Guest Column | December 9, 2016

Insights On FDA: What We Can Learn From Two New U.S. Inspector General Reports

By Cynthia Schnedar, Greenleaf Health

The Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) recently released two reports that contain nuggets of interest to those who are watching for trends in the pharmaceutical industry. On November 10, OIG released its Work Plan for 2017, followed on November 17 by Top Management and Performances Challenges Facing HHS. These documents focus on all of HHS, but they both contain sections devoted to the Food and Drug Administration (FDA) and its regulation of the pharmaceutical industry. By taking a closer look at these sections, those outside the agency can gain a valuable insight into what OIG identifies as areas of risk for FDA. This article first explains the role of OIG in providing oversight of FDA, and then discusses what the pharmaceutical industry can learn from these two recent OIG publications.

What Is An OIG?

The Inspector General (IG) Act of 1978, as amended, created the federal inspectors general as independent units charged with combatting fraud, waste, and abuse and promoting integrity and efficiencies within their respective agencies. While inspectors general share their findings with the head of the agency and with Congress; according to the IG Act, they are to remain as “independent and objective” units within an agency. Inspectors General carry out their mission through audits, investigations, and evaluations of their respective agencies. Thus, HHS OIG is an important and independent voice on the challenges facing FDA and what FDA should do to address those challenges.

What Is The Significance Of The Top Management And Performance Challenges Report?

The Reports Consolidation Act of 2000 requires all inspectors general to prepare an annual report on the top management and performance challenges facing the agency it oversees, more commonly known as the Top Management Challenges report.

The 2016 report recently released by OIG identifies 10 management and performance challenges facing HHS, one of which falls directly within FDA’s purview — “ensuring the safety of food, drugs, and medical devices.” OIG noted in the agency’s efforts to ensure the safety of the nation’s drug supply, the agency faces the biggest challenges in addressing drug compounding, the complex drug supply chain, and improper marketing activities. OIG’s comments on each of these three challenges are summarized below.

  • Drug compounding: OIG noted that the potential danger of improperly compounded drugs came to the nation’s attention through the deadly fungal meningitis outbreak that occurred in 2012. OIG acknowledged that since new authorities that were given to FDA in the Drug Quality Security Act of 2013 (DQSA), FDA has stepped up its inspections of compounded facilities. However, OIG noted that “FDA continues to identify serious problems at facilities that compound drugs, the vast majority of which do not register with the FDA.” In identifying what needs to be done, OIG in essence urged FDA to continue on the same path it is on. OIG stated that “FDA must continue to implement its new authorities to enhance oversight of drug compounders and better ensure the safety of compounded products, including by inspecting drug compounders and pursuing regulatory action when deficiencies are identified.”
  • Complex drug supply chain:  According to OIG, the increasingly complex and globalized supply chain presents strong challenges to FDA’s regulatory oversight in this area.  Products can be difficult to trace, complicating a company’s ability to recall and FDA’s ability to ensure the integrity of the products. Multiple parties may be involved in distributing or repackaging the finished product. In addition, drugs from unapproved sources can enter the domestic supply chain, while disruptions can cause patients to lose access to needed medications.

    OIG noted that FDA is at work on implementing the Drug Supply Chain Security Act (DSCSA) contained within the DQSA. The DSCSA provides the basis for building an electronic, interoperable system to identify and trace prescription drugs distributed in the U.S. OIG recognized that FDA has issued some guidances to help implement DSCSA, but also appeared to express concern that FDA has twice delayed its enforcement of certain product tracing requirements for wholesale distributors and dispensers, due to requests for additional time to meet requirements. OIG stressed that FDA must continue “to implement its new authorities” under DSCSA and “must ensure that drug supply chain partners comply with product tracing requirements.”
  • Improper marketing activities: OIG noted that improper marketing of drugs, biologics, and medical devices “can put patients at risk of receiving inappropriate or harmful care and lead to fraudulent claims for payment from Federal health care programs.” OIG recognized that FDA, in conjunction with its law enforcement partners, has worked to pursue enforcement actions against improperly marketed medical products, while also engaging in outreach efforts to warn consumers about the medical risks that come from importing unapproved drugs. OIG urged FDA to continue its efforts to protect federal health care programs and beneficiaries from these potentially dangerous products.

What Does The HHS OIG Work Plan Say About FDA?

HHS OIG has a tradition of releasing its work plan for the upcoming fiscal year. While inspectors general are statutorily required to issue a Top Management Challenges report, there is no similar requirement to release the annual work plan for an OIG in advance. Not all federal inspectors general issue a public annual work plan, so the HHS OIG annual work plan is an important source of information not afforded to all agencies and to the regulated industries that follow those agencies.

OIG is charged with the oversight of more than 100 programs administered by HHS, and the amount of work conducted concerning various programs is determined by the amount of funds available and the purpose limitations in the funding appropriated to OIG. For example, approximately 78 percent of OIG’s funding in fiscal year 2016 was specifically directed toward oversight of the Medicare and Medicaid programs. Because OIG’s mission is so broad and its resources are limited, it must carefully pick and choose what programs merit its attention. In choosing what to audit or inspect, OIG said it assesses “relative risks in HHS programs and operations to identify those areas most in need of attention.” Not surprisingly, the reviews and inspections identified in the HHS OIG work plan that concern FDA often are designed to assess how well the agency is addressing the relevant challenges identified by OIG in its annual Top Management Challenges report.

In its most recent work plan, OIG announced it anticipates issuing reports on the following three topics during the 2017 fiscal year:

  • Hospitals reliance on drug compounding facilities: OIG noted that large hospitals compounding drugs without a patient-specific prescription are regulated as an outsourcing facility under the DQSA. OIG is launching a report aimed at determining both the extent to which hospitals are obtaining compounded sterile preparations from compounders, including outsourcing facilities that have registered with FDA, and the extent to which compounders that produce compounded sterile preparations without a patient-specific prescription have registered with FDA.
  • Review of prescription drug user fees: OIG noted that under the terms of the prescription Drug User Fee Act (PDUFA), FDA is expected to use those fees to meet its goals for the timely review of human drug applications. OIG intends to review FDA policies and procedures and financial records related to prescription drug user fees to determine whether FDA appropriately expended user fee collections and accurately computed user fee rates.
  • Review of information exchange in the drug supply chain: Consistent with its identification of securing the nation’s drug supply chain as a top challenge facing HHS, OIG intends to report on FDA’s implementation of the DSCSA. OIG noted that DSCSA requires the exchange of transaction information (such as the strength and dosage of the drug, the National Drug Code, etc.) and transaction history (for every prior transaction for that drug back to the manufacturer) between drug supply chain trading partners, and that this forms the foundation of drug traceability and the security of the drug supply chain that DSCSA aims to build. Thus, OIG will interview drug manufacturers, wholesale distributors, and dispensers to learn what has worked and what obstacles have arisen as these trading partners have exchanged this information during the early phases of DSCSA implementation. Through this outreach, OIG may identify valuable information and recommendations for FDA as FDA continues with its DSCSA implementation efforts.

What To Watch For

OIG stated it intends to issue the three reviews described above in fiscal year 2017. Each of those reports will contain not only OIG’s findings, but also recommendations on how FDA can address any OIG findings and FDA’s response to those recommendations.  Thus, those anticipated reports should contain yet another valuable assessment of any OIG-identified shortcomings at FDA, and a description of what actions FDA may take to address those shortcomings.  In addition, OIG is careful to state that work planning is a dynamic process, and that it adjusts its work plan throughout the year to respond to emerging issues. Therefore, it is worth keeping a look out for any additional reviews OIG may launch in 2017. Those newly launched reviews could be smoke signals for other emerging issues in FDA’s regulation of the pharmaceutical industry.

About The Author:

Cynthia Schnedar is executive VP of regulatory compliance at Greenleaf Health. She was formerly director of the Office of Compliance for FDA’s Center for Drug Evaluation and Research (CDER), where she led a staff of more than 300 doctors, scientists, manufacturing experts, pharmacologists, attorneys, and administrative staff. During her time at FDA, she spearheaded efforts to protect the American public from unsafe and ineffective drug products by ensuring that companies comply with federal standards for quality and safety. Among her many duties, Cynthia advised the FDA commissioner, the CDER director, and other senior FDA officials on significant enforcement issues.

Cynthia spent more than two decades at the Department of Justice (DoJ), where she specialized in compliance and enforcement issues. During her tenure there, she served as acting inspector general and led a nationwide workforce in providing oversight of DoJ. She earned a B.A. from the University of New Mexico and a J.D. from the University of Texas School of Law. You can connect with her on LinkedIn.