Background Globalization of Drug Manufacturing Drugs sold in the United States—including active pharmaceutical ingredients and finished dosage forms—are manufactured throughout the world. According to a May 2019 FDA report, in fiscal year 2018 about 40 percent of establishments manufacturing drugs for the U.S. market were located domestically and more than 60 percent of establishments manufacturing for the U.S. market were located overseas. As of March 2019, FDA data show that India and China had the most manufacturing establishments shipping drugs to the United States, with about 40 percent of all foreign establishments in these two countries. (See fig. 1.) Types of Inspections Drugs manufactured overseas must meet the same statutory and regulatory requirements as those manufactured in the United States. FDA’s Center for Drug Evaluation and Research (CDER) establishes standards for the safety, quality, and effectiveness of, and manufacturing processes for, over-the-counter and prescription drugs. CDER requests that FDA’s Office of Regulatory Affairs (ORA) inspect both domestic and foreign establishments to ensure that drugs are produced in conformance with applicable laws of the United States, including current good manufacturing practice (CGMP) regulations. FDA investigators generally conduct three main types of drug manufacturing establishment inspections: preapproval inspections, surveillance inspections, and for-cause inspections, as described in table 1. At times, FDA may conduct an inspection that combines both preapproval and surveillance inspection components in a single visit to an establishment. FDA uses multiple databases to select foreign and domestic establishments for surveillance inspections, including its registration database and inspection database. Because the establishments are continuously changing as they begin, stop, or resume marketing products in the United States, CDER creates an establishment catalog monthly. The catalog is prioritized for inspection twice each year. In our 2008 report we found that, because of inaccurate information in FDA’s databases, the agency did not know how many foreign drug establishments were subject to inspection. For example, some establishments included in FDA’s registration database may have gone out of business and did not inform FDA that they had done so or did not actually manufacture drugs for the U.S. market. In our report, we noted that some foreign establishments may register because, in foreign markets, registration may erroneously convey an “approval” or endorsement by FDA, when in fact the establishment may never have been inspected by FDA. We recommended that FDA take steps to improve the accuracy of this registration information. In our 2010 and 2016 reports we found that FDA had taken steps to improve the accuracy and completeness of information in its catalog of drug establishments subject to inspection, such as using contractors to conduct site visits to verify the existence of registered foreign establishments and confirm that they manufacture the products that are recorded in U.S. import records. To prioritize establishments for surveillance inspections, CDER applies a risk-based site selection model to its catalog of establishments to identify those establishments (both domestic and foreign) that, based on the characteristics of the drugs being manufactured, pose the greatest potential public health risk should they experience a manufacturing defect. This model analyzes several factors, including inherent product risk, establishment type, inspection history, and time since last inspection, to develop a list of establishments that FDA considers to be a priority for inspection. Through this process, CDER develops a ranked list of foreign and domestic establishments selected for inspection that is submitted to ORA. To be efficient with its resources, according to FDA officials, ORA staff may shift the order of establishments to be inspected on CDER’s prioritized list based on geographic proximity to other planned inspection trips. FDA Inspection Workforce Investigators from ORA and, as needed, ORA laboratory analysts with certain expertise are responsible for inspecting drug manufacturing establishments. FDA primarily relies on three groups of investigators to conduct foreign inspections: ORA investigators based in the United States, who primarily conduct domestic drug establishment inspections but may sometimes conduct foreign inspections. Members of ORA’s dedicated foreign drug cadre, a group of domestically based investigators, who exclusively conduct foreign inspections. Investigators assigned to and living in the countries where FDA has foreign offices, including staff based in the foreign offices full time and those on temporary duty assignment to the foreign offices. FDA began opening offices around the world in 2008 to obtain better information on the increasing number of products coming into the United States from overseas, to build relationships with foreign stakeholders, and to perform inspections. FDA full-time foreign office staff are posted overseas for 2-year assignments. FDA staff can also be assigned to the foreign offices on temporary duty assignments for up to 120 days. In fiscal year 2019, there were full-time and temporary duty drug investigators assigned to FDA foreign offices in China and India. Post-Inspection Activities FDA’s process for determining whether a foreign establishment complies with CGMPs involves both CDER and ORA. During an inspection, ORA investigators are responsible for identifying any significant objectionable conditions and practices and reporting these to the establishment’s management. Investigators suggest that the establishment respond to FDA in writing concerning all actions taken to address the issues identified during the inspection. Once ORA investigators complete an inspection, they are responsible for preparing an establishment inspection report to document their inspection findings. Inspection reports describe the manufacturing operations observed during the inspection and any conditions that may violate U.S. statutes and regulations. Based on their inspection findings, ORA investigators make an initial recommendation regarding whether regulatory actions are needed to address identified deficiencies using one of three classifications: no action indicated (NAI); voluntary action indicated (VAI); or official action indicated (OAI). Inspection reports and initial classification recommendations for regulatory action are to be reviewed within ORA. For inspections classified as OAI—where ORA identified serious deficiencies—such inspection reports and classification recommendations are to be reviewed within CDER. CDER is to review the ORA recommendations and determine whether regulatory action is necessary. CDER also is to review inspection reports and initial classification recommendations for all for-cause inspections, regardless of whether regulatory action is recommended by ORA. According to FDA policy, inspections classified as OAI may result in regulatory action, such as the issuance of a warning letter. FDA issues warning letters to those establishments manufacturing drugs for the U.S. market that are in violation of applicable U.S. laws and regulations and may be subject to enforcement action if the violations are not promptly and adequately corrected. In addition, warning letters may notify foreign establishments that FDA may refuse entry of their drugs at the border or recommend disapproval of any new drug applications listing the establishment until sufficient corrections are made. FDA may take other regulatory actions if it identifies serious deficiencies during the inspection of a foreign establishment. For example, FDA may issue an import alert, which instructs FDA staff that they may detain drugs manufactured by the violative establishment that have been offered for entry into the United States. In addition, FDA may conduct regulatory meetings with the violative establishment. Regulatory meetings may be held in a variety of situations, such as a follow-up to the issuance of a warning letter to emphasize the significance of the deficiencies or to communicate documented deficiencies that do not warrant the issuance of a warning letter. The Number Of Foreign Inspections Declined In Recent Years, And The Majority Of Such Inspections Identified Deficiencies Total Number of FDA Foreign Drug Inspections Has Decreased Since Fiscal Year 2016 after Several Years of Increases Our preliminary analysis of FDA data shows that from fiscal year 2012 through fiscal year 2016, the number of FDA foreign drug manufacturing establishment inspections increased but then began to decline after fiscal year 2016 (see fig. 2). In fiscal year 2015, the total number of foreign inspections surpassed the number of domestic inspections. From fiscal year 2016 to 2018, both foreign and domestic inspections decreased—by about 10 percent and 13 percent, respectively. FDA officials attributed this decrease to vacancies in the number of investigators available to conduct inspections (which we discuss later in this testimony statement) and to inaccurate data used to select establishments for inspection in fiscal years 2017 and 2018. Despite steps taken to improve the accuracy and completeness of FDA data on foreign establishments, data challenges we identified in our 2008 report continue to make it difficult for FDA to accurately identify establishments subject to inspection. Specifically, since 2017, FDA has pursued an initiative to inspect approximately 1,000 foreign establishments that lacked an inspection history and, as of November 2019, officials said all of these establishments had either been inspected or were determined to not be subject to inspection. However, officials told us that this effort contributed to the decline in the number of foreign inspections conducted because of how data inaccuracies affected the process for selecting establishments for inspection. Specifically, after selecting uninspected foreign establishments for inspection, FDA determined that a sizeable percentage of these establishments were not actually subject to inspection (e.g., about 40 percent of those assigned to the China Office in fiscal years 2017 and 2018). These foreign establishments were thus removed from the list for inspection for the given year. FDA officials told us that the next highest priority establishments identified through the risk- based model to replace those establishments were domestic. As a result, the number of foreign establishments actually inspected decreased. As part of our ongoing work, we plan to examine the accuracy and completeness of information FDA maintains about foreign establishments and the application of its risk-based site selection process. FDA continues to conduct the largest number of foreign inspections in India and China, with inspections in these two countries representing about 40 percent of all foreign drug inspections from fiscal year 2016 (when we last reported on this issue) through 2018. (See table 2.) In addition to India and China, the rest of the countries in which FDA most frequently conducted inspections has generally been the same since our 2008 report. Most Foreign Inspections Are Surveillance Inspections Our preliminary analysis of FDA data shows that each year from fiscal year 2012 through 2018, at least 50 percent of FDA’s foreign inspections were surveillance inspections. In contrast to preapproval inspections, surveillance inspections are used to ensure drugs already on the market are manufactured in compliance with FDA regulations. In recent years, the proportion of foreign surveillance inspections has increased. As figure 3 shows, in fiscal year 2012, 56 percent of foreign inspections were surveillance-only inspections; in contrast, from fiscal year 2016 through 2018, about 70 percent of foreign inspections were surveillance-only, which was comparable to the percentage for domestic inspections during that period. This is a significant increase from the 13 percent of foreign inspections that were surveillance-only when we made our 2008 recommendation that FDA inspect foreign establishments at a comparable frequency to their domestic counterparts (85 percent of which were surveillance-only at that time). FDA has implemented changes to its foreign drug inspection program since our 2008 report that may have contributed to the increase in surveillance inspections. Prior to 2012, FDA was required to inspect domestic establishments that manufacture drugs marketed in the United States every 2 years, but there was no similar requirement for foreign establishments. As a result, and as we reported in 2008, foreign inspections were often preapproval inspections driven by pending applications for new drugs. FDA thus conducted relatively few surveillance-only inspections to monitor the ongoing compliance of establishments manufacturing drugs that were already on the market, with just 13 percent of foreign inspections conducted for surveillance purposes at the time of our 2008 report. However, in 2012, the Food and Drug Administration Safety and Innovation Act eliminated the 2-year requirement for domestic inspections, directing FDA to inspect both domestic and foreign establishments on a risk-based schedule determined by an establishment’s known safety risks, which was consistent with our 2008 recommendation. FDA Identified Deficiencies during the Majority of Foreign Inspections Our preliminary analysis of FDA data shows that from fiscal year 2012 through 2018, FDA identified deficiencies in approximately 64 percent of foreign drug manufacturing establishment inspections (3,742 of 5,844 inspections). This includes deficiencies necessitating a classification of VAI or the more serious OAI, as described in the text box. Inspection Classifications Based on their inspection findings, FDA investigators make an initial recommendation regarding the classification of each inspection: No action indicated (NAI) means that insignificant or no deficiencies were identified during the inspection. Voluntary action indicated (VAI) means that deficiencies were identified during the inspection, but the agency is not prepared to take regulatory action, so any corrective actions are left to the establishment to take voluntarily. Official action indicated (OAI) means that serious deficiencies were found that warrant regulatory action. About 59 percent of domestic inspections (3,702 out of 6,291) identified deficiencies during this time period. (See fig. 4.) This proportion is similar to what we found when we last looked at this issue in 2008, when FDA identified deficiencies in about 62 percent of foreign inspections and 51 percent of domestic inspections from fiscal years 2002 through 2006. Our preliminary analysis showed that serious deficiencies identified during foreign drug inspections classified as OAI—which represented 8 percent of inspections from fiscal year 2012 through 2018—include CGMP violations such as those related to production and process controls, equipment, records and reports, and buildings and facilities. For example: Failure to maintain the sanitation of the buildings used in the manufacturing processing, packing, or holding of a drug product (21 C.F.R. § 211.56(a) (2019)). At an establishment in India producing finished drug products, the investigator reported observing a live moth floating in raw material used in the drug production, and that the facility staff continued to manufacture the drug products using the raw material contaminated by the moth, despite the investigator pointing out its presence. Failure to perform operations relating to the manufacture, processing, and packing of penicillin in facilities separate from those used for other drug products (21 C.F.R. § 211.42 (d) (2019)). At an establishment in Turkey that manufactured penicillin and other drugs, the investigator reported that the manufacturer had detected penicillin outside the penicillin manufacturing area of the establishment multiple times. According to FDA, penicillin contamination of other drugs presents great risk to patient safety, including potential anaphylaxis (even at extremely low levels of exposure) and death. The identification of serious deficiencies is not unique to foreign inspections. For example, at a domestic establishment producing finished drug products, the investigator observed brown stains, white residues, and brown stagnant water in manufacturing equipment. Some investigators who conduct foreign inspections expressed concern with instances in which ORA or CDER reviewers reclassify the investigator’s initial inspection classification recommendations of OAI to the less serious classification of VAI. We plan to examine this issue as part of our ongoing work. FDA Continues To Face Challenges Filling Vacancies Among Staff Conducting Foreign Inspections Our ongoing work showed FDA’s foreign inspection workforce has staff vacancies, which FDA officials said contributed to the recent decline in inspections. As previously mentioned, FDA uses multiple types of staff resources to conduct foreign drug inspections—including ORA investigators based in the United States, members of ORA’s dedicated foreign drug cadre based in the United States, and investigators assigned to FDA’s foreign offices. However, each of these groups has current vacancies. According to FDA officials, the agency is trying to fill vacancies in each of these groups, but the lower staff numbers may limit FDA’s ability to conduct more foreign inspections. ORA investigators based in the United States. This group of investigators conducts the majority of foreign inspections; about 76 percent of foreign inspections in fiscal year 2018 involved an ORA investigator based in the United States who conducts both foreign and domestic inspections. FDA officials said that the more experienced investigators from this group are expected to conduct three to six foreign inspections per year, and investigators hired using generic drug user fees are expected to inspect nine to 12 foreign establishments per year. As of June 2019, there were 190 investigators eligible to conduct foreign drug inspections, but officials said that as of November 2019, the agency had an additional 58 vacancies in this group. Officials said that the agency was in the process of hiring 26 ORA investigators based in the United States to fill these vacancies, with 32 vacancies remaining. FDA officials attributed the vacancies to multiple factors: investigator retirements, investigator movement to other parts of FDA, and the need to hire to additional investigator positions using generic drug user fees. Officials also said that a reorganization within ORA led to a reduced number of investigators who conduct drug manufacturing establishment inspections. While FDA recently filled several of the vacancies, officials told us that new investigators are not typically used for foreign inspections until they have been with the agency for 2 to 3 years. ORA dedicated foreign drug cadre. About 15 percent of foreign inspections in fiscal year 2018 involved an investigator from ORA’s dedicated foreign drug cadre—a group of ORA investigators based in the United States who exclusively conduct foreign inspections. FDA officials said that members of the cadre are expected to conduct 16 to 18 foreign inspections each year. According to FDA, the cadre had 20 investigators in 2012 and 15 investigators in 2016. However, the cadre had only 12 investigators as of November 2019, out of 20 available slots. According to FDA officials, the agency is attempting to fill these positions from the current ORA investigator pool, but officials are not confident that all 20 slots will be filled. Investigators assigned to FDA’s foreign offices. Approximately 7 percent of foreign inspections in fiscal year 2018 involved investigators from FDA’s foreign offices. The investigators conducting these inspections are those based in the China and India foreign offices—the countries where most drug inspections occur— and also include those on temporary duty assignment to these offices. According to FDA officials, these investigators are expected to conduct 15 foreign inspections each year. We have noted high vacancy rates for these foreign offices in past reports. While these vacancy rates have decreased over time, vacancies persist. As of November 2019, FDA’s China office had three of 10 drug investigator positions vacant (a 30 percent vacancy rate), while FDA’s India office had two of six drug investigator positions vacant (a 33 percent vacancy rate). FDA has taken steps to address vacancies in the foreign offices, but continues to face challenges. In our 2010 report, we recommended that FDA develop a strategic workforce plan to help recruit and retain foreign office staff. FDA released such a plan in March 2016, but the long- standing vacancies in the foreign offices raise questions about its implementation. FDA officials told us that one challenge in recruiting investigators for the foreign offices is that well-qualified investigators for those positions need foreign inspection experience. For example, an official in FDA’s India office told us that foreign inspections can be challenging and the India office does not have the resources to develop or train new investigators. Therefore, it is important to recruit investigators who have experience conducting foreign inspections, and such investigators are recruited from ORA. Thus, vacancies in the other two groups of investigators can influence the number of staff available to apply for positions in the foreign offices. Further, according to FDA officials, after employees have accepted an in-country position, the agency can experience significant delays before they are staffed in the office due to delays in processing assignments. For example, an official in FDA’s India office said that investigators need to complete a week-long security training program and must obtain the security clearance needed to work at the U.S. Embassy, which is where FDA’s foreign office is located. However, the official told us that there are limited availabilities for that training and background checks for security clearances can take time. According to this official, FDA investigators do not usually receive first priority for the training. FDA estimates that it can take as little as 1 year to over 2 years to clear background and medical checks and arrive at a foreign office. For example, an investigator in FDA’s China office told us that as a result of these requirements and other issues, it took nearly 2 years for the investigator to arrive at the office after FDA had accepted the investigator’s application. According to FDA’s own strategic workforce plan for the foreign offices, these types of delays have resulted in staff changing their decision after accepting a position in the foreign offices. Persistent Challenges Unique To Foreign Inspections Raise Questions About Their Equivalence To Domestic Inspections Our preliminary analysis indicates that FDA continues to face unique challenges when inspecting foreign drug establishments—as compared to domestic establishments—that raise questions about the equivalence of these inspections. Specifically, based on our interviews with drug investigators in the dedicated foreign drug cadre and FDA’s foreign offices in China and India, we identified four challenge areas related to conducting foreign inspections, which are described below. Of the four challenge areas identified, three areas—preannouncing inspections, language barriers, and lack of flexibility—were also raised in our 2008 report. Preannouncing Inspections. As we reported in 2008, the amount of notice FDA generally gives to foreign drug establishments in advance of an inspection is different than for domestic establishments. Domestic drug establishment inspections are almost always unannounced, whereas foreign establishments generally receive advance notice of an FDA inspection. According to FDA officials, FDA is not required to preannounce foreign inspections. However, they said the agency generally does so to avoid wasting agency resources, obtain the establishment’s assistance to make travel arrangements, and ensure the safety of investigators when traveling in country. FDA does conduct some unannounced foreign inspections, particularly if the investigators conducting the inspection are based in FDA’s foreign offices. However, FDA officials told us that FDA does not have data on the frequency with which foreign drug inspections are unannounced, nor the extent to which the amount of notice provided to foreign establishments varies. According to FDA officials, this is because FDA does not have a data field in its database to systematically track this information. However, the officials estimated that the agency generally gives 12 weeks of notice to establishments that investigators are coming when investigators are traveling from the United States. While investigators in FDA’s China and India offices do conduct unannounced or short-notice inspections, these staff do not perform most of the inspections in these countries. (See table 3). Our preliminary work indicates that preannouncing foreign inspections can create challenges and raises questions about the equivalence to domestic inspections. Of the 18 investigators we interviewed, 14 said that there are downsides to preannouncing foreign inspections, particularly that providing advance notice gives foreign establishments the opportunity to fix problems before the investigator arrives. For example, when an inspection is preannounced, it gives establishments time to clean up their facility and update or generate new operating procedures. However, establishments are expected to be in a constant state of compliance and always ready for an FDA inspection, and several investigators told us seeing the true day-to-day operating environment for an establishment is more likely during an unannounced inspection. Of the 18 investigators we interviewed, 12 said that unannounced inspections are generally preferable to preannounced inspections. One investigator told us that, although they believe the best way to ensure industry compliance to CGMPs is for establishments to not know when FDA is coming for an inspection, there is no data that would allow the agency to evaluate whether unannounced inspections are better than preannounced inspections. In addition, some investigators told us that it is still possible to identify serious deficiencies during preannounced inspections. For example, investigators can still identify issues by looking at the firm’s electronic records, including time-stamped data relating to the creation, modification, or deletion of a record. Three investigators also told us that in some cases there can be benefits to announcing inspections in advance. For example, for preapproval inspections, announcing the inspection in advance gives the establishment time to organize the documentation and staff needed to conduct the inspection. Language Barriers. Our preliminary work indicates that language barriers—which we first reported as a challenge to conducting foreign inspections in our 2008 report—can add time to inspections and raise questions about the accuracy of information FDA investigators collect and thus about the equivalence to domestic inspections. FDA generally does not send translators on inspections in foreign countries. Rather, investigators rely on the drug establishment to provide translation services, which can be an English-speaking employee of the establishment being inspected, an external translator hired by the establishment, or an English-speaking consultant hired by the establishment. Of the 18 investigators that we interviewed, 14 said that language barriers can be a challenge to conducting foreign inspections and were especially challenging in parts of Asia, including China and Japan. Seven investigators told us this is less of a challenge for inspections conducted in other foreign countries, including India and countries in Europe, because workers at establishments in these countries are more likely to speak English, and documentation is also more likely to be in English. Investigators told us that compared to domestic inspections, it can be more challenging and take longer to complete typical inspection-related activities, such as reviewing documentation or interviewing employees, if the investigator needs to rely on translation. Fourteen of the 18 investigators we interviewed said that there can be concerns related to relying on establishment staff and independent translators. Specifically, 11 investigators told us there can be uncertainties regarding the accuracy of the information being translated, particularly when investigators rely on the translation provided by an employee of the establishment being inspected. For instance, one investigator said that there is more risk of conflict of interest if the establishment uses its own employees to translate. Another investigator said that they went to a drug establishment in China that told FDA it had English-speaking employees to translate the inspection, but that this was not the case, and the investigator had to use an application on their phone to translate the interviews. In addition, the firm representative providing the translation may be someone that does not have the technical language needed, which can make it harder to communicate with firm staff and facilitate the inspection. One investigator told us that the independent translators hired by firms are sometimes consultants and, in those instances, it can seem like the consultants are coaching the firm during the inspection. FDA officials told us that when they conduct unannounced for-cause inspections in China, investigators bring locally employed staff who work in FDA’s China office to act as translators. The investigators we interviewed said that in such instances, they valued knowing that the translation they were getting was accurate. However, FDA does not have the resources to provide locally employed staff on every inspection, according to an FDA official. We will continue to examine this issue with FDA as part of our ongoing work. Lack of Flexibility. Our preliminary work indicates that, as we first reported in 2008, the overseas travel schedule can present unique challenges for FDA’s domestically based investigators—including both ORA investigators and members of the dedicated foreign dug cadre— who conduct the majority of foreign inspections. Eight of the 12 dedicated foreign drug cadre investigators that we interviewed told us that there is little flexibility to extend foreign inspections conducted by domestically based investigators because the inspections they conduct on an overseas trip are scheduled back-to-back in 3-week trips that may involve three different countries. This raises questions about their equivalence to domestic inspections. For instance, extending one inspection would limit the amount of time the investigator has to complete their other scheduled inspections, some investigators told us. In addition, eight investigators told us that domestically based staff are generally unable to extend the total amount of time spent on an overseas trip—one investigator told us that an investigator would have to find something really bad to justify an extension. In contrast, FDA officials told us that inspections conducted by in-country investigators in China or India, and domestic inspections in the United States, are generally scheduled one at a time and can thus more easily be extended if the investigator needs additional time to pursue potential deficiencies. However, in-country investigators are not involved in the majority of inspections conducted in China or India. Three investigators from the dedicated foreign drug cadre told us that when they travel overseas, they adjust their inspection approach to help ensure they finish foreign inspections on time. For example, one investigator told us an investigator may start the inspection in an area of the establishment that was noted as having issues during the last inspection. However, one investigator said that sometimes it is not possible to cover everything in depth during a foreign inspection. Another investigator told us that they focus on identifying the most serious issues during a foreign inspection, and that less serious issues can be identified in the establishment inspection report for reference in the next inspection. Five investigators also noted that they work long hours during their inspection to ensure they can complete the needed work. While FDA may assign more than one investigator to an inspection to complete needed work, one investigator said that FDA does not usually assign more than one person to an inspection because investigators are expected to have the experience to conduct inspections by themselves. From fiscal years 2012 to 2018, the majority of both foreign and domestic inspections were conducted by one person—77 percent and 66 percent, respectively. Post-Inspection Classification Process. According to FDA officials, starting in fiscal year 2018, FDA implemented a new post-inspection classification process: when an ORA investigator recommends an OAI classification following an inspection, ORA compliance is required to send that inspection report to CDER for review within 45 calendar days from the inspection closeout. Among other things, the process was intended to help ensure FDA can communicate inspection results to domestic and foreign establishments within 90 days of the inspection closeout, as committed to under the Generic Drug User Fee Amendments of 2017(GDUFA II). FDA officials told us that the changes also required an additional ORA review for foreign inspection reports to align that process with the process for domestic inspection reports. Although the 45-day reporting time frame for potential OAI classifications is a requirement for both domestic and foreign inspections, adding the additional level of review within ORA effectively shortened the amount of time investigators have to document findings for foreign inspections. Our preliminary work indicates that the post-inspection reporting time frames can create challenges for domestic investigators that conduct foreign inspections and raise questions about the equivalence to domestic inspections. Eight of the 18 investigators that we interviewed said shortening the time for completing reports and adding a level of review has made it more challenging to meet reporting requirements, especially if serious deficiencies are identified during the inspection. Investigators told us that for a potential OAI inspection, they now need to send the inspection report to their supervisor for endorsement within 10 days of the closeout of a foreign inspection, regardless of when the investigator’s next inspection is scheduled for, or whether the investigator has to travel from overseas back to the United States after the inspection. For example, if a domestic investigator finds serious deficiencies on the first inspection, thus indicating an initial OAI classification, the investigator needs to write and send the related inspection report to the ORA supervisor for endorsement before returning home from the 3-week overseas trip to meet the required time frame. One investigator told us that, as a result of the time pressures, post-inspection reports may be less thorough, and that some inspection observations could be better supported if investigators had more time to write the reports. In conclusion, foreign manufacturing establishments continue to be a critical source of drugs for millions of Americans, and FDA inspections are a key tool to ensure the quality of these drugs. Over the years since we first examined this issue, FDA has made significant changes to adapt to the globalization of the drug supply chain and has greatly increased the number of inspections that it conducts of foreign establishments. Notably, it has markedly increased the percentage of foreign inspections conducted to monitor drugs already on the market, which we previously noted were vital to FDA oversight of foreign establishments. However, the agency continues to be faced with many of the same challenges in the oversight of foreign establishments that we identified in our 2008 report. Our preliminary work has identified inspection decreases, related in part to FDA challenges filling investigator vacancies. We have also identified a variety of unique challenges that investigators face in foreign inspections. As we continue to conduct our work, we will further examine the cumulative effect of these challenges that raise questions about FDA’s ability to conduct equivalent inspections in foreign establishments. We will examine the extent to which FDA has assessed its oversight of drugs manufactured overseas and the steps it is taking to mitigate any risks, and make recommendations as appropriate. Chair DeGette, Ranking Member Guthrie, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. GAO Contact and Staff Acknowledgments If you or your staff have any questions about this testimony, please contact Mary Denigan-Macauley, Director, Health Care at (202) 512-7114 or DeniganMacauleyM@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this testimony are William Hadley (Assistant Director); John Lalomio (Analyst-in- Charge); Katherine L. Amoroso; George Bogart; Zhi Boon; Derry Henrick; Laurie Pachter; and Vikki Porter. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.


Background Government-wide Reform Plan Requirements In March 2017, the President issued an executive order requiring comprehensive reorganization plans for executive branch agencies (see fig. 1). In April 2017, OMB provided guidance to federal agencies for developing their respective reform plans. The government-wide reform plan was to have been based on the agency reform plans, OMB-coordinated crosscutting proposals, and public input. According to OMB’s M-17-22 guidance, OMB, in coordination with the President’s Management Council, was to establish a way to track the progress of the reforms. OMB’s guidance also stated that it would track progress of the reforms by leveraging the federal performance planning and reporting framework originally put into place by the Government Performance Results Act of 1993 (GPRA), and significantly enhanced by the GPRA Modernization Act of 2010 (GPRAMA), through the use of cross-agency priority (CAP) goals, agency priority goals, and Performance.gov. In March 2018, OMB released the President’s Management Agenda (PMA), which provided information on the preliminary status of government reorganization efforts and is connected with these reform efforts. The PMA also identified a set of CAP goals, required under GPRAMA, to target those areas where multiple agencies must collaborate to effect change and report progress in a manner the public can easily track. The PMA gave OPM a key role in fulfilling the administration’s human capital-related goals. Specifically, OPM, along with OMB and the Department of Defense (DOD), were tasked to “align and strategically manage the workforce to efficiently and effectively achieve the federal government’s mission.” OPM Reorganization Proposals The administration is planning to transfer OPM’s background investigations to DOD, policy and workforce strategy functions to the EOP, and all remaining functions to GSA (see fig. 2). These remaining functions include human resource solutions, information technology systems, healthcare and insurance, retirement services, merit system accountability and compliance, and IG functions. The President’s fiscal year 2020 budget proposal, which was issued in March 2019, states that the administration is planning to complete the reorganization of OPM by the end of fiscal year 2020. As such, the budget proposal provided no funds for OPM for fiscal year 2020. According to that budget proposal, “the Administration has been developing plans to execute transfers of OPM functions to GSA and the DOD using a combination of existing legal authority and legislation” since June 2018. The budget proposal also requested $50 million to transfer certain OPM functions to GSA, including an additional $1 million to cover costs associated with merging the OPM IG with the GSA IG. On May 16, 2019, the administration proposed new legislation requesting authority to fully implement its reorganization proposal. OMB, OPM, and GSA Have Not Fully Addressed Key Reform Practices in Reorganizing OPM Setting Goals and Measures, and Assessing Costs and Benefits As we previously reported, a critical first step in the reform and reorganization process is to define the benefits of the merger, and describe how the future will be both different from and better than the past. As of May 17, 2019, OMB, OPM, and GSA had not fully established outcome-oriented goals and performance measures for, or assessed the costs and benefits of, the administration’s proposal to reorganize OPM (see fig. 3). Specifically, GSA provided one document, a draft Qualitative Business Case and Value Proposition for the GSA/HRS Merger (October 2018), which includes some preliminary goals and measures, such as to improve customer satisfaction. However, this document focuses only on the goals and measures related to the transfer of human resources solutions from OPM to GSA, rather than on the entire reform proposal. In addition, that document explicitly states that it is not a cost-benefit analysis, and OMB staff have told us that they have not conducted a cost-benefit analysis of the reform. In our prior work on organizational mergers and transformations, we have found that establishing a coherent mission and integrated strategic goals to guide the transformation involves adopting leading practices for results-oriented strategic planning and reporting. Leadership Focus and Attention We have previously reported that organizational transformations should be led by a dedicated team of high-performing leaders within the agency, and GSA has provided some evidence of this leadership focus and attention, but OMB, OPM, and GSA have only partially addressed this key practice (see fig. 4). According to GSA officials and documents we reviewed, the agency designated a member of its Senior Executive Service as the leader of the reorganization within GSA, and has established a Project Management Office with dedicated staff and resources which will take on the responsibility of supporting the transfer of OPM’s functions to GSA. Also, GSA officials told us that OMB leads the reform by, for example, leading meetings under the Six Sigma management approach to manage progress on implementing the reorganization. However, as of May 17, 2019, OMB did not provide documents we requested about the role of these management meetings for the reorganization, and OPM did not provide relevant information or documents. Our past work has also found that leadership should articulate a succinct and compelling reason for the reform, as this helps build morale and commitment to the organizational changes. OMB provided the case for change in several public documents, such as the government-wide reform plan, which primarily state that the administration’s reason for moving OPM’s functions to GSA and the EOP is that these changes would create greater efficiencies and elevate the importance of human resources policy. However, sharing the case for change is only one key factor in successful reforms and reorganizations. As we stated above, illustrating what success looks like is also important, and involves articulating the specific goals and costs and benefits of the reform. Involving and Communicating with Congress, Employees and Key Stakeholders Our prior work has shown that it is important for agencies to directly and continuously involve their employees, Congress, and other key stakeholders in the development of any major reforms. OMB and GSA have taken some actions to involve and communicate with Congress, employees, and other key stakeholders, but these initiatives lack documentation (see fig. 5). For example, GSA officials told us that they have met with members of Congress, conducted town hall meetings in which they provided information to and answered questions from GSA officials, and established an email inbox for communication between GSA leaders and employees on the reform. However, as of May 17, 2019, GSA officials had not provided us with documentation of their meetings and communications with employees, and neither OMB nor OPM had provided relevant documents on employee outreach and inclusion. Developing and Communicating Implementation Plans with Milestones and Time Frames We have previously reported that organizational transformations must be carefully and closely managed by developing an implementation plan with key milestones and deliverables to track and communicate implementation progress, among other actions. However, as of May 17, 2019, OMB, OPM, and GSA had not developed an implementation plan or publicly reported on key milestones (see fig. 6). This is the case despite the fact that the President’s fiscal year 2020 budget states that the reform is underway in fiscal year 2019, and that all remaining portions of the reform would be completed in fiscal year 2020 through legislation. Moreover, these agencies have not ensured transparency of their efforts by publicly reporting on implementation progress. Addressing Existing Management Challenges Our prior work has shown that successful reorganizations seek to implement best practices in the systems and processes wherever they may be found, and guard against automatically adopting the approaches used by the largest or acquiring component. The risk is that the new organization may migrate less-than-fully efficient and effective systems and processes merely because those systems and processes are most often used. Accordingly, OPM’s proposed reorganization should address agency management challenges, such as those in our high-risk program, priority open recommendations, or those identified by agency IGs. OMB, OPM, and GSA are aware of our related prior work, including major management challenges, but have not demonstrated how the proposed reorganization will help address these challenges (see fig. 7). Based on a document released by the administration on May 15, 2019 discussing its rationale for the merger of OPM and GSA, the reorganization should better support human capital delivery across the federal government by centralizing the services provided by both agencies, and reducing duplication. The reform plan also acknowledges that federal human capital management remains a high-risk area due to mission-critical skills gaps within the federal workforce. The reform plan further states that OPM does not have the capacity to address the high- risk issues we have identified, and progress would be achieved more efficiently by transferring OPM’s responsibilities to other government entities, including GSA and the EOP. However, as of May 17, 2019, OMB, OPM and GSA had not provided any documentation or analysis to demonstrate how the proposed reorganization would help resolve high- risk issues. The reform plan also draws attention to the OPM security breach that occurred several years ago, and cites it as a reason for moving information technology systems to GSA. We have five open priority recommendations to OPM regarding information security, as we reported to OPM in April 2019. For example, in May 2016, we recommended that OPM update security plans to ensure controls specific to high-impact systems are addressed, provide and track training for individuals with significant security responsibilities, and ensure that security control assessments specific to high-impact systems are comprehensive. To fully implement these recommendations, we reported that OPM needs to complete its ongoing efforts in each of these areas by implementing an automated system for management of security controls and security plans, defining and completing its planned corrective actions on training, and reviewing completed security control assessments. It is unclear whether OMB, OPM, and GSA have fully considered how relevant major management challenges identified by OPM’s and GSA’s IGs may affect the proposed reorganization (see fig. 7). For example, the GSA IG’s 2018 report on management challenges contains a number of findings that call into question GSA’s capacity to take on certain responsibilities the administration proposes transferring to GSA as part of the reorganization. Specifically, the report discusses GSA’s challenges with managing internal controls, prioritizing cybersecurity, and managing human capital. By addressing major management challenges and adopting best practices and processes as part of the reorganization effort, the administration will be better positioned to successfully implement their proposal. More Information Needed to Fully Assess Legal Authorities to Reorganize OPM As of May 17, 2019, OMB, OPM and GSA had not provided documentation that they had identified specific actions that can be taken administratively versus those that will require legislative action to reorganize OPM. We asked OMB, OPM, and GSA for their views on what legal authority, including appropriations, they are relying on to reorganize OPM, including any additional authority that may be needed. As described earlier in this statement, these agencies have not provided implementation plans or other details on the reorganization. Similarly, they have not provided details on the statutory underpinnings for OPM’s reorganization. To the extent the administration identifies the legal authority it is it relying on to support this proposed reorganization, or the additional legal authority it needs, we will continue to assess it. OPM is statutorily created as “an independent establishment in the executive branch.” In addition, the Director of OPM is vested with certain functions by statute, and the Director (or OPM designee) is required to perform those functions, including executing, administering, and enforcing civil service requirements. While the Director of OPM may delegate selected human capital management functions to other agencies, OPM remains statutorily responsible for certain oversight activities, such as establishing standards that apply to such delegated activities and making written findings, where appropriate, if an agency to which OPM delegated human capital management functions acts contrary to law, rule, regulation, or standard, and requiring that the agency take corrective action, among other activities. OPM has various statutorily required responsibilities related to administering civil service retirement, insurance, health benefits, and life insurance programs, among others. OPM is funded primarily through its revolving fund—which is made up of fees or reimbursements provided by agencies for services OPM provides, such as background investigations and human resources services— transfers from OPM’s Earned Benefits Trust Funds for administrative services, and discretionary appropriations for OPM’s general activities and the Office of IG. To execute certain transfers of functions from OPM to GSA, the administration has acknowledged the need for additional statutory authority, but has also stated that it will rely on existing authority to move certain functions administratively. For example, the Analytical Perspectives accompanying the President’s fiscal year 2020 budget acknowledges that the transfer of OPM functions to GSA will be completed using a combination of existing legal authority and legislation. However, the administration does not identify which functions will require legislation and which OPM functions may be transferred administratively. In particular, OMB’s Deputy Director for Management stated, in July 2018, that many of the administration’s reorganization proposals can be implemented in whole or in part through existing administrative authorities. The conference report accompanying the 2019 Appropriations Act directed OPM to submit a report that included, among other things, the legal authority under which OPM proposed to transfer the human resources solutions function within the OPM revolving fund to GSA. OPM’s report stated that it and GSA, in consultation with OMB, continue to deliberate upon the application and use of administrative authorities to transfer the OPM functions to GSA. In addition, in April 2019, the General Counsel of OPM told us that the agency is unable to provide its legal analysis to us because it was still in progress and the agency was waiting for certain executive branch actions to be finalized. Without this information, we cannot assess the legal authorities the administration is relying on to implement the reorganization of OPM. Key Capacities Important for Effective Strategic Human Capital Management As Congress and the administration consider whether or how to restructure OPM, regardless of the eventual decision about the organizational arrangement, we believe that it will be important to retain the capacity to execute certain government-wide, strategic human capital functions. These include the capacity to (1) identify trends affecting the future of the federal workforce; (2) effectively collaborate and coordinate with key stakeholders to address these government-wide trends; (3) lead the design of government-wide solutions to shared human capital challenges; and (4) administer and enforce civil service laws and regulations. As noted in our prior work, these functions are desirable and appropriate because they generate broad consistency across federal agencies, which is critical for, among other things, ensuring that each federal employee has certain safeguards and protections regardless of where he or she works. They also produce certain efficiencies and economies of scale that come from central coordination, and help maintain a reasonably level playing field among federal agencies when competing for talent. This is particularly important because we continue to designate strategic human capital management as a high-risk area. While many day-to-day human capital responsibilities have been delegated from OPM to individual agencies over the years, OPM continues to play an important strategic role including in the creation, execution, oversight, and strengthening of human capital policies and programs. For example, OPM’s 2018-2022 strategic goals are to: Transform hiring, pay, and benefits across the federal government to attract and retain the best civilian workforce. Lead the establishment and modernization of human capital information technology and data management systems and solutions. Improve integration and communication of OPM services to federal agencies to meet emerging needs. Optimize agency performance. Moreover, OPM was given a key role in fulfilling the human capital-related goal of the most recent President’s Management Agenda, in which the administration noted its intention to partner with Congress on “overhauling the statutory and regulatory rules that have, over time, created an incomprehensible and unmanageable civil service system.” OPM, along with OMB and DOD was tasked with the goal of aligning and strategically managing the workforce to efficiently and effectively achieve the federal government’s mission. To carry out these government-wide, strategic responsibilities, the following capabilities, whether possessed by OPM or some other entity, will be essential for ensuring cost-effective leadership, management, and oversight of the federal workforce. The Capacity to Identify Trends Affecting the Future of the Federal Workforce In our March 2019 report, we noted that such trends as technological advances, an increased reliance on nonfederal partners, and changing demographics and shifting attitudes toward work, are affecting how federal work is done, and consequently the skills and competencies that workers need to accomplish agency missions. Moreover, recent publications by the administration and others have raised concerns about whether the government’s employment policies and practices are still relevant and desirable to the current and future workforce. As far back as 1989, we reported that OPM had not provided the leadership necessary to sustain attention to identifying and resolving critical human resource problems affecting government operations and preparing for the future. Although OPM has made progress in this area and provides a variety of services, its progress has been inconsistent and issues still remain. For example, in 2018, OPM issued its Federal Workforce Priorities Report, which identifies changes in the external environment that will likely affect federal human capital management, including the evolving role of workers, changes in technology, employee health, and shifting generational demographics. OPM has also hosted a series of symposia that provide human capital specialists insight on addressing workforce challenges of the future. While these and other efforts are all important steps in the right direction, more work is needed in other areas. For example, as discussed in our March 2019 report, over the years we have made a number of recommendations to OPM to help agencies better meet their missions in an era of changing technology, demographics, fiscal constraints, and other challenges. OPM agreed with most of these recommendations and has made some progress, but additional actions are needed. They include, for example, identifying existing skills and competencies, assessing gaps in existing and future skills and competencies, and monitoring progress toward closing skills gaps. Moreover, in our March 2019 High Risk report, we noted that OPM needs to fully address the recommendations in our January 2015 report. Our recommendation called on OPM to make more strategic use of government workforce data to build a predictive capacity for identifying and mitigating emerging skill gaps across government. The Capacity to Effectively Collaborate and Coordinate with Key Stakeholders Certain human capital issues, such as addressing mission critical skills gaps, are crosscutting in nature and require the coordinated efforts of multiple stakeholders. However, a key challenge we identified in our May 2014 report on strategies to help agencies meet their missions in an era of highly constrained resources was that the federal human capital community is highly fragmented, with multiple actors both inside and outside of government informing and executing human capital policies and initiatives in ways that are not always aligned with broader, government-wide human capital efforts. Within government, OPM, OMB, the Chief Human Capital Officers (CHCO) Council, and individual agencies create, implement, and oversee human capital initiatives. Those initiatives are shaped, in part, by input provided by labor unions and federal management councils such as the President’s Management Council. The federal chief human capital officers with whom we spoke noted that each of these actors possess its own mission, initiatives, agendas, chain of command, budgets, and oversight. While this is to be expected given their various roles and responsibilities, these same factors can create disincentives to collaborating to achieve common human capital goals. In response to this issue, we recommended in 2014 that OPM work with the CHCO Council to, among other actions, strengthen coordination and leadership on government-wide human capital issues. OPM agreed with our recommendation and issued a final regulation, effective in April 2017, requiring it and agencies take significant steps in identifying, prioritizing, and coordinating efforts to address critical human capital issues. We believe this final regulation represents an important step toward addressing fragmentation within the federal human capital community. Going forward, it will be important for OPM, or another entity, if reorganized, to work with the CHCO Council and other stakeholders to address our open recommendations concerning specific human capital functions. Indeed, many of our open recommendations, including those that require priority attention from OPM, call on OPM to work in conjunction with the CHCO Council. The Capacity to Lead and Design Government-Wide Solutions to Shared Human Capital Challenges Government-wide or “enterprise” solutions are important because they can integrate the efforts of multiple departments and agencies to address crosscutting human capital challenges more effectively by leveraging agencies’ expertise, experience, technology, and other resources. However, in our 2014 report, we found that while agencies have many common human capital challenges, they tend to address these issues independently without looking to enterprise-wide solutions that could resolve them more effectively. Across government, there are examples of agencies and OPM initiating enterprise solutions to address crosscutting issues, including the consolidation of federal payroll systems into shared-services centers. While these and other actions are important steps in the right direction, the CHCOs we spoke with in 2014 identified certain barriers to greater coordination to address common problems. For example, federal budgeting and account structures reinforce the prevailing tradition of controlling agency resources within a single agency. Moreover, agencies may be reluctant to contribute resources to a government-wide approach because they may not get an equitable return on their investment, or may get a product that does not fit their needs. According to the CHCOs in 2014, two areas that are ripe for greater government-wide collaboration are human resource information technology (HR IT), and strategic workforce planning. Specifically, the CHCOs said agencies could be missing cost-savings opportunities by not coordinating HR IT investments within and across agencies. They noted that agencies are individually procuring identical systems rather than leveraging the purchasing power of multiple agencies to negotiate better prices or services, or use shared service centers. Similarly, several CHCOs we spoke with said agencies are not consistently leveraging lessons learned or collaborating to address difficulties they encounter with workforce planning models. To further agencies’ use of government-wide approaches, we recommended that the Director of OPM, in conjunction with the CHCO Council, should explore the feasibility of expanded use of enterprise solutions to more efficiently and effectively address shared or government-wide human capital challenges. Such actions could include: (1) seeking cost savings and improved functionality through coordinated government-wide human resources information technology planning and acquisition; (2) seeking agency input to ensure OPM’s workforce planning tools provide effective guidance for agencies; and (3) sharing workforce planning lessons learned and successful models across the government. OPM agreed with the recommendation and in September 2018, it reported that in spring 2019, data will be available to indicate whether surveys and tools to address government-wide human capital challenges are meeting their intended goals. In March 2019, OPM told us that it was conducting Human Capital Reviews with relevant agencies. However, to fully implement the recommendation, OPM, or another entity, if reorganized, needs to demonstrate continued progress in addressing government-wide human capital challenges. The Capacity to Administer and Enforce Civil Service Laws and Regulations Broad consistency across federal agencies is important for ensuring that all federal employees have the same safeguards, rights, and protections regardless of where they work. These include, for example, merit principles; protection from prohibited human capital practices; the ability to organize, bargain collectively, and participate through labor organizations; and due process that is fair, fast, and final. OPM is responsible for executing, administering, and enforcing the civil service rules and regulations, and the laws governing the civil service. Additionally, OPM is required to establish and maintain oversight over delegated human capital activities, including delegated competitive examining activities, to ensure agencies are acting in accordance with the merit system principles and the relevant standards established by OPM, such as compliance with applicable laws, rules, regulations, executive orders, and OPM policies. OPM monitors overall implementation and identifies corrective actions when deficiencies are found. OPM conducts this oversight through three primary means: delegated examining unit audits, human resource management evaluations, and special studies. However, in our prior work, we have identified the need for more effective oversight in such areas as agencies’ use of hiring authorities, agencies’ classification programs, the conversion of political appointees to career positions, and the Senior Executive Service performance-based pay system. With respect to agencies’ use of hiring authorities, for example, to help strengthen the government’s ability to compete in the labor market for top talent, and to improve the federal hiring process, we recommended in 2016 that the Director of OPM, in conjunction with the CHCO Council, should determine whether opportunities exist to refine, consolidate, eliminate, or expand agency-specific authorities to other agencies and implement changes where OPM is authorized. OPM agreed with the recommendation and in December 2018, OPM said that it continues to research and examine streamlining opportunities, such as those identified in its July 2018 study on excepted service hiring authorities, as part of the broader initiative to modernize federal hiring practices under the President’s Management Agenda. However, OPM did not provide a time frame for implementation. In its March 2019 Congressional Justification for the fiscal year 2020 budget request, OPM included legislative proposals for new hiring authorities such as highly qualified experts and temporary appointments to help agencies meet critical needs as well as a change to the criteria for granting direct hire authority. While OPM has made some progress in this area, it will be important for the agency to follow through on its planned actions to streamline hiring authorities. To fully implement the recommendation, OPM or another entity, if reorganized, needs to complete these efforts and, as appropriate, develop legislative proposals in consultation with the CHCO Council. Thank you, Chairman Connolly, Ranking Member Meadows, and Members of the Subcommittee. This concludes my testimony. I would be pleased to answer any questions. 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