Europe and the United States to Negotiate a Free-Trade Agreement

Producers of APIs in both Europe and the United States are hoping that a European Union (EU)-US free-trade agreement would provide a platform for the creation of a system for the global monitoring of standards of GMP. The agreement aims to dismantle barriers of transatlantic trade, particularly nontariff measures (e.g., the provision of safety certificates or evidence of quality compliance) that have generated conflicting regulatory regimes. Negotiations are expected to start this year.

Sean Milmo

A study by the Dutch consultancy, Ecorys Nederland BV based in Rotterdam, funded by the European Commission (EC), estimated that an agreement could potentially reduce trading and investment costs in pharmaceuticals by 15.3% for US companies and by 9.5% for EU companies. The pharmaceutical sector in the EU and US hopes that, with this free-trade agreement, there would be greater consistency in areas such as regulations on GMP compliance as well as quality testing of APIs and finished medicines using pharmacopoeia standards. Once in operation, the agreement is expected to provide the pharmaceutical sector on both sides of the Atlantic with the basis for a robust system for GMP inspections of API plants throughout the world. These inspections could be done initially by joint teams of inspectors from the EU and the US, together with those from other developed countries such as Japan and Australia.

There are, however, signs that preliminary talks between EU and US officials are running into problems. The publication of a report by a high-level working group, given the task of recommending proposals to be discussed in the negotiations on the deal, has been delayed at least three times. Within the pharmaceutical sector itself, the EU has erected new nontariff barriers and taken measures considered to be inconsistent with international GMP standards, all of which are seen as possible obstacles to a successful outcome of the discussions.

Recently, the EU has been taking steps to strengthen checks on GMP compliance of imported pharmaceuticals while extending the scope of its GMP rules. This effort is reflected in the details of the Falsified Medicines Directive (FMD), an EU legislation aimed at combating counterfeit medicines that includes provisions for closer scrutiny of API quality. For example, a controversial section of the FMD's regulations stipulates that imports of active substances into the EU must be accompanied by written confirmation from the exporter's national regulatory authority that the plant manufacturing the API complies with GMP standards equivalent to those in the EU. This requirement is due to come into effect on July 1 this year; however, some countries will be exempted from it on the grounds that they have systems in place for regulating and monitoring GMP standards that are equivalent to those in the EU.

The US, through FDA, is one of several countries that has applied to be assessed for exemption from the need for providing written confirmations. "We do count on the EU to put every effort into completing its US assessment in a timely fashion to allow sustained US-made API importations and sustained EU-based medicines production using these imports," says Julie Marechal-Jamil, senior manager, quality and regulatory affairs at the European Generic Medicines Association (EGA), Brussels.

The FMD also confirms the EC's intention to extend GMP to the starting materials used in the manufacturing of APIs. For example, active substance manufacturers would be required to check out claims by suppliers about the sources of their starting materials. Some European pharmaceutical companies have protested that these new rules on starting materials exceed the EC's own GMP guidelines.

"We have big concerns with the FMD because it has the potential to be a trade barrier," says John DiLoreto, executive director of the Bulk Pharmaceuticals Task Force (BPTF) of the Society of Chemical Manufacturers and Affiliates (SOCMA), Washington, DC. "We need to get as much international harmonization as possible with GMP. The European Commission and the FDA have got to a point where there is not much distance between what they want. The EU then comes up with the FMD, which requires the FDA to be exempted from the written confirmation rule."

The EC insists that it is not putting up new nontariff barriers or working outside the Q7 rules on GMP for APIs drawn up by the International Conference on Harmonization (ICH). "These claims are completely unsubstantiated," says a Commission spokesperson. She stressed that the introduction of equivalence regulations in the FMD, such as the written confirmation requirement, are consistent with the rules of the World Trade Organization while the EU's GMP standards remain "equivalent" to ICH Q7 standards and GMP standards of the World Health Organization (WHO).

Joint proposals for the EU-US trade agreement by the European and US producers of APIs are focused mainly on the issue of GMP compliance. Three of the four proposals, put forward in a joint statement in Oct. 2012 by SOCMA, the European Fine Chemicals Group (EFCG), and the Active Pharmaceutical Ingredients Committee (APIC) of the European Chemical Industry Council (Cefic), deal with GMP certification, a mutual recognition agreement of GMP inspections, and regulatory assessments of process changes. The fourth proposal focuses on the need for transatlantic harmonization of pharmacopoeia to provide more impetus to the establishment of a global pharmacopeia standard.

On the matter of GMP certification, the joint statement emphasized the necessity of reconciling FDA's system of giving manufacturing sites "certificates of pharmaceutical product" with the EU's detailed confirmation of GMP standards. With systems on reporting of process modifications, there is also a need to resolve differences between the EU and US relating to what process changes need to be reported to licensing authorities and whether they should be reported before or after the changes are implemented. With respect to a mutual recognition agreement between the EU and the US that was first discussed in the late 1980s, the three trade organizations (SOCMA, EFCG, and APIC) argued it would enable EU and US agencies to concentrate their efforts on GMP inspections in third countries.

Even without the EU-US free-trade initiative, progress is already being made in bilateral cooperation across the Atlantic on key issues. A four-year-old joint-plant-inspection program between FDA and EMA entered a second phase last year but is still being limited to a few sites. "At least there are stakes being placed in the ground, which ought to move things forward," says Tony Scott, adviser to the EFCG. Since 1989, the European Directorate for the Quality of Medicines (EDQM), which is responsible for the European Pharmacopoeia, and its US counterpart the United States Pharmacopeia (USP) have been drawing up mutually recognized monographs on drugs. Both are participating in a scheme, launched last year by WHO, for global pharmacopoeia standards. "Out of a total of 2200 monographs, we and the USP have so far harmonized less than 100," says Susanne Keitel, EDQM secretary. "Harmonization entails a lot of hard work."

For the EU–US free-trade negotiations, the major target will be to achieve a mutual recognition agreement because of its implication for worldwide recognition of inspections. "The talks on the transatlantic trade agreement has given us an opportunity to reopen dialogue to try to achieve an EU–US mutual recognition agreement," says Scott. "If successful, it could be the first in a series to eventually cover the global pharmaceutical industry." The vision is for the global pharmaceutical industry to have a global GMP inspection system. Perhaps the EU–US free-trade deal would kick start crucial moves towards realizing it.

Sean Milmo is a freelance writer based in Essex, UK, seanmilmo@btconnect.com.