At least in the area of exporting unapproved drugs, biologics and medical devices, it appears that the effort to reinvent government may be beginning to pay dividends. The FDA Export Reform and Enhancement Act of 1996 ("Export Reform Act"), signed into law by President Clinton on April 26, 1996, substantially reduces, and even eliminates many of the regulatory obstacles previously associated with exporting unapproved drug, biologics and device products. While a few issues remain which require clarification concerning the Food and Drug Administration's ("FDA's") implementation of the Export Reform Act, for the most part, it has proven successful.

The following briefly describes the Export Reform Act and offers some practical points to consider in expediting FDA's approval of export certificates, required by foreign governments and/or foreign customers. This article addresses the export provisions (rather than the import provisions) and in particular focuses on those that affect medical devices (as compared to drugs and/or biologics).

Background

Congress passed the Export Reform Act, which amends the Federal Food, Drug, and Cosmetic Act ("FDC Act"), in response to the public cry for FDA reform and, specifically, to U.S. manufacturers' complaints that they were forced to move manufacturing facilities abroad (and thereby move jobs abroad) because FDA did not authorize exportation in a timely manner. The old system required prior FDA approval for exports, significantly limited when and where manufacturers could export, and imposed many bureaucratic obstacles and substantial paperwork requirements. The new Export Reform Act is an effort to streamline the regulatory process, making it easier for manufacturers to export their products abroad.

Regulatory Overview

The Export Reform Act provides several means by which a manufacturer may export an unapproved device. Which means is appropriate depends on whether the device is intended for investigational or commercial use, and where the device will be exported.

Export of an unapproved device for investigational use

A manufacturer may export an unapproved device for investigational use by one of two means; one permits export to any country; the other permits export only to specific countries. One method requires FDA prior authorization; the other does not.

Section 801(e)(1)

Section 801(e)(1) of the FDC Act provides that a device intended for export which cannot be legally marketed in the United States because it would be considered adulterated or misbranded may be exported without FDA pre-clearance if it:

1. accords to the specifications of the foreign purchaser;
2. is not in conflict with the laws of the export target country;
3. is labeled on the outside of the shipping package as intended for export (there is no specific language that must be used); and
4. is not sold or offered for sale in domestic commerce.

The Medical Device Amendments of 1976 amended the FDC Act to add section 801(e)(2), which permitted the export of an unapproved medical device if it was subject to premarket notification under section 510(k) but not premarket approval and it met the four standard export requirements described in section 801(e)(1). The Export Reform Act did not amend section 801(e)(2). This provision is invoked if the device does not comply with a performance standard, lacks premarket application (PMA) approval, requires an investigational device exemption (IDE), or has been banned under section 516. 21 U.S.C. SECTION 381(e)(2). The additional conditions are that FDA must determine: 1) that export of the device is not contrary to public health and safety, and 2) the device has the approval of the destination country or is eligible for export under section 802. Id. That is, under this provision (but not section 801(e)(1)), some form of FDA authorization is required prior to exportation of a device for investigational use. To date, FDA has not stated how, or on what basis, it will make this type of determination. The type of information that a manufacturer must provide FDA is also unclear at this time. FDA has said informally that the existence of an IDE demonstrates a device's safety (i.e., it is prima facie evidence of the device's safety), although it is not the only means by which a device's safety can be demonstrated. It should be noted that compliance with the IDE requirements is not a precursor to all exports under section 801(e)(2) unless the device is otherwise required to comply with the IDE regulation.

Section 802(c)

As a limited alternative to meeting the additional conditions of section 801(e)(2), a device intended for investigational use may be exported under section 802(c) of the FDC Act to one of 25 countries specifically listed in section 802(b)(1)(A) in accordance with the export target country's laws. 21 U.S.C. SECTION 382(c). However, it is important to keep in mind that section 802 applies only to devices that require a PMA, and not to devices that may be marketed after FDA clearance of a 510(k) application. The 25 countries, commonly referred to as "tier-one" countries, are: Australia, Austria, Belgium, Canada, Denmark, Germany, Greece, Finland, France, Iceland, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, South Africa, Spain, Sweden, Switzerland, and the United Kingdom. 21 U.S.C. SECTION 382(b)(1)(A). (The law refers specifically to Australia, Canada, Israel, Japan, New Zealand, South Africa, and Switzerland, and those countries in the European Union or a country in the European Economic Area if the device is marketed in that country or the device is authorized for general marketing in the European Economic Area.) The Secretary of Health and Human Services may add other countries to the list of tier-one countries, under section 802(b)(1)(B), if certain criteria are met by the candidate country. These criteria can be met only if the candidate country has a sophisticated regulatory system, i.e., one which substantially parallels that of the United States.

Under section 802(c), the unapproved device need not comply with FDA's IDE requirements. However, the device must comply with section 802(f), which, in relevant part, prohibits export if any of the following criteria are met:

1. the device is not manufactured, processed, packaged, and held in "substantial conformity" with good manufacturing practice requirements or does not meet international standards as certified by an international standards organization (this is likely not synonymous with being ISO-certified);
2. the device is otherwise adulterated because: (A) it consists, in whole or in part, of a filthy, putrid, or decomposed substance; (B) it has been prepared, packed, or held under unsanitary conditions whereby it may have been contaminated with filth; or (C) its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health;
3. the device does not meet the four requirements described in section 801(e)(1) of the FDC Act, (these requirements are: a) the device accords to the specifications of the foreign purchaser; b) it is not in conflict with the laws of the export target country; c) it is labeled on the outside of the shipping package as intended for export; and d) it is not sold or offered for sale in domestic commerce);
4. the device is the subject of a determination by FDA (presumably in the form of a written notice by FDA) that the probability of reimportation of the device would present an imminent hazard to the public health and safety of the United States and the only means of limiting the hazard is to prohibit the device's export, or the device presents an imminent hazard to the public health of the importing country;
5. (A) the device labeling is not in accordance with the requirements and conditions for use in the export target country; and (B) the device is not labeled in the language and units of measurement of the export target country or in another language designated by that country; or
6. the device is not promoted in accordance with the foreign labeling requirements of paragraph (5).

In summary, in contrast to section 801(e)(2), section 802(c) does not require prior FDA authorization to export an unapproved device for investigational purposes. Moreover, section 802(c) does not appear to require prior notification to FDA because the notification provision of, section 802(g) (discussed below), applies only if the devices are exported under section 802(b)(1). 21 U.S.C. SECTION 382(g) Because, unlike 801(e), export under section 802(c) does not require prior FDA authorization, and does not appear to require FDA notification, a manufacturer is well-advised to export unapproved devices (that require premarket approval) for investigational use under section 802(c), rather than section 801(e), if exporting to a tier-one country. An IDE to export the device is not required under section 802(c) (see Footnote #1 below). Of course, export under section 802(c) must comply with the provisions of section 802(f) and, by extension, section 801(e)(1).

Footnote #1: On June 27, 1996, at a Food and Drug Law Institute seminar held to discuss export reform, Patricia Kaeding, an attorney in FDA's Office of the General Counsel, said that FDA will nevertheless expect manufacturers who export unapproved products, either for commercialization or for investigational use, to keep records of each shipment. These records will be subject to FDA review during facility inspections. Ms. Kaeding also said FDA is currently drafting a rule on the export of investigational devices.

Export of an unapproved device for commercial use

Sections 801(e) and 802(b)(1)(A)

As previously discussed, an unapproved device may be exported for commercial use under section 801(e). Section 802(b)(1)(A) also allows an unapproved device to be exported to "any country" for commercial purposes without prior FDA approval if the product complies with the laws of the export target country and has "valid marketing authorization by the appropriate authority" in one of the tier-one countries. 21 U.S.C. SECTION 382(b)(1)(A) (see Footnote #2 below). That is, an unapproved device may be exported to any country in the world so long as the device is authorized for marketing in at least one of the tier-one countries, even though the device is not approved for marketing in the United States.

Footnote #2:FDA has not yet determined what constitutes "valid marketing authorization". Informally, FDA has said that at this time, it is interpreting the requirement in section 802(b)(1)(A) for "valid marketing authorization" to include the absence of the need for marketing authorization. As a result, if a tier-one country does not require marketing authorization for a particular device, the device may be exported under section 802(b)(1) to any country upon notification to FDA (pursuant to section 802(g)), identifying the device and name of any non-tier-one country to which the device is exported. The exporter should obtain and retain in its files: (1) a statement from the tier-one country (whose regulatory system is used to support export under section 802(b)(1)) that marketing authroization is not required for the particular device, and (2) a statement from the country to which the device is exported (even if that country is another tier-one country) that importation of the particular device into that country does not violate the laws of that country. (Export of the device must be in accordance with all provisions of section 802(f).)

Anyone who exports a device, which cannot be legally marketed in the U.S., to a tier-one country for commercial purposes must provide a "simple notification" to FDA identifying the product. This "simple notification" is to be submitted to FDA when the exporter "first begins" to export. 21 U.S.C. SECTION 382(g). It is unclear exactly what constitutes a "simple notification" or when an export "first begins." However, the phrase "first begins to export" implies that no notification is required for subsequent export of the same device, at least to the same country, and possibly to all tier-one countries to which export is permitted pursuant to section 802(b)(1). The exporter must also maintain records of all devices exported and the countries to which they were exported. 21 U.S.C. SECTION 382(g). Finally, the exporter must also comply with the conditions described in section 802(f).

Additional significant improvements over the old law

As previously noted, the Export Reform Act makes it significantly easier for a manufacturer to export an unapproved device for investigational or commercial use (e.g., simple notification replaces FDA approval for export to a tier-one country, and a manufacturer can export an unapproved device for investigational use to a tier-one country without the need for an IDE or prior FDA authorization or notification.)

The following briefly describes some additional changes from the old law that will assist device manufacturers' efforts to export abroad.

1. Import for Exportation

   A manufacturer may import any component, part or accessory of a device that is intended to be incorporated by the initial owner or consignee into a device that will be exported as allowed under the FDC Act. 21 U.S.C. SECTION 382(d)(3). Previously, importation solely for export was illegal. The conditions for importation are:

   1. the importer must provide a statement to FDA, at the time of initial importation, that the imported article will be so incorporated;
   2. any imported article not so incorporated must be destroyed or exported (but cannot be sold in the U.S.); and
   3. the initial owner or consignee responsible for the imported article must maintain records that identify the use of the imported article and, upon request by FDA, must provide an accounting of the disposition of the imported article.

    

2. The In-Betweener

   Section 802(d) provides that a device intended for formulation, filling, packaging, labelling, or further processing "in anticipation of market authorization" in any of the tier-one countries may be exported for use in accordance with the laws of that country. 21 U.S.C. SECTION 382(d). This a new provision. The provision does not state whether a notification of export is required.

3. Addition to the Tier-One List

   The list of countries to which an unapproved device may be exported under section 802(b) has been increased from 21 to 25. (Greece, Israel, Liechtenstein, and South Africa are the new additions.) Moreover, if the device is approved in any of these countries, the device may be exported to any country.

4. No prohibition of transhipment

   The old law prohibited the transhipment of an unapproved device that was exported from a listed country to any unlisted country. There is no comparable provision in the new law. Thus, it appears that an unapproved device which is lawfully exported to any country, whether listed or unlisted, may be lawfully transhipped to any other country. (Of course, the importing country's laws must be observed.)

Export certificates

Frequently, a foreign customer or government will request a verification that the products to be imported: (1) are freely marketed in the U.S.; (2) are in compliance with U.S. laws and regulations; (3) are in compliance with the importing country's requirements; (4) meet certain national or international standards, such as quality standards; or (5) do not contain specific contaminants. See Compliance Policy Guide (CPG) 110.100 (revised CPG 7150.01) ("Certification for Exports" issued on Oct. 29, 1996). Under section 801(e)(4), a firm exporting a device can request a certificate from FDA that the device, whether or not approved for commercial distribution in the United States, may be exported under section 801(e)(1) or section 802, or meets the "applicable requirements" of the FDC Act. 21 U.S.C. SECTION 381(e)(4).

A firm may request any one of three types of certificates: (1) a Certificate to Foreign Government, issued for legally marketed devices that are in compliance with the requirements of the FDC Act (this type of certificate replaces the old Certificate of Products for Export); (2) a Certificate of Exportability (section 802(e)(1)), issued for products that cannot be legally marketed in the U.S., but which can be exported under section 801(e)(1); and (3) a Certificate of Exportability (section 802), issued for unapproved devices that can be legally exported under section 802. The Export Reform Act provides for the last two types of certificates. (The first type remains the same, except for a name change.) A firm may list more than one product to be exported in a request for an export certificate, so long as both devices are exported to the same country (and comply with the laws of the export target country). However, FDA will likely require separate requests if the devices are exported to different countries. In short, separate requests are necessary for different countries; the differences in products to be exported is irrelevant.

If the statutory conditions are met (and the exporting firm completes the necessary administrative paperwork), FDA must issue a certificate within 20 days of receiving the request. 21 U.S.C. SECTION 381(e)(4)(B). FDA may charge $100.00 for processing the first certificate and $10.00 for any subsequent certificates issued for the same product in response to the same request. 61 Fed. Reg. 57445, 57446 (Nov. 6, 1996). (The fees are larger for drug and biologic export certificate requests.) FDA can only collect a fee if it issues the certificates within the 20-day statutory response period. 21 U.S.C. SECTION 381(e)(4)(B).

The Export Reform Act does not require a company to submit requests for export certificates to FDA. However, if the company makes a request and the applicable statutory requirements are met, FDA must issue a certificate within 20 days of receiving the request.

Recommendations to expedite approval of export certificate requests

FDA has issued written guidance concerning the completion and submission of export certificates and offered sample certification statements. To date, FDA has experienced little problem in this area and, if a particular certificate request is found satisfactory, FDA will issue a certificate within approximately one week of receipt of the request.

In order to expedite the review process, a manufacturer should insure that all of the information provided is complete. Any omissions are likely to result in FDA's return of the request for completion, which will, of course, delay the process. A manufacturer must also submit accurate information to FDA. Under 18 U.S.C. SECTION 1001, the submission of false information to FDA may subject the manufacturer to civil and/or criminal sanctions of up to $250,000 in fines and up to 5 years imprisonment. This word of caution remains true once the certificate is issued. A manufacturer must not change or alter the certificate. For example, it is our understanding that a company that changed the certificate to include a product to be exported, which was not submitted to FDA for export certificate review, is currently under investigation by FDA's Office of Criminal Investigations for possible fraud prosecution. Clearly, if a manufacturer requires a new certificate, it should submit a new request.

In addition, if the facts in a particular situation are unique, the manufacturer should consult with FDA before submitting the request. FDA will likely refuse to accept a firm's certification statement if it deviates from FDA's sample certification, unless there is prior authorization. Thus, in those situations where the facts require the manufacturer to submit a certification statement which may deviate from FDA's sample certification, a manufacturer should obtain prior authorization from FDA to successfully reach acceptable, alternate language.

A firm should also plan ahead. Remember Murphy's law -- anything that can go wrong, will. If the firm knows that it will need an export certificate by a certain date, it should make sure to leave enough room for possible delays. The manufacturer should also have at its fingertips the following documents for guidance (in addition to this summary!): (1) the Export Reform Act; (2) CPG 110.100; and (3) the Center for Devices and Radiological Health's guidance document/letter to industry (dated Oct. 1, 1996).

Conclusion

The Export Reform Act has proven successful, so far. While FDA and industry continue to work to make improvements, unapproved products are exported more quickly than ever. The new law is indeed a step in the right direction toward reinventing government.

About the Author's affiliation: Arnall, Golden & Gregory offers a broad range of legal services to business, industrial and financial clients, domestically and internationally. Founded in 1949, the firm has represented numerous manufacturers and distributors of goods, drugs, cosmetics, and medical devices; trade associations with members from these regulated industries; and hospitals and other healthcare providers. The firm's food and drug law practice includes counseling on statutory and regulatory requirements, especially with regard to product approval and safety issues, GMPs, labeling, advertising, and enforcement issues; preparation of tailored compliance manuals and guidelines; and monitoring of current legislation and regulatory developments. In addition, lawyers from the firm's food and drug law litigation practice regularly appear before state and federal courts, and administrative agencies. More information about food and drug law services offered by Arnall Golden & Gregory can be obtained by contacting Alan Minsk, JD, at (404) 873-8690 or minskag@argold.com.

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