Mutual Recognition Agreement: Update on the Food and Drug Administration's Progress in Assessing Equivalency of European Union Pharmaceutical Good Manufacturing Practice Regulatory Systems

Published by the Government Accountability Office on 1999-08-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States

GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division


      August 13,1999

      The Honorable Thomas J. Bliley, Jr.
      The Honorable John D. Dingell
      Ranking Minority Member
      Committee on Commerce
      House of Representatives

      The Honorable Fred Upton
      The Honorable Ron Klink
      Ranking Minority Member
      Subcommittee on Oversight and Investigations
      Committee on Commerce
      House of Representatives
      Subject:     Mutual Recognition Agreement: Undate on the Food and Drug
                   Administration’s Progress in Assessing Eauivalencv of Euronean Union
                   Pharmaceutical Good Manufacturing Practice Regulatorv Svstems

      A mutual recognition agreement (MRA) between the United States and the European
      Union1 became effective December 1,199s. MRA affects billions of dollars in trade
      and includes six annexes, 2one of which covers good manufacturing practice (GMP)
      inspections of pharmaceutical facilities. Specifically, the pharmaceutical GMP annex
      provides that the United States will assesswhether the pharmaceutical GMP
      regulatory systems3 in the 15 European Union member states are equivalent to that of
      the United States during a 3-year transition period beginning December 1,1998. An

      ‘The European Union consists of 15 cotmuies, or member states: Austria, Belgium, Denmark, Finland,
      Prance, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain,Sweden, and
      the United Kingdom.
      ‘The annexes contain specific provisions related to the products, programs, and procedures covered by
      %nder Article 1 of the pharmaceutical GMP annex to MPA, a pharmaceutical GMP regulatory system is
      referred to as the body of legal requirements for GMPs, inspections, and enforcements that ensure
      public health protection and legal authority to ensure adherence to these requirements.

                                          /4&%Gd4/GAOMEHS-99-143R        Mutual   Recognition   Agreement

appendix to MRA’s pharmaceutical annex also provides criteria that the United States
and the European Union are to use to assessthe equivalence of their respective
regulatory systems. (See enclosure I.) The Food and Drug Administration (FDA)-
which conducts GMP inspections in the United States and abroad to ensure the safety
and quality of domestic and imported pharmaceutical products4-is responsible for
making these assessments.

This correspondence responds to your request that we provide an update on the
status of FDA’s implementation of MRA. In an earlier correspondence on FDA’s
progress assessing pharmaceutical inspection programs, we reported that nearly 3
months into the transition period, FDA did not have a comprehensive plan for
conducting equivalence assessmentsof member states’ pharmaceutical GMP
regulatory systems.’ At that time, FDA also could not provide us an update of the
estimated costs and resources needed to implement MI& FDA officials told us that
an update of the plan for making assessments of equivalence and cost estimates
would not be available until March 1999. Given your concerns about FDA’s lack of
progress in developing plans to implement MRA, you asked us to continue to monitor
FDA’s progress. Specifically, you asked us to determine (1) the progress FDA has
made in developing a plan for assessing equivalence of European Union member
states’ pharmaceutical GMP regulatory systems; (2) the amounts FDA spent, from
October 1994 through March 1999,on negotiating and implementing MRA and the
amount FDA plans to spend on making assessments of equivalence; and (3) the status
of the European Union’s efforts to coordinate with FDA to implement MRA.

In summary, FDA’s MRA implementation plan establishes a framework for making
assessments of equivalence of European Union member states. The implementation
plan also includes a strategy for making assessments of equivalence and estimating
the costs and resources needed to implement MEA. However, FDA has not yet
determined how it will use the criteria in the pharmaceutical GMP annex to assess
whether the regulatory systems of the European Union member states are equivalent
to FDA’s regulatory systems. FDA could only provide rough estimates of the costs to
negotiate and prepare for the implementation of MRA because it does not maintain a
system for tracking the time staff spent on MRA-related activities. According to FDA
estimates, FDA will require about $10 million-including    the cost of about 125 full-
time equivalent employees-during the transition period and first operational year of

4Weuse pharmaceutical products to refer to pharmaceuticals imported in finished dosage forms as well
as bulk drug substances (for example, active pharmaceutical ingredients or bulk pharmaceutical
6Mutua.lRecognition Ameement: Food and DruzeAdministration’s Progress in Assessing Eauivalencv of
EuroDean Union Pharmaceutical Inzmection Pro~ams (GAO/HF,HS-99-71R,Feb. 26,1999).

2                                           GAO/HEHS-99-143R      Mutual   Recognition   Agreement

MRA.6 Meetings of the committees established to oversee implementation of the
pharmaceutical GMP annex and MRA have resulted in the exchange of draft plans for
implementing the annex and making assessments of equivalence and clarification of
the GMP definition.

Our work was conducted between April 1999 and August 1999 in accordance with
generally accepted government auditing standards. Our‘methodology is described in
enclosure II.


MRA includes six annexes covering telecommunications equipment, electromagnetic
compatibility, electrical safety, recreational craft, medical devices, and GMP
inspections of pharmaceutical facilities. The pharmaceutical annex to MRA provides
that during a 3-year transition period, which became effective on December 1,1998,
FDA will assessthe pharmaceutical GMP regulatory systems of the 15 European
Union member states, For countries determined by FDA to have systems equivalent
to the United States’, the annex provides for the exchange and endorsement of U.S.
and European Union pharmaceutical GMP inspection reports after the transition
period. According to FDA, such an exchange will help it redirect some of its
inspection resources to foreign pharmaceutical facilities that manufacture drug
products not covered by such agreements, thereby providing a more responsive level
of U.S. consumer protection in the global marketplace.

During the transition period, FDA and member states of the European Union will
undertake equivalency assessments of their respective regulatory systems. According
to the pharmaceutical GMP annex, equivalence is achieved when regulatory systems
cover criteria specified in the annex and demonstrate the ability to consistently apply
the criteria These include criteria for evaluating the equivalence of the regulatory
authority, professional standards and conduct, administrative controls, inspection
competence, and systems of enforcement and surveillance. In addition, the parties
will develop a common inspection report format, establish an alert system for the
exchange of information on the safety of drug products, and conduct joint traming
sessions for inspectors. MRA also provided for the establishment of the Joint Sector-al
Committee to monitor the activities under both the transitional and operational
periods of the pharmaceutical GMP annex and a joint committee to oversee the
functioning of the six MRA annexes.

6Theoperational period begins after the end of the transition period and continues for the life of the
annex. Activities during the period include sharing alert information and establishment inspection
reports, endorsement of establishment inspection reports, and monitoring equivalence.

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In February 1998, before MBA was ratified, FDA prepared an initial implementation
plan that provided an organizational and procedural framework for implementing the
pharmaceutical GMP annex. The plan identified the organizational groups within
FDA responsible for carrying out various aspects of the annex and provided a
schedule of general activities and milestones for implementing MRA. However, the
plan did not include specific information on the tasks FDA would perform to conduct
assessments of equivalence, how those tasks would be dompleted, or estimates of the
costs and resources necessary to implement MRA. The final regulation to implement
M.&I’s pharmaceutical annex was published on November 6,1998, and became
effective on December 7,1998. On April 13,1999, FDA provided us with a revised
implementation plan that supplements the February 1998 implementation plan.


FDA’s April 1999 implementation plan generally provides for the same organizational
and procedural framework for implementing the pharmaceutical GMP annex as the
February 1998 implementation plan. However, the revised plan for implementing the
annex includes FDA’s most recent stiategy for initiating assessments of equivalence,
including milestones for completing MBA-related activities and estimates of costs and
resources necessary during the transition period (fiscal year 1999 through 2001) and
the first year of the operational period (fiscal year 2002). According to FDA officials,
the implementation plan does not account for ah of the potential scenarios that may
result from conducting assessments of equivalence because this process is new to the
agency. Nevertheless, FDA intends to carry out these assessments in a way that
allows the agency to adjust the implementation plan as it gains experience, while
ensuring public health protection.

The first step in FDA’s implementation plan is to initiate document reviews of the
member states’ pharmaceutical GhIP regulatory systems. These will include reviews
of the statutes, regulations, inspection and sampling procedures, and training
requirements used by each member state to determine whether they are equivalent to
FDA’s. In preparing for these assessments, FDA developed a document that describes
aspects of its pharmaceutical GMP regulatory system for each criterion listed in MRA,
which serve as benchmarks for assessing the European Union member states’
regulatory systems. In July 1999, FDA made the document available to the European
Union member states and requested that they provide information on their
pharmaceutical GMP regulatory systems by August 1999.

Upon completing the document reviews, FDA will conduct on-site inspections in the
member states to verify that the documented procedures of the regulatory systems
are in place. In those member states that appear to have equivalent regulatory
systems, FDA will conduct inspections to assessthe performance of the inspectors’
investigations of drug products and process types, as well as the equivalence of the
systems of enforcement and surveillance. These inspections will be completed during
the transition period.

4                                      GAO/HEHS-99-143R Mutua.l Recognition Agreement

FDA’s implementation plan projects that it will complete the assessments of
equivalence for each member state’s regulatory system by the end of the transition
period. These assessments will include establishing the equivalence of member
states’ legal and administrative processes, the competence of their inspectors, and the
adequacy of their enforcement and surveillance systems. However, FDA’s projection
assumes that it will not be necessary to evaluate each member state for every phase
of the assessment process because significant deficiencies may be identified in a
member state’s regulatory system during the initial phases of the assessment process.
When significant deficiencies are identified, FDA intends to cease further evaluation
of a member state until these deficiencies are corrected. FDA expects that the
experienced gamed from its early evaluations will help the agency refine its
procedures and ultimately result in later assessments being completed in less time
than earlier ones.

FDA has not established an order for making assessments of equivalence among the
member states. However, to decide the order in which it will make assessments of
member states, FDA plans to consider factors such as the volume of drugs imported
into the United States from a member state, the number of manufacturing facilities in
a member state that market in the United States, and the results of past FDA
inspections. According to FDA officials, several FDA teams will apply the criteria in
the pharmaceutical GlVP annex and make initial assessments of equivalence based on
their expertise and input from other offices within the agency. The teams’ proposals
of equivalence will be presented to and endorsed by the designated committees
responsible for MRA implementation.

Although FDA has made progress in preparing for the implementation of MRA since
February 1998-when it issued its fist implementation plan-the April 1999 plan still
does not include information on how it will apply the annex’s approximately 30
criteria to the regulatory systems of member states and render decisions of
equivalence. In our view, the implementation plan should clearly explain how the
criteria should be applied to ensure that FDA can make consistent assessments and
equivalence determinations among member states.

FDA officials acknowledged that they have not yet identified the attributes of its
regulatory system that should be included in the regulatory systems of member states
in order for them to be considered equivalent. However, these officials stated that the
teams making equivalence assessments will decide how to make these comparisons
and present their findings during the initial equivalence deterrninations. The teams’
procedures and decisions will be documented for use in making subsequent
equivalence reviews. According to FDA officials, a final judgment of equivalence will
not be made until the end of the transition period to ensure ample opportunity to
review early decisions and ensure that all member states are treated equitably in the
assessment process.

5                                     GAO/HEHS-99-143R    Mutual   Recognition   Agreement


Because it does not have a system for tracking the time individual personnel spend
working on specific assignments, FDA can not provide a precise accounting of the
amount the agency has spent on the negotiation and early implementation of MRA’s
pharmaceutical GMP annex. Nevertheless, FDA estimated that from October 1994
through March 1999,it spent approximately $3 million, including the costs for 33 full-
tune equivalent (F’I’E) employees, to participate in various meetings related to the
negotiation of MRA and to prepare MRA regulation. FDA also estimated that it
additionally spent about $22,000in travel expenses related to MRA negotiations. To
develop its estimates, FDA relied heavily on the recollections of key participants in
MRA negotiations and a list of participants that attended MR.&related meetings.

FDA’s April 1999 implementation plan includes estimates of the costs and resources
that it will need during the transition period (fiscal year 1999 through fiscal year 2001)
and the first year of the operational period (fiscal year 2002).7 HoFever, FDA officials
acknowledged that these estimates are preliminary projections that may change as it
gains experience implementing MRA.

According to the April 1999 implementation plan, FDA wiu spend about $10 million
on MRA-about $8 million during the transition period and about $2 million in the
first year of the operational period. FDA plans to spend most of these funds on FI’Es
to carry out MRA-related activities-about $7.1 million during the transition period
and about $1.3 million during the first year of the operational period. These MRA-
related activities will include audits of the regulatory systems of member states,
training of FDA personnel to conduct inspections and make assessments of the
performance and competence of inspectors in conducting drug investigations in
member states, and formal committee meetings and public meetings. In addition,
FDA estimates it will spend $977,000during the transition period and $350,000 during
the first year of the operational period for non-personnel-related MRA expenses, such
as travel and translation of foreign documents.

To carry out its responsibilities under MRA, FDA intends to use resources from
several organizational groups within the agency. The plan estimates that a total of
about 125 FlEs are required during the transition period and the first year of the
operational period, 105 FTEs and 20 FI’Es, respectively. During the transition period,
FDA estimates that it would use an average of about 35 FIEs per year, ranging from
about 17 FTEs in fiscal year 1999to about 46 FTEs in fiscal year 2001.

7FDAcould not reconcile the overlap between the estimated cost to implement the Ml3A for fscal year
1999 with the estimated amount of funds that were spent on travel and resources to negotiate and
implement the MRA during the first 6 months of fiscal year 1999.

6                                           GAO/HEHS-99-143R      Mutual   Recognition   Agreement


According to European Union officials, responsibility for implementing work on the
pharmaceutical GMP annex of MRA has been delegated to the European Agency for
the Evaluation of Medicinal Products (EMEA). EMEA is coordinating the resources
in member states to ensure the equivalency assessmentsof FDA’s pharmaceutical
GMP regulatory system. Since December 1998, when the transition period began,
FDA and European Union representatives have held several telephone conversations
to discuss preliminary plans and responsibilities for conducting equivalency
assessments. European Union officials acknowledged that to execute MRA, there are
several issues that will require FDA cooperation, including developing a mutually
agreed upon inspection report format and a joint alert system, which are currently
under discussion.

The European Union expects that these issues will be discussed and resolved through
formal meetings of the Joint Sectoral Committee, the first of which was held on May
 18 and 19,1999. At that meeting, FDA and European Union representatives discussed
implementation of the pharmaceutical GMP annex. Specifically, they discussed
methods to facilitate coordination between the United States and European Union,
issues concerning the safeguarding of cotidential documents, the establishment of a
joint work group to develop elements of a two-way alert system to protect public
health, and draft plans for making assessments of equivalence.

On June 11,1999, the European Union and United States held a joint committee
meeting to review the progress of MRA implementation. During the meeting, the
resolution of GMP’s definition was discussed. FDA and the European Union agreed
on an approach to accommodate their different views on what should be included in
the definition. The committee endorsed this approach, and the European Union will
proceed with its process to initiate the necessary change in the agreement. According
to FDA officials, an identical GMP definition is not essential because the focus of
equivalency assessments is on whether the pharmaceutical GMP regulatory systems
of the European Union member states are equivalent to FDA%. As such, the first
paragraph’ of the GMP definition contained in the text of MRA will be attributed to

‘FDA defines GMPs to mean “the requirements found in the respective legislations, regulations, and
administrative provisions for methods to be used in, and the facilities or controls to be used for[ ,] the
manufacturing, processing, packing, and/or holding of a drug to [en]sure that such drug meets the
requirements as to safety, and has the identity and strength, and meets the quality and purity
characteristics that it purports or is represented to possess.”

7                                              GAOIHEHS-99-143R        Mutual   Recognition    Agreement

FDA and the second paragraph9 to European Union member states.


FDA officials reviewed a draft of this report. FDA generally found the report to be
accurate and complete and made several technical comments clarifying aspects of the
agency’s implementation of the pharmaceuticsil GMP annex, which have been
incorporated as appropriate.

We are sending copies of this report to the Honorable Donna E. Shalala, Secretary of
Health and Human Services; the Honorable Jane E. Henney, M.D., the Commissioner
of FDA; and others who are interested. If you have any questions about this
correspondence, please call me at (202) 512-7114 or John Hansen at (202) 512-7105.
Other major contributors included Darryl Joyce and Claude Hayeck.

Sincerely yours,


William J. Scanlon
Director, Health F?inancing
 and Public Health Issues

%lember states define GM% as “that part of quality assurance that ensures that products are
consistently produced and controlled to quality standards. For the purpose of this annex, GMF’s
include therefore the system whereby the manufacturer receives the specifications of the product
and/or process from the marketing authorization/product authorization or license holder or applicant
and ensures the product is made in compliance with its specifications.”

8                                            GAOBIEHS-99-143R       Mutual   Recognition   Agreement
ENCLOSURE I                                                              ENCLOSURE I


Appendix 4 of the pharmaceutical GMP annex of MRA establishes criteria, listed
below, for making equivalency assessments of the U.S. and European Union
regulatory systems. According to MRA, equivalence is achieved by having regulatory
systems that cover these criteria and a demonstrated pattern of consistent
performance in accordance with the criteria

I.     LegaVRegulatorv Authoritv and Structures and Procedures Providing for Post-
       and Preapproval Insuections

             Appropriate statutory mandate and jurisdiction
             Ability to issue and update binding requirements on GMPs and guidance
             Authority to make inspections, review and copy documents, and to take
             samples and collect other evidence
             Ability to enforce requirements and to remove products found in violation of
             such requirements from the market
             Substantive current good manufacturing requirements
             Accountability of the regulatory authority
             Inventory of current products and manufacturers
             System for maintaining or accessing inspection reports, samples, and other
             analytical data, and other firm/product information relating to matters
             covered by this sectoral annex

II.    Mechanism in Place to Ensure Appropriate Professional Standards and
       Avoidance of Conflicts of Interest Administration of the Regulatorv Authoritv

III.   Administration of Reaulatorv Authoritv

       l     Standards of educational/qualification and training
       l     Effective quality assurance system measures to ensure adequate job
       l     Appropriate staffing and resources to enforce laws and regulations

IV.    Conduct of Insuections

       l     Adequate preinspection preparation, including appropriate expertise of
             investigator/team, review of firm/product and databases, and availability of
             appropriate inspection equipment
       l     Adequate conduct of inspection, including statutory access to facilities,
             effective response to refusals, depth and competence of evaluation of

                                           GAO/HEHS-99-143R Mutual Recognition Agreement
ENCLOSURE I                                                             ENCLOSURE I

              operations, systems, and documentation; collection of evidence; appropriate
              duration of inspection and completeness of written report of observations to
              firm management
      l       Adequate postinspection activities, including completeness of inspector’s
              report; inspection report review, where appropriate; conduct of follow-up
              inspections and other activities, where appropriate; and assurance of
              preservation and retrieval of records

V.    Execution of Regulatorv Enforcement Actions to Achieve Corrections Designed
      to Prevent Future Violations and to Remove Products Found in Violation of
      Reauirements From the Market

VI.   Effective Use*of Surveillance Svstems

      l       Sampling and analysis
      l       Recall monitoring
      l       Product defect reporting system                        z
          l   Routine surveillance inspections
          l   Verification of approved manufacturing process changes to marketing
              authorizations/approved applications

VII. Additional Specific Criteria for Preanmoval Insnections

              Satisfactory demonstration through a jointly developed and administered
              training program and joint inspections to assessthe authorities’ capabilities
              Preinspection preparation includes the review of appropriate records,
              including site plans and drug master fiIe or similar documentation to enable
              adequate inspections
              Ability to verify chemistry, manufacturing, and control data supporting an
              application is authentic and complete
              Ability to assess and evaluate research and development data as scientificahy
              sound, especially transfer technology of pilot, scale-up, and full-scale
              production batches
              Ability to verify conformity of the on-site processes and procedures with
              those described in the application
               Review and evaluate equipment installation, operational and performance
              qualification data, and evaluate test-method validation

 10                                         GAO/HEHS-99-143R Mutual Recognition Agreement
ENCLOSURE II                                                           ENCLOSURE II


In examining FDA’s implementation of the pharmaceutical GMI? annex, we reviewed
MRA to determine the annex’s requirements. To obtain information on FDA’s plan for
making equivalence determinations with European Union member states, we met
with FDA officials involved in implementing the pharmaceutical GMP annex. These
included officials from the Center for Drug Evaluation and Research, Center for
Biologics Evaluation and Research, the Office of Regulatory Affairs, the Office of
International Affairs, and the Office of Chief Counsel. We analyzed FDA’s revised
implementation plan of April 13,1999, and compared it to the initial implementation
plan of February 1998to determine the progress made in implementing MRA. We also
analyzed FDA’s estimates of the costs to (1) negotiate and implement MRA from
October 1994through March 1999 and (2) implement MRA during the transition
period (fiscal year 1999 through fiscal year 2001) and the first year of the operational
period (fiscal year 2002). We interviewed European Union officials to discuss their
coordination with FDA and reviewed correspondence of the designated committees
of MRA to determine the progress made in implementing the agreement.


                                      GAO/HEHS-99-143R    Mutual   Recognition   Agreement
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