On-shoring Pharmaceutical Manufacturing: Navigating Regulatory Obligations and Strategic Considerations

The Trump administration’s Executive Order entitled, “Regulatory Relief to Promote Domestic Production of Critical Medicines,” notes a desire to bolster supply chains, enhance national security, and ensure compliance with evolving regulatory frameworks. Nevertheless, the decision to relocate manufacturing operations for U.S. Food and Drug Administration (FDA)-approved drugs is fraught with regulatory obligations – including those administered by the FDA – and strategic considerations that must be thoroughly analyzed.

Key FDA Regulatory and Compliance Considerations

Prior Approval Supplement Requirements. One of the leading regulatory hurdles that pharmaceutical companies must navigate when relocating manufacturing facilities is the requirement for a Prior Approval Supplement (PAS). The FDA typically considers an establishment relocation to be a major change for which a comprehensive PAS must be submitted for the site. This process triggers mandatory regulatory review periods, which can lead to significant manufacturing delays. Companies must be prepared for the time it takes the FDA to review and approve the PAS.

Pre-Approval Inspection Protocols. The FDA often requires a pre-approval inspection to assess the facility’s adherence to regulatory standards before approving the relocated site for commercial production. This can present an operational risk. Delays in site readiness or in the FDA scheduling the inspection can extend the time before approval is granted. Additionally, significant findings during the inspection could result in further delays in manufacturing authorization. Pharmaceutical companies must ensure that their relocated facilities meet all criteria to mitigate the risk of non-compliance and subsequent operational setbacks.

Enhanced Foreign Manufacturing Surveillance. In addition to domestic manufacturing considerations, as part of its response to the Executive Order, the FDA is likely to implement increased unannounced inspections for all overseas manufacturing operations, not just those in India and China. This development elevates the compliance monitoring burden for offshore facilities, as companies must be prepared for potentially more disruptive inspections. It may necessitate enhanced compliance programs and internal audits to maintain operational integrity and to avoid regulatory pitfalls that could result in a problematic inspection that leads to an FDA Import Alert.

Potential Regulatory Streamlining Actions. It remains to be seen what steps the FDA will take to encourage onshoring. The Executive Order gives the agency 180 days from its issuance to review the relevant regulations and guidance and take action. The FDA is likely to consider a number of options. For example, it could establish a process for expedited onshoring of domestic manufacturing that allows site changes to be done through a Changes Being Effectuated (CBE) supplement as opposed to a PAS, eliminating prior approval and offering a more efficient alternative to the traditional supplemental application processes. The agency could also explore inspection waiver mechanisms or using oversight tools in lieu of an inspection, such as requests for documents, for manufacturers with a history of compliance. Additionally, it could establish opportunities for regular and frequent communications between the FDA and manufacturers to discuss the agency’s initial views and guidance related to the specific site transfer.

Cost-Benefit Analysis Imperatives. While on-shoring is a priority for the administration, domestic manufacturing operations are often significantly more expensive under the current regulatory environment compared to overseas alternatives in countries such as India and China. Companies must conduct comprehensive economic impact assessments that not only weigh the financial costs of relocating but also account for specific risks, such as operational disruptions, regulatory uncertainties, and the potential for significant interruptions if administrative barriers and sector-specific regulatory modifications are not clearly understood or addressed. Implementing a robust risk assessment framework is crucial to evaluate these operational disruption risks. Therefore, companies should carefully assess the current regulatory environment, consider the long-term strategic implications, and ensure that any decision to relocate aligns with their overall operational capabilities and goals before making substantial changes.

Conclusion

As the pharmaceutical industry navigates the complexities of on-shoring foreign manufacturing operations, it is important to remain vigilant about FDA regulatory obligations and strategic considerations. By addressing the key challenges outlined above, manufacturers can position themselves for success in an evolving regulatory landscape.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.