Originally published September 1996
Jonathan S. Kahan
When it comes to the export provisions of the Federal Food, Drug, and Cosmetic Act (FD&C Act), the consensus among FDA-regulated industries seems to be that these provisions have been outdated for years. Under the FD&C Act, all medical devices not cleared through the 510(k) premarket notification process or not having obtained premarket approval (uncleared or unapproved devices) can nevertheless be exported if the product accords to the specifications of the foreign purchaser, if it is not in conflict with the laws of the country to which it is intended for export, if it has a label on the outside of the shipping package stating that it is intended for export, and if it is not sold or offered for sale in domestic commerce.1
In addition to these four preconditions, an additional provision under section 801(e)(2) states that the conditions do not apply to any device that does not comply with applicable requirements of sections 514 (performance standards) or 515 (premarket approval); that is exempt under section 520(g) (investigational device exemption [IDE] requirements) from either such section; or that is a banned device under section 516, unless, in addition to the requirements of section 801(e)(1), the secretary of the Department of Health and Human Services (HHS) has determined that exportation of the device is not contrary to public health and safety and has the approval of the country to which it is intended for export.
Under section 801(e)(2) and FDA's interpretation of that section, all Class III devices--including Class III preamendment devices for which premarket approval applications have not yet been called--are thus required to meet not only the four conditions of section 801(e)(1) listed above but also to obtain a finding from FDA that exportation of the device is not contrary to public safety and has the approval of the country to which it is intended for export. Obtaining FDA export approval under section 801(e)(2) has historically been difficult and time-consuming. More recently, FDA has made export approval virtually automatic for devices that are the subjects of approved IDE applications, with approvals averaging 4.2 days. For devices without IDE approvals, export approval averages 12.3 days. However, the need to obtain the approval of foreign countries has led to significant delays in the ultimate export of the products. Export requirements for pharmaceuticals and biologics have been even more difficult and burdensome.
In fact, a recent article in Forbes magazine described FDA's export requirements as "a top FDA job-killer," and Edward Rozynski, senior vice president of the Health Industry Manufacturers Association (HIMA), characterized the law as an arrogant policy.2 Industry has always been upset by the fact that FDA export approval is required for products that are approved in the countries to which they are intended for export, and it has also lobbied Congress to revise the law and revoke FDA's role as an "international nanny." To a certain degree, the agency itself has actually gone on record as favoring export reform. With the support of Senator
Orrin Hatch (RUT) and Congressman Fred Upton (R MI)--as well as many influential politicians such as Congressman John Dingell (DMI) and the late commerce secretary Ronald Brown--President Clinton signed the FDA Export Reform and Enhancement Act of 1996 (Export Reform Act) into law on April 26, 1996.
APPROVAL IN LISTED COUNTRIES
The Export Reform Act was part of the Omnibus Consolidated Recissions and Appropriations Act of 1996.3 The new law revamps the export provisions of sections 801 and 802 of the FD&C Act and significantly lessens the burdens on the medical device industry in the export of unapproved and uncleared products to foreign countries.
The key provision of the law allows the export of medical devices not approved for marketing in the United States to any country if the device complies with the law of that country and has valid marketing authorization in at least one of the following countries or entities (herein referred to as the listed countries): Australia, Canada, Israel, Japan, New Zealand, Switzerland, South Africa, or the European Economic Area.
The HHS secretary--on his or her own initiative or at the request of an appropriate country official, manufacturer, or exporter--may designate additional countries to be added to the list if the following requirements are met:
(i) Statutory or regulatory requirements exist [in the candidate country] which require the review of drugs and devices for safety and effectiveness by an entity of the government of such country and which authorize the approval of only those drugs and devices which have been determined to be safe and effective by experts employed by or acting on behalf of such entity and qualified by scientific training and experience to evaluate the safety and effectiveness of drugs and devices on the basis of adequate and well-controlled investigations, including clinical investigations, conducted by experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs and devices.
(ii) Statutory or regulatory requirements that the methods used in, and the facilities and controls used for: (I) the manufacture, processing, and packing of drugs in that country are adequate to preserve their identity, quality, purity, and strengths; and (II) the manufacture, preproduction design validation, packing, storage, and installation of a device are adequate to assure that the device will be safe and effective.
(iii) Statutory or regulatory requirements for the reporting of adverse reactions to drugs and devices and procedures to withdraw approval and remove drugs and devices found not to be safe or effective.
(iv) Statutory or regulatory requirements that the labeling and promotion of drugs and devices must be in accordance with the approval of the drug or device; and
(v) The valid marketing authorization system in such country or countries is equivalent to the systems in the [listed countries]. (The secretary is prohibited under this section of the new law from delegating the authority to designate new listed countries.)4
Interestingly, the regulatory criteria necessary to add a country to the list are sometimes more stringent than the regulatory requirements of some of the listed countries. It will be interesting to see how many countries are added to the list based on these strict criteria.
The importance of the foregoing provisions cannot be emphasized enough. Under the Export Reform Act, a U.S. medical device manufacturer will no longer have to seek FDA approval to export an unapproved Class III device so long as it is approved for use in one of the listed countries. Not only can the device then be exported to one of the listed countries, but it can also be shipped to any country where its import is legal (under the theory that, if one of the industrialized countries has approved the sale of the product in that country, FDA does not need to further evaluate public health issues involving the export of that product).
EXPORT OF INVESTIGATIONAL DEVICES
The Export Reform Act states that any investigational device intended for export to one of the listed countries may be exported in accordance with the laws of that country and is exempt from the investigational medical device requirements of section 520(g) and 21 CFR 812.
While the new law does not define investigational use, one can presume that a device that is involved in a formal clinical study can be freely exported if it meets the laws for investigational devices within the country of intended import. Indications of investigational use include a formal protocol, review of the protocol by an institutional review board or equivalent, and the provision of informed consent under the Declaration of Helsinki or similar study subject protection requirements.
The importance of this new investigational device export provision is that, if read broadly, FDA approval or review will no longer be necessary for the export of a Class III medical device to one of the listed countries so long as the proposed investigational use is in accord with the importing country's laws. If an unapproved device is not approved in one of the listed countries and is intended to be exported for investigational use to an unlisted country, the existing requirements of section 801(e)(2) would still be applicable.
IMPORTATION AND REEXPORT OF COMPONENTS
The Export Reform Act addresses, and probably resolves, a troublesome anomaly under the prior law. Under provisions of the FD&C Act, a component or accessory of a device that was ready or suitable for use for health-related purposes could not be brought into the United States without actual clearance or approval of the device, even though the component was intended for incorporation into a finished device and destined only for export.
Under the new law, such component parts or accessories cannot be excluded from importation into the United States if the following conditions are met:
* The importer of the device, at the time of initial importation, submits a statement to the HHS secretary that says the initial owner or consignee intends to incorporate the article into a device that will be exported in accordance with the revised provisions of sections 801(e) and 802.
* The initial owner or consignee responsible for the imported article maintains records identifying the use of the imported article and, upon the secretary's request, submits a report providing an account of the exportation or the disposition of the imported article, including portions that have been destroyed, and the manner in which such person complied with the requirements of the paragraph.
* Any imported component, part, or accessory of a device not incorporated is destroyed or exported by the owner or consignee.
The 1996 law does not define what constitutes a component or an accessory, and consequently importers or consignees are required to make their own determinations as to whether the parts they want to bring into the United States for reexport qualify under this provision. The term accessory is not defined in the FDA regulations, although a component is defined as "any material, substance, piece, part, or assembly used during device manufacture which is intended to be included in the finished device."5 FDA may possibly define these terms further in regulations implementing the new law.
This provision should help companies that are in the business of importing parts or accessories that are ready or suitable for health-related use with the intent to further manufacture or package and reexport the finished device. Many such companies exist, and they can now bring in these products for further processing without having to obtain 510(k) clearance or premarket approval for the part or accessory before importation.
The Export Reform Act outlines general requirements for the export of unapproved devices.
Applicability to Class I and Class II 510(k)-able Devices. The Export Reform Act maintains the four requirements of section 801(e)(1), meaning that all uncleared or unapproved devices--even those exported to the listed countries--must meet the previously mentioned requirements of section 801(e)(1). Under prior law, FDA took the position that Class I and Class II devices were not subject to the section 801(e)(2) requirement for FDA export approval but only had to meet the four conditions of section 801(e)(1). Although one cannot be certain, FDA will probably continue to use its enforcement discretion and permit export of a 510(k)-able device that is not the subject of an FDA-cleared 510(k) notification if the exporter can reasonably conclude that the device would be found to be substantially equivalent to a legally marketed device. Exporters of these uncleared 510(k)-able devices need only meet the four conditions of section 801(e)(i), and no FDA notification is required.
GMP Requirements. Additionally, under the new law a device may not be exported if it is not manufactured, processed, packaged, and held in substantial conformity with current good manufacturing practice (GMP) requirements or does not meet international standards as certified by an international standards organization recognized by the HHS secretary. Interestingly, this provision of the law does not specifically require that all exported devices meet the GMP requirements of 21 CFR 820, but rather states that they must be manufactured in substantial conformity with GMPs. Substantial conformity is not defined in the law, but the prudent exporter would interpret this provision as requiring all exported devices to be in essential compliance with GMPs prior to export. This would apparently apply to uncleared Class I and Class II 510(k)-able devices as well.
How this "GMP conformity" requirement would apply to investigational devices is also unclear. Under 21 CFR 812.1, investigational devices are exempt from the GMP requirements of section 520(f) of the FD&C Act. However, under IDE regulations, a sponsor of an investigational device must provide FDA with a description of the methods, facilities, and controls used for the manufacture, processing, packing, storage, and, where appropriate, installation of the device, and sufficient
details so that a person generally familiar with GMPs can make a knowledgeable judgment about the quality control used in the manufacture of the device.6 Industry has interpreted this provision to mean that, while the investigational devices are exempt from GMP requirements, the sponsor must still demonstrate that a device was manufactured under sufficient control so that there is uniformity in devices distributed to the investigational sites. Under the Export Reform Act, it is unclear whether these exported investigational devices must now meet the requirements of 21 CFR 820. Again, FDA may clarify this issue in implementing regulations or technical modifications to the act itself.
Simple Notification. Another requirement applicable to devices exported for commercial sale in listed countries is that the exporter must provide a simple notification to the HHS secretary identifying the device when the exporter initially exports it. Similarly, when a device exporter initially exports an unapproved device that has market approval in a listed country to a nonlisted country, that exporter must also provide notification to the secretary identifying the device and country to which it will be exported. The exporter must maintain records of all devices exported as well as the destination countries. It is not clear whether an exporter has to provide separate notification to FDA of each initial shipment of an unapproved device to a listed or nonlisted country. For example, if a device is approved for marketing in France, does the exporter have to notify FDA of the device's initial export to France and also notify the agency separately of the initial export to any other listed country? Similarly, if a device is approved for marketing in France, does the exporter have to notify FDA separately of the initial export to a nonlisted country?
The Center for Devices and Radiological Health (CDRH) has not issued regulations or guidelines implementing the Export Reform Act. Nevertheless, CDRH officials have advised industry that FDA intends to draft such regulations and that one of their provisions will clarify what is meant by simple notification. Indeed, some officials within CDRH's Office of Compliance who are responsible for the export of devices initially advised device manufacturers not to file the requisite notification to the secretary at this time but rather to keep documentation on such exports until FDA issues regulations or guidelines implementing the new law. Notwithstanding this initial advice, a simple notification to the HHS secretary, along with a copy to the CDRH Office of Compliance, is probably a prudent course to follow until implementing regulations are promulgated.
Imminent-Hazard Devices. The Export Reform Act also allows FDA to prohibit the export of any device if FDA finds that its reimportation would present an imminent hazard to U.S. public health and safety, and that the only means of limiting that hazard is to prohibit the export of the device. The new law would also preclude export of the device if it presents an imminent hazard to the public health of the destination country.
Labeling Requirements. Another significant requirement of the new law is that the exported device must be labeled in accordance with the requirements and conditions for use in the country in which the device received valid marketing authorization (from one of the listed countries) and the country to which the device ultimately will be exported. Further, the labeling must be in the language and units of measurement of the country to which the device will be exported. And finally, the device cannot be exported if it is not promoted in accordance with the labeling requirements set forth above.
The labeling provisions of this law are controversial and will require clarification from the agency. It is unclear whether FDA intends to use this provision to prevent off-label uses of the exported products, and it is not clear how FDA intends to implement or enforce this provision. Will it require the submission and FDA review of all promotional materials associated with the exported product? If so, it would defeat part of the Export Reform Act's purpose--namely, getting FDA out of the export review business.
For years, FDA has been issuing Certificates for Products for Export (CPEs). No statutory or regulatory requirement that FDA issue CPEs had been established. However, many nations refused to accept U.S.-manufactured devices unless FDA provided some assurance that the devices were approved for sale in the United States and that there were no legal or regulatory actions pending against the manufacturer. Consequently, FDA voluntarily provided CPEs to encourage exports.
Under the new law, FDA is specifically authorized to certify in writing that an exported device meets the requirements of FDA export laws and that the device being exported meets the applicable requirements of the FD&C Act. FDA is directed to issue a certification within 20 days of the receipt of a request. If certification is issued within 20 days, FDA is authorized to charge a fee that may not exceed $175 for each certification. The fees collected are directed to be credited to the FDA appropriation account to meet the salaries and expenses of FDA. The House and Senate conferees intended that these fees be established on a sliding scale to minimize the impact on small businesses.
It can certainly be said that the Export Reform Act is not a model of clear drafting. Many issues need to be clarified through the implementation of regulations or guidances, and it is possible that certain controversial "drafting errors" will be resolved through technical amendments. These technical amendments will likely be directed toward the labeling requirements related to the export of antibiotics, insulin, and new animal drugs, although it is quite possible that other changes may be enacted.7
Even with many issues still needing to be resolved, the direction of the new law is extremely helpful to the U.S. medical device industry. A recent HIMA study showed that approximately 10,000 jobs a year in the medical device industry are being lost to overseas operations of U.S. device companies.8 The revocation of the export approval requirements may help stem part of the outflow of these jobs and encourage exports of medical technology, not jobs.
1. United States Code, 21 USC 801(e)(1).
2. Lane R, "It's a Start," Forbes, 157(11):9798, 1996.
3. Pub. L. 104-134.
4. 21 USC 802(b)(1)(B).
5. 21 CFR 820.3.
6. 21 CFR 812.20(b)(3).
7. FDA Week, May 24, p 7, 1996.
8. The Wilkerson Group, Forces Reshaping the Performance and Contribution of the U.S. Medical Device Industry, Washington, DC, Health Industry Manufacturers Association, 1995.
Jonathan S. Kahan is a partner in the law firm of Hogan & Hartson (Washington, DC), and a contributing editor and member of MD&DI's editorial advisory board.