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Thanks a lot. Ms. Chairman, commissioners, thanks for the opportunity to be here today. In recent weeks in response to mounting concern about the safety and purity of food and medical products imported from China, the government of the People's Republic of China has taken steps to increase their regulatory oversight of the manufacture and export of these products. While these steps are encouraging, I believe taken alone, they are not enough to improve our confidence in these goods.
The Chinese approach to regulation remains conditioned on arbitrary enforcement of existing rules and ad hoc disclosure of findings of shortcomings and wrongdoing. Until the approach to regulation works to guarantee more consistent and complete enforcement of their own rules and, in particular, the disclosure of problems associated with these goods, then our ability here in the U.S. to make meaningful steps of our own to better ensure the safety of imported products is hampered.
First and foremost, effective regulation relies on good information about potential safety problems. In China this kind of information is a currency that remains under tight control, eroding confidence in that regulatory system. There are many components to public confidence in government institutions, but principal among them is openness and transparency.
Openness from the perspective of the U.S. and our regulatory bodies is based in large measure on access to information. Transparency means explaining how regulatory agencies act on information they collect, which helps to make sure that regulations are enforced with consistency and predictability. The U.S. FDA helps maintain one of the safest food and drug supplies in the world.
American rule require businesses to disclose information about their performance that consumers can make smarter choices about what they buy, and citizens groups and the press can identify and publicize organizational failures and push for improvements. Not only does the public need to have access to some of the same definitive information about safety issues possessed by regulatory bodies, but they need to have the ability to understand how regulatory agencies act on these facts.
As I said at the outset, there are encouraging signs of progress in China. The State Food and Drug Administration, the body that regulates drugs inside China, announced on July 12 revised drug registration provisions that on paper will improve supervision of approval standards. Along with these new rules, on April 5, the People's Republic of China State Council also issued the provisions of the People's Republic of China on a Disclosure of Government Information.
This regulation will go into effect May 2008 and is aimed at improving disclosure, for example, requiring administrative agencies to divulge information the government has about issues of, quote, "vital interest to citizens."
It remains to be seen how consistently and completely Chinese officials will follow the new provisions, which themselves use broad and sometimes vague terminology to describe the kinds of information that will be released. In some places, the new regulations refer to the disclosure requirements as voluntary.
With the specter of unhappy consumers both in China and abroad as well as the threat of restrictions on exports of its products, one would hope things inside China could be changing. I recently returned from a trip to Beijing where among drug officials there was a palpable sense that they need to step up their own standards.
The SFDA is promising that the new provisions will strengthen the drug registration requirements and enable the agency to better ensure safety in part by making the registration process itself more open to the public. Among other things, the regulations would require SFDA to take new steps to confirm the clinical information filed in support of a new drug application to inspect manufacturing sites and to improve the collection of drug samples by picking them at the site of manufacturing instead of relying on samples sent by the applicant as is now commonly the case.
China is taking similar steps when it comes to regulation and oversight of food products. Regulators this year shut down more than 180 illegal food producers. In recent weeks, China's quality inspectors promised to improve quarterly reports to European Union about consumer product safety.
The government said it planned to offer large rewards to citizens who report any illegal practices in the food industry and high ranking officials and regulatory vow to tighten controls over chemicals used by large seafood and meat producers and create a system that holds producers more accountable for selling unsafe products.
They have also taken steps to improve the disclosure of food safety problems, but Article 10 of the provision of the People's Republic of China on a Disclosure of Government Information, the regulation I spoke about previously, already requires the general administration of quality, supervision, inspection and quarantine of China at national and local levels to periodically publish conclusions of spot checks which can be accessed on its official Web site.
The prevailing view is that there is spotty adherence to these provisions at best, meaning information on problems is sporadic and incomplete. Regulatory agencies at the national and local levels are also required to periodically publish lists of facilities that are found in, quote, "serious violations under their Article 72 of the Implementing Rules of Supervision and Administration of Quality and Safety of Food Manufacturers and Process Enterprises," the holding regulation.
Once again, spotty enforcement plagues disclosure requirements and diminishes confidence that genuine problems get disclosed.
Regulators themselves are also susceptible to corruption and local inspectors can easily be persuaded that cracking down on local companies hurts economic development and risks jobs, once again, impinging upon efforts to try to enforce regulations at the level of the manufacturing.
If the enforcement of requirements for disclosure are sporadic, so are the regulatory requirements themselves in many cases, notwithstanding recent steps taken in Beijing to toughen disclosure rules.
For example, significant findings from safety inspections of drug manufacturing facilities are not routinely published. Ask any American company seeking to do business in China with a particular Chinese manufacturing facility how they go about getting information on a facility and any past violations it may have had, the American firm will describe a Byzantine process they undertake of searching newspapers and unreliable government databases.
On the food side, things get even more complicated because in the maze of regulatory agencies in China with overlapping jurisdiction that mitigate against responsibility-taking. I'll recount just a few of these. China has a law of hygiene for food. Everyone producing food needs a hygiene license that is administered. Then there are local inspections by local administration for industry, commerce that has grassroots authority to take action on a local basis.
Sanitary inspections are done by local health authorities, sometimes in collaboration with another agency called the AIC. Meanwhile AQSIQ is in charge of import and export and quarantine as well as making quality standards.
Finally, when it comes to information about the safety of drugs and food products, there is also an "x" factor that no regulation, no matter how well crafted or enforced, can take measure of. This "x" factor is a filter that resides somewhere at a senior political level where potentially embarrassing or politically damaging disclosures get assessed and filtered.
A recent food safety episode will illustrate what I mean. News reports in China several weeks ago detailed an undercover investigation that found a popular form of food, dumplings, was being made by one large food maker using paper pulp instead of real meat. These reports made their way all the way to American news stations.
After a few days, another report came out from official Chinese news stations, this time saying that the original news was faked and that the news reporters behind the dispatch had themselves been punished, but many people inside the media said the news was, in fact, true, but the government had become wary of inciting a backlash. Since dumplings are a popular staple food someone inside the political apparatus coerced a second report.
The view of food and drug interests doing business in China is that when it comes to information about safety issues, there is a simple abiding faith inside the highest levels of Chinese government. If the government believes information about problems with products or their manufacturing is sensitive, they may suppress it. There is an internal process in the government that ordinary people cannot figure out.
That means that in the final analysis, although regulations may require the disclosure of certain information, it is highly likely that before it is published, there is an internal review between the regulatory departments and government leaders on how to address the issue and when to publish.
Finally, in China, the historically weak regulations for requirements of public disclosure of problems and more importantly the arbitrary and often sporadic implementation in these rules puts U.S. regulators in an awkward if not potentially dangerous position. The sheer volume of imports coming from China into the U.S. means that regulators here need to take new steps to target their oversight to areas of greatest risk.
They need to take a risk-based approach to the kinds of inspections that we do with food products coming in at the border. Here in the U.S., the lack of reliable information about problems in China prevents our own regulatory agencies, principally the FDA, from being able to target its inspections of Chinese imports and take the necessary steps to implement a risk-based approach to regulation.
We don't know who the past violators are. We don't know who the good actors are and we don't know who the local criminals are. And taking the necessary steps to improve our oversight of safety of imported products is what we need to do in this environment when more and more of the products that we are importing are coming from overseas countries that we don't have good collaboration with, we don't have good ties with, and we don't understand the local lay of the land.
Mrs. Chairman, commissioners, thank you for the opportunity to testify here today. I'd be happy to answer any questions.
Scott Gottlieb, M.D., is a resident fellow at AEI.
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