The FDA Regulatory Risks of Shifting to Foreign Suppliers

The very thought of working in a highly regulated environment can be a very daunting experience for many pharmaceutical companies. With the increase of imported ingredients and sourcing from developing countries, financial risks of non-compliance are becoming more unambiguous. We can also see a massive supply shift for FDA regulated products of 650% increase between 1990-2005. Two of the largest sourcing countries for drug ingredients are China and India which make up the majority of imports. China’s pharmaceutical imports more than doubled from 2002-2007, to $698 million while India pharmaceutical imports increased 2,400% from 1996-2006.

Changes in technologies, management, and processes are also evident and have become a necessity in order to be a successful organization. All food and drug companies are obligated to meet with FDA’s compliance requirements in order to protect the health of the consumer. For the Department of Justice (DOJ), drug safety is a top priority. A few critical questions to consider whether a company will maintain its success in the long run are:

  • How are the drugs made?
  • What are the processes or methods used?
  • Is the organization taking remedial actions?
  • Where are the ingredients coming from?

These are some of the factors which determine the overall quality of the final product and whether the organization will survive in this fast growing industry. With the business industry evolving, some organizations have even fallen short in complying with FDA’s laws and regulations. One example is, Dakota Laboratories (South Dakota) which was shut down and had a consent decree for repeated failure to remediate according to DOJ. These included, insufficient control over environment, sterility testing, failure to investigate discrepancies, and issues related to procedures for preventing contamination.

Because of the severity in the type of business, these organizations have gone through investigations to determine if they are capable of operating. If the organization is not in compliance with laws and regulations, the FDA may seek an injunction or consent decree.  This means the production and distribution of the company products could be seized until a legal settlement between the parties is resolved.

In some cases, the organization can even be shutdown permanently. The Consumer Protection Branch (DOJ-CPB) evaluates these corporations on their processes implemented and the people involved in the GMP compliance.

In essence, corporations must continue to evolve and have a plan of action in order to correct any of the violations occurred and prevent them from happening in the future. One of the solutions that can be looked at is, ensuring that all employees involved in GMP compliance are properly trained, have the proper tools, and have the expertise to recognize a problem. Another solution would be to look into the people of the organization and find out whether they are highly motivated and satisfied with their current positon. If employees are not satisfied then perhaps there is a lack of incentives. It is vital for an organization to have a very diverse and good working culture.

The needs of the people, process methods, and technology used, corporate programs offered, and expanding the business market globally can all have a direct impact on the sustainability of the company. In the end, when shifting to foreign suppliers, it is essential for organization to look into changing their corporate structure to meet with the needs and changing demands of the global market to avoid violating the laws and regulations implemented by the FDA and other government agencies.

Posted in Business Process, Consumer Products, Industrial Manufacturing, Manufacturing, Pharmaceuticals and Medical Products, Strategy.