FDA Announces Import Reforms to Crack Down on Careless Drugmakers

The U.S. Food and Drug Administration is unleashing a barrage of quality-control initiatives aimed at overseas drug manufacturing, potentially empowering prosecutors who choose to target those companies with sloppy production techniques. The campaign played a large part in FDA Commissioner Margaret Hamburg’s trip to India last month. Hamburg chastised the country’s regulators for not cooperating with foreign counterparts, discounting complaints about aggressive foreign inspections.

Because the U.S. now imports so many drugs and pharmaceutical ingredients, the FDA is realizing that the demanding standards they place on U.S. production facilities are going to have to be employed elsewhere as well in order to truly protect the American public. About 40 percent of drugs consumed in the U.S. are shipped from abroad, and 80 percent of active ingredient makers are located outside the U.S., according to the FDA.

FDA officials just launched a pilot project that loosens import restrictions for those drugmakers that the agency respects, freeing up inspectors to focus on less reliable companies. The FDA said its India drug inspection workforce will grow to from 3 positions to 10. There are also plans to create a central U.S. office dedicated to pharmaceutical quality.

Concerns that U.S. regulators were ill-equipped to police globalized drug manufacturing have been simmering for some time. A wake-up call came in 2008 when dozens of patients died after using Baxter Healthcare Corp.’s blood thinner heparin, which the FDA found had been contaminated with ingredients made in China.

The flood of new initiatives gives drugmakers strong incentives to clean up their acts, especially in light of clear interest from the U.S. Department of Justice in pursuing civil and criminal cases against messy manufacturers. Early last year, one official from the department called quality problems “the next hot thing” and vowed to take an “especially hard look” at breaches of good manufacturing practices.

There is no question that Congress is pushing the FDA and pushing the Department of Justice to criminally prosecute people in the pharmaceutical industry who do not follow the law, because Congress does not feel that civil fines are effective. Whether punishments begin to go beyond heavy fines will likely depend on how much truly egregious conduct (persistent, widespread or intentionally concealed violations) is out there.

A separate possibility is that additional FDA inspectors will lead to more recalls, which can fuel investor suits if stock prices take a beating. Last year, for example, Johnson & Johnson paid $23 million to end a shareholder complaint over an alleged cover-up of production errors linked to a massive recall of children’s medicines.

Many recent steps by the FDA and Congress have sought to hold drugmakers liable for every step of the supply chain, where multiple companies often play a role in creating a single product. Last year, an important guidance document about contract manufacturing made clear that both drugmakers and their contractors are responsible for ensuring quality, regardless of what their agreements may state.

Litigation aside, the FDA crackdown could drive an uptick in so-called import alerts that block products from making it into American pharmacies. With the U.S. acting as the largest pharmaceutical market in the world, this is sure to get the attention of overseas drug making facilities. There is still some uncertainty about how effective the FDA’s import reforms will be, in part because there has been resistance to American regulators dictating manufacturing standards on foreign soil. But without a doubt, experts see a clear pivot abroad, thanks in no small part to new financial resources from the 2012 laws.