March 11,2008

Grassley seeks feedback on use of registration fees for inspection of foreign manufacturers of pharmaceutical drugs

WASHINGTON — Senator Chuck Grassley is asking the federal agencies charged withdrug safety to weigh in on the use of registration fees as a way to help pay for more inspectionsof foreign pharmaceutical drug manufacturers and also limit the number of facilities that need tobe inspected.

Grassley said he’s learned that many foreign plants register with the Food and DrugAdministration without actually shipping medicine and drug components to the United States,and this bogs down the system within the FDA. At the same time, many foreign plants shipmedicine and drug components to the United States without ever registering with the FDA.Grassley also said it’s also clear that the FDA needs more resources to meet the massive task ofconducting the foreign inspections necessary to protect the American public.

The senator spelled out the issues in a letter sent today to the Secretary of Health andHuman Services and to the Commissioner of the FDA. He noted that medical device makerslocated outside of the United States are currently required to pay registration fees to the FDA.Grassley has conducted active oversight of the FDA since 2004, and has sought a numberof administrative and legislative reforms to improve the performance of the drug-safety agency.

Here is the text of Grassley’s letter.

March 11, 2008

Dear Secretary Leavitt and Commissioner von Eschenbach:

The United States Senate Committee on Finance (Committee) has jurisdiction over theMedicare and Medicaid programs and, accordingly, a responsibility to the more than 80 millionAmericans who receive health care coverage under those programs to oversee the properadministration of the programs, including the payment for prescription drugs regulated by theFood and Drug Administration (FDA or Agency), Department of Health and Human Services(HHS). As a senior member of the Senate and Ranking Member of the Committee, I have a dutyto ensure that FDA upholds its responsibility to the public's health by properly regulating thenation's drug supply and ensuring that the drugs Americans use are safe and effective.

In December, FDA officials briefed my staff regarding FDA's program for inspectingforeign pharmaceutical manufacturing facilities and ongoing questions regarding inspectionfunding, emerging exporters, and weaknesses in the inspection process, among other things.This briefing was part of my ongoing inquiry into the FDA's foreign inspection process. In theDecember briefing, an important point of discussion was the registration of foreignpharmaceutical plants with the FDA.

As I stated in earlier letters, the challenge before the FDA is a daunting one. Withlimited inspection resources, the FDA is charged with ensuring the safety and efficacy of drugsand pharmaceutical ingredients produced in nearly every corner of the globe. To make mattersworse, as the FDA's challenges multiply, its resources for foreign inspections are shrinking. Areport prepared last year for the FDA Science Board documented how dwindling resources haveled to major reductions in the number of inspections the FDA conducts abroad. The report,"FDA Science and Mission at Risk," stated that the FDA cannot afford to send sufficientinspectors abroad because of "increasing responsibilities… stagnant number of personnel, aswell as a lack of travel funds." Looking at all FDA inspections conducted abroad, the reportfound a 17% drop in the number of inspections since 2000. The Government AccountabilityOffice (GAO) also found decreases in foreign inspection resources. Specifically, the GAOtestified on November 1, 2007, that funds for foreign preapproval inspections have dropped from$8.2 million in fiscal year (FY) 2002 to $7.5 million in FY 2007. Funds for foreign postapprovalinspections remained stagnant during this same period. In addition, the GAO found that thereare approximately 3,000 foreign pharmaceutical manufacturing facilities currently registeredwith the FDA, but as many as 6,800 facilities importing products into the United States.

It is troubling that the very agency charged with ensuring the safety and efficacy ofAmerica's medicines is grossly under-resourced at a time when foreign production of drugs andactive pharmaceutical ingredients is growing at record rates. Adding to the difficulty of thistask, it appears that many foreign pharmaceutical plants register with the FDA as a means tobolster their own standing and with no intention of exporting products to the United Statesmarket. I understand that these registrations can have the effect of increasing the costs and poolof potential inspections for the FDA while providing no benefit at all to American consumers.For example, my staff was informed that in China there are about 578 pharmaceutical facilitiesregistered with the FDA, but only about 200 to 300 of those facilities actually ship products tothe United States.

In light of this, I am writing today to ask for your thoughts about the feasibility ofintroducing registration fees as a way to both augment the FDA's inspection resources and tolimit the number of facilities that may register with the FDA without any intention of shippingproducts to the United States.

Interestingly, registration fees are currently used by the FDA in regard to medicaldevices. Owners and operators of establishments involved in the production or distribution ofmedical devices are required to register with the FDA. This registration includes annual feespaid by the establishment, as required under the Medical Device User Fee and ModernizationAct (MDUFMA), and in accordance with a congressionally established schedule of registrationfees. For FY 2008, MDUFMA registration fees are listed at $1,706, and are set to increase to$2,364 in FY 2012. Entities required to register and pay fees include both foreign and domesticestablishments that manufacture, prepare, propagate, compound, or process a device that isimported to the U.S. market.

There is currently no corresponding requirement that establishments involved in theproduction of drugs or active pharmaceutical ingredients pay registration fees. Though only abeginning, requiring registration fees for these establishments may help bolster the FDA'sinspection capacity while also reducing the number of establishments that register withoutshipping products to the United States.

As stated above, about 3,000 foreign pharmaceutical manufacturing facilities areregistered with the FDA, but other databases suggest that as many as 6,800 are activelyimporting products to the U.S. market. Collecting registration fees from the lower estimate offoreign facilities that are currently registered with the FDA alone would raise more than $5.1million for foreign inspection activities, assuming that these facilities paid the same fees requiredof medical device facilities for FY 2008. This amounts to about a 40% increase for FDA'scurrent foreign inspection budget of roughly $12.7 million. If registration fees were collectedfrom the approximately 6,800 facilities currently importing products to the U.S. market, the FDAcould raise more than $11.6 million, nearly doubling the current foreign inspections budget. Atthe same time, a registration fee requirement may discourage establishments that do not intend toship products to the U.S. from taking advantage of the registration system. These numbers takeinto account only foreign pharmaceutical manufacturing facilities-a registration system forpharmaceutical facilities similar to the one established under MDUFMA would require thecollection of fees from both foreign and domestic facilities, potentially increasing further theresources available for inspections.

It is critical that we address the inspection resource issues at the FDA if the Agency is toensure that America's increasingly foreign-produced drug supply is both safe and effective. Iwould appreciate a written response to this letter as soon as possible. In addition, I am thatrequesting that HHS/FDA provide a briefing to my Committee staff on the FDA's program forinspecting establishments that manufacture medical devices for the U.S. market.

Thank you for your cooperation and attention to this important matter.


Charles E. Grassley
United States Senator
Ranking Member, Committee on Finance