing number of inspections, Import Alerts, Warning Letters and use of refusal to inspect as a basis for Warning Letters. This is consistent with the 2012 Congressional mandate. These trends suggest that many foreign manufacturers have not trained their personnel in preparing for an FDA inspection. FDA has statutory authority to inspect at reasonable times, within reasonable limits and in a reasonable manner. Education in the appropriate management of an FDA inspection is paramount to avoid the peril of losing the US market until a resolution of problems is reached with FDA. The impact of a consequent ban on import is a substantial risk to manufacturers who operate non-U.S. production sites. Drug manufacturers should familiarize themselves with FDA’s guidance and inspectional and regulatory procedures manuals. Drug companies should learn and develop policies and procedures to host an FDA inspection and train their personnel. Legal counsel should be retained in advance so that disagreements can be rapidly resolved without FDA’s citation of § 501(j).