Coast Guard: Initiatives to Address Aids to Navigation Challenges Could be Enhanced to Better Ensure Effective Implementation

One of the Coast Guard's statutory missions is the care and maintenance of ATON. Much like drivers need signs and universal driving rules, mariners need equivalent nautical “rules of the road.” As of November 2019, the Coast Guard managed 45,664 federal fixed and floating ATON that are designed to assist those operating in the U.S. Marine Transportation System, which includes about 25,000 miles of waterways, 1,000 harbor channels, 300 ports, and 3,700 terminals. According to the Coast Guard, as of July 2018, these ATON had a collective replacement value of about $1.6 billion. The Coast Guard has faced an array of challenges in managing its ATON, such as deteriorating buoys, and questions have been raised regarding the extent to which the Coast Guard is addressing these challenges.

This report (1) describes what is known about the condition and costs of maintaining the Coast Guard's ATON, and (2) examines challenges the Coast Guard has experienced in managing its ATON and how it is addressing them. To address these issues, GAO reviewed ATON regulations and guidance, analyzed data on ATON condition and cost measures, collected input from all nine Coast Guard districts on ATON challenges, accompanied ATON units on mission activities, assessed agency initiatives using leading program management practices, and interviewed headquarters and field unit officials.

The condition of the Coast Guard's aids to navigation (ATON), both fixed (e.g., lighthouses) and floating (e.g., buoys), have declined slightly while the overall costs for repairing or replacing them increased in recent years. According to Coast Guard data, its key metric for ATON condition—the Aid Availability Rate, or percentage of time that ATON are functioning correctly—declined from 98.0 to 97.1 percent during fiscal years 2014 through 2018, dipping slightly below the 97.5 percent target rate in fiscal years 2017 and 2018. During this time period, the overall costs to repair and replace ATON increased from about $12 million in fiscal year 2014 to about $20 million in fiscal year 2018. According to Coast Guard data, the majority of the costs for fixed ATON were spent on repairs whereas the majority of the costs for floating ATON were spent on replacements.

The Coast Guard faces challenges in managing its fixed and floating ATON and has developed plans and initiatives to address them, but it has limited assurance that the plans and initiatives will be effectively implemented. According to Coast Guard officials, the challenges include decreased availability of vessels to service ATON, reduced ability to provide routine ATON servicing in a timely manner due to severe weather, among other factors, and limited capacity at ATON major repair and refurbishment facilities. The Coast Guard has developed plans to guide the ATON program, and these plans have led to the development and implementation of various initiatives at the headquarters and field unit levels to address these challenges. However, GAO found that the initiatives do not contain certain elements that help ensure effective implementation—such as desired outcomes and schedule milestones and completion dates—as recommended by leading program management practices. According to Coast Guard officials, they are still developing guidance and procedures for ATON-related initiatives that are to be implemented by the districts. By updating these initiatives to include certain elements, such as the specific outcomes desired and timeframes for completing them, the Coast Guard would have better assurance that its initiatives to address ATON management challenges will be effectively implemented.

GAO recommends that the Coast Guard update its ATON initiatives by including the specific outcomes to be achieved and associated time frames. The Department of Homeland Security concurred with the recommendation.

One of the 11 statutory missions of the U.S. Coast Guard, within the  Department of Homeland Security (DHS), is the administration of the U.S.  Aids to Navigation System, which consists of federal aids to navigation  (ATON) operated by the Coast Guard, ATON that serve the needs of the  Armed Services, and private ATON operated by other persons. Much  like drivers need stoplights, street signs, and universally-accepted driving  rules, mariners need equivalent nautical signs and “rules of the road.” The  Coast Guard is responsible for ensuring this network of physical ATON— such as signs, buoys, markers, and lighthouses—are maintained and  functioning properly so commercial mariners and recreational boaters can  safely navigate in the maritime environment.

According to Coast Guard officials, as of November 2019, the Coast  Guard managed 45,664 federal fixed and floating ATON that are  designed to assist those operating in the U.S. Marine Transportation  System, which includes about 25,000 miles of waterways, 1,000 harbor  channels, 300 ports, and 3,700 terminals. These physical ATON consist  of fixed structures (e.g., lighthouses) and floating assets (e.g., buoys)  that, according to an internal Coast Guard report, as of July 2018, had a  collective replacement value of about $1.6 billion.

The Coast Guard has faced an array of challenges in managing its  ATON—such as the deteriorating condition of fixed and floating ATON  and limits in the Coast Guard’s ability to keep pace with needed ATON  repairs and replacements—and questions have been raised regarding the  extent to which the Coast Guard is able to address the challenges it faces  associated with carrying out the ATON mission. You asked us to review  Coast Guard’s management of fixed and floating ATON. This report  addresses (1) what is known about the condition and costs of maintaining  the Coast Guard’s fixed and floating ATON, and (2) challenges the Coast  Guard has experienced in managing its fixed and floating ATON and how  the Coast Guard is addressing these challenges.

To determine what is known about the condition and costs of maintaining  the Coast Guard’s fixed and floating ATON, we took the following steps:

To identify recent trends in the condition and costs of maintaining the  Coast Guard’s fixed and floating ATON, we reviewed Coast Guard  annual reports on shore infrastructure covering fiscal years 2014  through 2018 (the first of which was issued in fiscal year 2015) that  provide a summary of issues such as the fixed and floating ATON  asset line, an overview of the ATONs’ ages compared to their  designed service lives, and how the ATON are performing in relation  to existing Coast Guard performance metrics. In order to describe the  Coast Guard’s process for maintaining its fixed and floating ATON, we  analyzed relevant Coast Guard plans, policies, and procedures—such  as ATON Technical and Administration Program Manuals—and  related ATON regulations.

We collected and analyzed data Coast Guard officials identified as the  best condition measures for fixed and floating ATON. Specifically, for  each of the Coast Guard’s nine districts, we obtained data covering  fiscal years 2014 through 2018 on (1) the numbers of fixed and  floating ATON, (2) ATON availability rates (the probability that ATON  are functioning correctly at any random, chosen time expressed as a  percentage), and (3) the percentage of ATON serviced on time. We  also collected and analyzed available data on the Coast Guard’s  repair and recapitalization (replacement) expenditures for fixed and  floating ATON for fiscal years 2014 through 2018. To assess the  reliability of these data, we examined responses the Coast Guard  provided to questions regarding the administration and oversight of  the relevant information systems; as well as interviewed Coast Guard  officials about these systems and their processes for ensuring data  reliability. We determined that the data are sufficiently reliable for the  purposes of our reporting objectives.

In addition, we conducted site visits and in-person meetings with  Coast Guard officials in Baltimore, MD and Wilmington, DE (District  5); as well as in Mobile, AL and New Orleans, LA (District 8) to directly  observe the Coast Guard process for servicing and repairing fixed and  floating ATON and to obtain and describe the local conditions of  maintaining these ATON in different parts of the country. We selected  these site visit locations based on a variety of factors, to include a  range in the volume and types of fixed and floating ATON, and the  availability of ATON servicing schedules and ATON units.

To supplement this information, we gathered information from  knowledgeable Coast Guard officials with responsibility for managing  and implementing the ATON mission—both at headquarters and in  each of the Coast Guard’s nine districts—in order to summarize and  corroborate information and data on the condition and costs of  maintaining Coast Guard fixed and floating ATON. For the districts,  we used a standardized question set to either interview Coast Guard  officials (in Districts 5 and 8), or request written responses (at the  remaining seven Coast Guard districts) to obtain information on,  among other things, the local conditions and costs of maintaining fixed  and floating ATON and the related maintenance practices.

To determine the challenges the Coast Guard has experienced in  managing its fixed and floating ATON and how the Coast Guard is  addressing these challenges, we took the following steps:

We collected and analyzed Coast Guard information from annual  reports on shore infrastructure and strategic planning documents,  such as the Coast Guard’s Strategic Planning Directions for fiscal  years 2015 through 2019, that describe issues and challenges the  Coast Guard has experienced in maintaining fixed and floating ATON.  These documents also include information on Coast Guard initiatives  planned or under way to address these challenges. We also collected  available Coast Guard data on challenges in managing fixed and  floating ATON, detailed information describing the Coast Guard’s  fixed and floating ATON initiatives, and interviewed Coast Guard  officials with responsibility for managing and implementing the ATON  mission, in order to describe these challenges and initiatives. Further,  we collected available information on issues or limitations the Coast  Guard reported as having an impact on its ability to fully address the  challenges associated with managing fixed and floating ATON  In addition, we collected documents and data from the relevant  Product Line Managers at the Coast Guard’s Surface Forces Logistics  Center on the number, types, and condition metrics for Coast Guard  vessels that support the ATON mission. This included data on (1) the  numbers of planned and unplanned maintenance days, (2)  maintenance hours, and (3) achieved material availability rates  (calculated based on the vessels’ availability and performance) for  each vessel class for fiscal years 2014 through 2018. To assess the  reliability of these data, we examined responses the Coast Guard  provided to questions on the administration and oversight of the  relevant information systems, and we interviewed Coast Guard  officials about these systems and their processes for ensuring data  reliability. We determined that the data are sufficiently reliable for the  purposes of our reporting objectives.

We then analyzed the above information to identify what impact these  issues and challenges may have had on the Coast Guard’s ability to  accomplish ATON missions and responsibilities and the extent to  which fixed and floating ATON initiatives address the challenges. To  determine if the Coast Guard’s efforts to improve management of  fixed and floating ATON included measures to guide decisions on  their success, we assessed the Coast Guard’s initiatives using  guidance from the Program Management Institute on program and  project management. In addition, we compared the initiatives to  GAO’s leading practices in capital decision-making that identify the  key elements of a project decision package.

We conducted this performance audit from October 2018 to February  2020 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

Overview of Coast Guard’s Federal Fixed and Floating ATON

Through its ATON mission, the Coast Guard promotes safe waterways  and an efficient Marine Transportation System. The Coast Guard has  statutory responsibility to operate and maintain a system of maritime aids  to facilitate navigation and to prevent disasters, collisions, and wrecks.  To fulfill this mission, the Coast Guard operates and maintains ATON that  are placed along coasts and navigable waterways as guides to mark safe  water and to assist mariners in determining their position in relation to  land and hidden dangers. As mentioned earlier, this report focuses on two  categories of ATON: fixed ATON that include lighthouses, towers, and  other structures that are directly affixed to the ground or seabed; and  floating ATON that include buoys and markers anchored to the sea bed  by a concrete or metal sinker connected by a metal chain or mooring. See  figures 1 and 2 for examples of fixed and floating ATON.

The Coast Guard uses several types of vessels to place and service fixed  and floating ATON. These ATON vessels include buoy tenders,  construction tenders, and boats. As of October 2019, the Coast Guard  had a fleet of 79 ATON cutters and 190 ATON boats—which varied in  size from a 240-foot Great Lakes Icebreaker to 16-foot ATON boats.  (See appendix I for additional details on the Coast Guard’s fleet of ATON  vessels.)

The Coast Guard’s ATON program consists of several offices and units  that work together to carry out the ATON mission:

Office of Navigation Systems: Based at Coast Guard headquarters  in Washington, D.C., the primary ATON-related roles and  responsibilities of Office of Navigation Systems officials include  providing oversight and approval for ATON operations and policy.  Specifically, the Aids to Navigation and Positioning, Navigation, and  Timing Division within the Office of Navigation Systems is responsible  for establishing requirements and policy; providing program level  guidance; and coordinating processes, platforms, and personnel  necessary to establish, maintain, and operate the U.S. ATON system.

Office of Civil Engineering: Based at Coast Guard headquarters in  Washington, D.C., the primary ATON-related roles and responsibilities  of Office of Civil Engineering officials include providing oversight and  approval for ATON engineering and logistics policy, including  supervision of the Shore Infrastructure Logistics Center.

Shore Infrastructure Logistics Center (SILC): Based in Norfolk, VA,  SILC supervises the Civil Engineering Units that execute fixed ATON  depot-level maintenance and recapitalization projects; as well as the  Waterways Operations Product Line.

Waterways Operations Product Line (WOPL): A division of the  Coast Guard’s Shore Infrastructure Logistics Center, WOPL was  established by the Coast Guard in 2016 with the goal of serving as the  focal point for implementing engineering and logistics solutions for  ATON in order to enhance the mission while reducing costs. To do  this, WOPL is to support the ATON mission by providing centralized  guidance and oversight covering such issues as ATON acquisition,  ATON configuration management (the proper mix of ATON) across  the Coast Guard’s nine districts, ATON production and delivery, and  ATON logistics and maintenance for the Coast Guard-wide inventory  of ATON equipment and systems. WOPL’s support encompasses the  entire lifecycle of ATON equipment and systems, from acquisition  through disposal.

Coast Guard Districts and Sectors: The Coast Guard has nine  districts, which have overall responsibility for administration of the  ATON within their district. Each district oversees the coordination of  operations at the sectors and individual ATON units, which includes  cutters, boats, and Aids to Navigation Teams. Figure 3 shows a map  of the Coast Guard’s nine districts and the numbers of fixed and  floating ATON in each district as of November 2019.

ATON Servicing and Maintenance Procedures

The ATON units are responsible for the servicing and maintenance of  ATON by conducting both routine servicing based on the last-service  dates of the ATON and non-routine servicing of ATON within their area of  responsibility. The non-routine servicing process includes responding to  and addressing discrepant ATON, which are aids that are not functioning  properly due to, for example, a weather-related event such as a  hurricane, or an equipment failure. Timely response to and correction of  discrepant ATON is a high-priority task for the Coast Guard. According to  internal guidance, the Coast Guard has a tiered approach to address  ATON discrepancies that accounts for the importance of the ATON  relative to the waterway and the nature of the discrepancy. In particular,  according to Coast Guard guidance, the servicing unit response ranges  from immediately after notification up to 72 hours or as soon thereafter as  weather and resources permit. In some cases, the determining factors do  not require responding within 72 hours and the servicing unit is to advise  the district of future plans to correct the discrepancy. Coast Guard  guidance states that during the routine servicing process for floating  ATON (buoys), the primary purpose of the ATON units is to check the  buoys’ positions, their condition, and ensure the correct operation of the  buoys’ signal hardware. As part of this process, the Coast Guard may  extract the buoys from the water and bring them onboard an ATON  vessel to check the condition of their mooring chain, hull, and lighting  equipment. If necessary, the mooring chains are cleaned and repaired  and non-functioning lanterns (lights) are replaced. After the planned  repairs are made, the buoys are placed back in their assigned position in  the water. See figure 4 for an example of the process used by an ATON  unit to service a steel buoy.

When ATON units conduct routine or non-routine servicing of fixed and  floating ATON, they also collect data on the condition of the ATON. These  data provide a “snapshot” of the ATON’s condition at the time of servicing  and include the aid’s geographic position; the last date that the ATON  was serviced; the next-scheduled service date; and other detailed  information about the aid, such as an assessment of the physical integrity  of the ATON. If warranted, ATON units can initiate action for repair or  replacement of ATON if necessary. The information gathered by ATON  units during their servicing activities is entered into a Coast Guard  database—the Integrated ATON Information System (I-ATONIS)—that is  used to track and monitor fixed and floating ATON. A hardcopy record  containing detailed information about each aid is subsequently generated  from I-ATONIS and stored in local unit files to track and schedule future  fixed and floating ATON servicing dates.

According to Coast Guard officials, based on the multi-mission nature of  its assets and workforce, the Coast Guard does not budget for, request,  or receive funding organized by specific missions or program activities. In  addition, Coast Guard financial systems are not structured to collect  accounting data by specific missions or program activities, and the Coast  Guard does not report expenditures by mission. Rather, the ATON  mission receives funding through various sources within the Coast  Guard’s annual budget. Specific to repairs and recapitalization of fixed  ATON, in fiscal year 2018, $300,000 was allocated from Procurement,  Construction, and Improvement funding while $10 million was allocated  from the Coast Guard’s Operations and Support funds for depot-level  ATON maintenance.

Prior Work on Coast Guard Management of Shore Infrastructure

We previously reported on the Coast Guard’s management and  maintenance of its shore infrastructure, which—in addition to fixed and  floating ATON—encompasses over 20,000 shore facilities such as piers,  docks, boat stations, air facilities, and housing units at more than 2,700  locations. In July 2018, we found that the Coast Guard had not been  able to address many shore infrastructure projects, primarily due to lack  of funding, longstanding acquisition management challenges, and that  previous Coast Guard leadership prioritized the acquisition of new  operational assets to replace aging vessels and aircraft over maintaining  and repairing shore infrastructure. We recommended, among other  things, that the Coast Guard’s annual Capital Investment Plans reflect  acquisition trade-off decisions and their effects. The Coast Guard agreed  with this recommendation, and estimated implementing actions by March  2020.

In February 2019, we found that almost half of the Coast Guard’s shore  infrastructure is beyond its service life, and its current backlogs of maintenance projects, as of 2018, will cost at least $2.6 billion to  address. We found that the Coast Guard’s process to manage its shore  infrastructure recapitalization and deferred maintenance backlogs did not  fully meet 6 of 9 leading practices we previously identified for managing  public sector maintenance backlogs. We recommended, among other  things, that the Coast Guard establish shore infrastructure performance  goals, measures, and baselines to track the effectiveness of maintenance  and repair investments and provide feedback on progress made; develop  and implement a process to routinely align Coast Guard’s shore  infrastructure portfolio with mission needs, including by disposing of all  unneeded assets; and employ models for its asset lines for predicting the  outcome of investments, analyzing trade-offs, and optimizing decisions  among competing investments. The Coast Guard agreed with our  recommendations and is taking steps to implement them.

The Condition of Fixed and Floating ATON Declined Slightly, While the Costs for Repairing and Replacing Them Increased in Recent Years The Condition of the Coast Guard’s Fixed and Floating ATON Declined Slightly from Fiscal Years 2014 through 2018

The condition of fixed and floating ATON Coast Guard-wide declined  slightly from fiscal years 2014 through 2018, as determined by the Coast  Guard’s key ATON condition metric.  In particular, according to data  provided by the Coast Guard, the aid availability rate—the percentage of  time ATON are functioning correctly—declined from 98.0 percent in fiscal  year 2014 to slightly below the Coast Guard’s performance target  percentage of 97.5 percent in fiscal years 2017 (97.4 percent) and 2018  (97.1 percent), as shown in figure 5.

While the aid availability rate metric indicates that the condition of fixed  and floating ATON Coast Guard-wide declined slightly from fiscal year  2014 through fiscal year 2018, other factors—such as the age of many  ATON—have contributed to more significant declines in the condition of  ATON for some locations. For example, an internal Coast Guard report  states that, as of 2018, nearly a quarter (24 percent) of all floating ATON  and over half (59 percent) of all fixed ATON are operating past their  designed service lives. On a district level, the conditions of fixed and floating ATON differ from one geographical area to the next, and varying  weather conditions often have an impact on the physical condition of  ATON. For example, the frigid weather conditions of the Great Lakes in  certain months frequently erode the condition of both fixed and floating  ATON. Coast Guard officials stated that ATON with large steel hulls many  times cannot withstand the pressure and weight of ice that can form on  them in the winter months. They also stated that the icy waters delay  routine servicing trips for personnel to adequately address ATON, which  can contribute to the deterioration of the aids.

In District 8’s area of responsibility, which includes much of the Gulf of  Mexico, Coast Guard officials said that severe storms and hurricanes can  adversely impact the condition of fixed and floating ATON and delay  servicing trips for safety reasons. Extended periods of exposure to  saltwater is another factor that contributes to the degraded condition of  ATON in District 8 and elsewhere, as water salinity often corrodes the  hulls of steel buoys. In addition to weather, geographic factors can affect  the condition of ATON as well. Coast Guard officials in District 1  (headquartered in Boston) stated that the hard, rocky coast in their district  makes it difficult to secure fixed ATON structures to the seabed. As a  result, this district requires a higher percentage of floating ATON to mark  the location of these hazards and these floating ATON are often damaged  by the rocks. See figure 6 for examples of the deteriorating condition of  some fixed and floating ATON.

Total ATON Repair and Recapitalization Costs Increased During Fiscal Years 2014 through 2018

Our analysis of Coast Guard data shows that the Coast Guard’s overall  repair and recapitalization expenditures for fixed and floating ATON  increased during fiscal years 2014 through 2018. Specifically, our  analysis of Coast Guard data shows that total ATON repair and  recapitalization costs increased from about $12 million in fiscal year 2014  to about $20 million in fiscal year 2018. As shown in figure 7, the majority  of the costs for fixed ATON were spent on repairs whereas the majority of  the costs for floating ATON were spent on recapitalizations.

The Coast Guard Has Faced Challenges in Managing ATON and Has Plans and Initiatives to Address Them, but Has Limited Assurance That They Will Be Effectively Implemented The Coast Guard Has Faced a Variety of Challenges in Managing its Fixed and Floating ATON Availability of ATON Cutters and Boats

According to Coast Guard documents, data, and officials, the Coast  Guard has faced a variety of challenges in managing its fixed and floating  ATON. The reported challenges include the availability of ATON vessels,  difficulty in conducting routine ATON servicing in a timely manner, and  capacity limits at ATON major repair and refurbishment facilities.

Our analyses of Coast Guard data on maintenance required of ATON  cutters and boats during fiscal years 2014 through 2018 show that ATON  cutter and boat availability varied by type and across classes. As  described below, our data analyses showed that 10 of the 12 ATON  cutter classes consistently met availability targets, whereas 4 of the 7  classes of ATON boats consistently met availability targets.

The Coast Guard determines the condition of its ATON cutters and boats  using the following measures—planned and unplanned maintenance  days, maintenance hours, and achieved material availability rate.  Specifically,

Planned maintenance days are the number of days that a vessel is  not mission capable due to scheduled maintenance. This measure is  applicable to cutters.

Unplanned maintenance days are the number of days that a vessel  is not mission capable due to unforeseen maintenance issues and  associated repair efforts. This measure is applicable to cutters.

Maintenance hours are the total number of hours that a vessel spent  in maintenance, including both planned and unplanned maintenance.  This measure is applicable to boats.

Achieved material availability rate is calculated based on a vessel’s  availability and performance. For cutters, the target availability rate  range is between 53 percent and 65 percent. For boats, the target  availability rate target is 80 percent.

According to our analysis of Coast Guard data, the number of  maintenance days for ATON cutters generally decreased during fiscal  years 2014 through 2018, as shown in Figure 8. In addition, our analysis  shows that the biggest decrease was with planned maintenance days.

The Coast Guard has established a target range for the achieved material  availability rate for ATON cutters that includes a minimum rate of 53  percent to a maximum rate of 65 percent. According to our analyses of  Coast Guard data, the achieved material availability rate for the ATON  cutters varied by cutter class during fiscal years 2016 through 2018, with  10 of the 12 cutter classes having met or exceeded the minimum target  material availability rate for all 3 years and the remaining 2 ATON cutter  classes having met or exceeded the minimum target material availability  rate for 2 of the 3 years analyzed. While most of the ATON cutters met  Coast Guard availability rate targets during fiscal years 2016 through  2018, officials in 7 of the 9 districts noted that maintaining some older  ATON cutters can take longer to repair because of old and obsolete  equipment and the lack of available parts, which decreases their  availability to conduct missions. Figure 9 shows the achieved material  availability rate for ATON cutters for fiscal years 2016 through 2018.

According to our analysis of Coast Guard data, we found that the total  number of maintenance hours for ATON boats generally decreased  during fiscal years 2014 through 2018, although there was an increase  from fiscal year 2017 to 2018. Figure 10 shows the total maintenance  hours for ATON boats during fiscal years 2014 through 2018.

In comparison to ATON cutters, which have a target range for the  achieved material availability rate, ATON boats have a material  availability threshold of 80 percent. According to our analyses of Coast  Guard data, 4 of the 7 classes of ATON boats consistently achieved the  80 percent availability threshold during fiscal years 2014 through 2018. In  particular, we found that the four smaller classes of ATON boats—those  16 to 26 feet in length—consistently achieved the 80 percent availability  threshold during fiscal years 2014 through 2018, whereas the three larger  classes of ATON boats—those 49-feet in length and longer—failed to  consistently meet the 80 percent availability threshold during this 5-year  period. In addition to the data on achieved material availability rates,  Coast Guard officials from 3 of the 9 districts noted they experienced  challenges with the availability of ATON boats. Figure 11 shows the  achieved material availability rate for seven classes of ATON boats.

The Coast Guard Has Developed Plans and Initiatives to Address ATON Challenges, but There Is Limited Assurance that They Will Be Effectively Implemented

The Coast Guard has taken positive steps to manage the ATON program,  including issuing strategic plans and directions, creating a unit to provide  a Coast Guard-wide perspective in managing ATON, and developing  various initiatives to improve management of fixed and floating ATON.  However, we found that some ATON-related initiatives to be implemented  Coast Guard-wide, such as the foam buoy implementation initiative, do  not contain certain elements that can provide better assurance that they  will be effectively implemented, such as milestones and completion dates,  and desired outcomes to be achieved.

Strategic Plans to Improve ATON Program Management

The Coast Guard has developed strategic plans and directions that  provide guidance for addressing challenges faced in managing fixed and  floating ATON. In June 2007, the Coast Guard issued the Maritime Short  Range Aids to Navigation Strategic Plan to coordinate and standardize a  number of ATON mission activities. According a Coast Guard official, at  the time this strategic plan was issued, ATON units within the Coast  Guard’s nine districts were operating largely independently in terms of  planning and conducting ATON missions and activities. The 2007 plan  changed this by developing a strategic approach to ATON management  and it identified a number of initiatives to improve ATON program  management, including reducing ATON lifecycle costs and maintenance  needs, increasing efficiency and service intervals, and improving the  performance and reliability of fixed and floating ATON.

More recently, the Coast Guard issued the Navigation Systems Strategic  Voyage Plan for Fiscal Years 2017-2022, which updates and expands on  the 2007 strategic plan by identifying priorities that impact ATON program  management broadly and the management of fixed and floating ATON in  particular. The plan specifically identifies initiatives, including the use of  non-steel floating ATON, development of year-round floating ice ATON,  increased use of LED lighting, and the increased use of less expensive  fixed ATON alternatives in lieu of lighthouses.

In addition to the 2007 and 2017 strategic plans, the Coast Guard also  issues annual Strategic Planning Directions. These annual directions  outline the Coast Guard’s strategic commitments and are the primary  mechanism for apportioning resources and providing guidance to field  units on initiatives and actions to improve mission operations, including  the ATON mission. For example, the Coast Guard has emphasized  continuing to leverage electronic ATON technology where appropriate in  an effort to reduce seasonal ATON workload, such as in districts with  ATON in waters that are subject to freezing during a part of the year.

Creation of the Waterways Operations Product Line

In addition to developing a strategic approach to management of fixed  and floating ATON through its strategic plans, the Coast Guard also  created a new unit to provide a Coast Guard-wide, centralized  perspective in managing fixed and floating ATON engineering and  logistics. In particular, in 2016, the Coast Guard created the Waterways  Operations Product Line (WOPL) to centrally manage the distribution,  repair, and replacement of fixed and floating ATON and parts; as well as  to formulate requests for ATON resources and funding. Since its creation,  WOPL has coordinated and helped to implement various Coast Guard- wide initiatives to improve the management of fixed and floating ATON.

These initiatives include centralized funding for ATON inspection and  major repair services, changes in cost limits for floating ATON  refurbishments, and expansion of commercial depot-level maintenance  contracts to supplement the Coast Guard’s ATON major repair and  refurbishment capacity. WOPL has also analyzed and recommended the  transition from steel to foam buoys, where appropriate, to increase life  cycle cost savings and reduce servicing times. In addition, WOPL has  initiated changes to better manage and sustain the duration of floating  ATON, including extending time in the water between major  refurbishments from 6 to 9 years for some buoys and increasing the  allowance for selected steel buoy hull repair weld hours.

Initiatives to Address Specific ATON Management Challenges

The Coast Guard has developed and is implementing a variety of  initiatives to address specific ATON management challenges that were  discussed earlier in this report. These initiatives include the following:  Improving the Availability of ATON Cutters and Boats: The Coast  Guard has ongoing initiatives to extend the service lives and to  recapitalize certain ATON cutters and boats to improve their availability  rates. For example, in fiscal year 2019, the Coast Guard continued the  major maintenance availability efforts on the 225-foot Seagoing Buoy  Tender fleet. In addition, from 2006 to 2016, a portion of the Coast  Guard’s ATON fleet (River Tenders, Buoy Tenders, and Construction  Tenders) underwent a limited maintenance program to act as a bridging  strategy until replacement assets could be acquired. Our 2018 report on  Coast Guard acquisitions noted that the designed service life for each of  these tenders is 30 years, but as of the time of the report, their average  age was 53 years. In 2018, we reported that the Department of  Homeland Security approved the Waterways Commerce Cutter Program  to replace aging River Tenders, Buoy Tenders, and Construction  Tenders. While the acquisitions have been approved, it will likely be years  before the new cutters are built and deployed. The Coast Guard has also  had an ongoing initiative since 2007 that has recapitalized the boat fleet  by 290 boats.

Conducting Routine ATON Servicing in a Timely Manner: The Coast  Guard has issued guidance to its districts to look for opportunities to  reduce the number of ATON that do not significantly increase navigational  risk and explore and leverage new technologies, such as the use of  electronic ATON, where feasible. Collectively, these efforts should help to  ease the servicing burden. In addition, the Coast Guard has also  introduced initiatives focused on improving ATON servicing time. For  example, officials in one district told us that they require their ATON units  to send in monthly reports on ATON servicing due dates and plans.  District officials review this information and may shift ATON servicing  work to another unit when the primary servicing vessel or unit is not  available to provide the needed service in a timely manner. Another  ongoing initiative the Coast Guard is exploring is the use of year-round  buoys for ice prone areas to reduce servicing requirements. The Coast  Guard has received positive feedback in two of the three districts where  such buoys have been in service.

Improving Capacity Limits at ATON Major Repair and Refurbishment  Facilities: According to a Coast Guard official, the Coast Guard has had  commercial contracts in District 9 (the Great Lakes region) and District 13  (the Pacific Northwest) going back decades to provide floating ATON  major repair and refurbishment services. Then, in March 2019, WOPL  awarded four regional commercial contracts to provide increased capacity  for ATON major repairs and refurbishments in an effort to help reduce the  Coast Guard’s floating ATON major repair and refurbishment backlog.  Specifically, the Coast Guard (1) renewed the contract in District 13; (2)  awarded a contract covering California (part of District 11); (3) awarded a  contract for a zone covering New England and the Mid-Atlantic (Districts 1  and 5); and (4) awarded a contract covering Guam (part of District 14).  According to Coast Guard officials, the addition or renewal of these four  regional contracts has resulted in greater capacity and flexibility to reduce  the floating ATON major repair and refurbishment backlog.

ATON Management Initiatives Lack Certain Elements

While the Coast Guard has developed various initiatives to improve  management of fixed and floating ATON, these initiatives do not contain  certain elements, which limit assurance that the initiatives will be  effectively implemented. For example, we found that many initiatives we  evaluated do not contain milestone and completion dates for Coast  Guard-wide implementation, which are elements that can guide decisions  on the success of the initiatives. Under the foam buoy implementation  initiative, the Coast Guard evaluated the use of foam buoys in lieu of steel  buoys (which are more expensive to overhaul) and found that it was  feasible to replace steel buoys with foam buoys in some locations but not  in others. For example, the Coast Guard’s evaluations showed that foam  buoys cannot stand up to ice conditions. On the basis of its evaluations,  the Coast Guard plans to continue replacing certain classes of steel  buoys with foam buoys where operationally feasible. However, the  initiative does not contain milestone dates or desired outcomes for Coast  Guard-wide implementation.

According to guidance from the Program Management Institute, programs  or projects—like the ATON-related initiatives being implemented by the  Coast Guard—are to include specific, desired outcomes, along with the  appropriate steps and time frames needed to achieve the final outcomes  and results to implement the enhanced capabilities across the  organization. In addition, our leading practices in capital decision- making state that such initiatives should include milestones and  completion dates. According to Coast Guard officials, WOPL is a  relatively new unit and is still developing ATON guidance and procedures  for ATON-related initiatives and responsibilities to be performed by the  districts. By updating its ATON-related initiatives to include the specific  outcomes desired and timeframes for completing them, the Coast Guard  would have better assurance that its initiatives to address ATON  management challenges will be effectively implemented.

Available Coast Guard data indicate that despite some slight declines in  the condition of fixed and floating ATON, and increasing repair and  recapitalization costs for floating ATON, the Coast Guard’s ability to meet  its ATON mission did not show a marked decline during fiscal years 2014  through 2018. However, the future of the fixed and floating ATON and the  vessels used to service them bears close watching given the challenges  the Coast Guard faces in managing its fixed and floating ATON. The fact  that many of the ATON have reached, or will soon be reaching, the end of  their designed service lives could lead to an increase in the number of  ATON requiring major repairs or replacement in the near future.  According to Coast Guard data, the Coast Guard’s ability to refurbish or  replace its aging ATON is made more challenging by limited capacity for  conducting major repairs and refurbishments of floating ATON. The Coast  Guard has taken positive steps to develop strategic plans to guide the  ATON program, and these plans have led to the development of various  initiatives to improve management of fixed and floating ATON, but these  initiatives would benefit from the inclusion of certain elements, such as  desired outcomes to be achieved and associated milestone dates, to  have better assurance that the initiatives will be effectively implemented.

The Commandant of the Coast Guard should direct the Assistant  Commandant for Engineering and Logistics and Assistant Commandant  for Prevention Policy to update the Coast Guard’s ATON-related  initiatives to include the specific outcomes to be achieved and associated  time frames. (Recommendation 1)

We provided a draft of this report to DHS for review and comment. In its  comments, reproduced in appendix II, DHS concurred with our  recommendation and stated that the Coast Guard plans to review and  update ATON-related initiatives to include specific outcomes with  associated implementation milestones by December 31, 2020. DHS also  provided technical comments that we incorporated into the report, as  appropriate.

We are sending copies of this report to the appropriate congressional  committee, the Secretary of Homeland Security, and other interested  parties. In addition, the report is available at no charge on the GAO  website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (206) 287-4804 or AndersonN@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.

Appendix I: The Coast Guard’s Fleet of Aids to Navigation Vessels

Figure 14 provides information on the cutters and boats that comprise the  Coast Guard’s fleet of aids to navigation (ATON) vessels.

Appendix II: Comments from the Department of Homeland Security

Appendix III: GAO Contact and Staff Acknowledgments

In addition to the contact name above, Christopher Conrad (Assistant  Director), Hugh Paquette (Analyst in Charge), Chuck Bausell, Breanne  Cave, Benjamin Crossley, Dorian Dunbar, Michele Fejfar, Tracey King,  Joshua Lanier, and Adam Vogt made significant contributions to this  report.

The Coast Guard maintains a network of signs, markers, buoys, and lighthouses to help mariners safely navigate through U.S. waters. The condition of these navigation aids—both fixed (e.g., lighthouses) and floating (e.g., buoys)—has declined in recent years while the overall costs for repairing or replacing them have gone up.

The Coast Guard is considering ways to address this situation, such as replacing steel buoys with cheaper-to-maintain foam buoys where practicable. We recommended that the Coast Guard determine desired outcomes to be achieved and associated milestone dates to better ensure effective implementation of these initiatives.


Generic Drug Applications: FDA Should Take Additional Steps to Address Factors That May Affect Approval Rates in the First Review Cycle

Generic drugs—copies of brand-name drugs—lead to significant cost savings. Before a generic drug can be marketed, FDA must approve the generic drug application. According to FDA, applications go through an average of three cycles of review before being approved, which may take years.

The FDA Reauthorization Act of 2017 included a provision for GAO to study issues regarding the approval of generic drug applications in the first review cycle. This report examines 1) the first review cycle approval rate of generic drug applications in recent years and factors that may have contributed to whether applications were approved; and 2) changes FDA has made to increase the first review cycle approval rate. GAO reviewed FDA data on all generic drug applications reviewed from fiscal years 2015 through 2017 and documentation from the first review cycle for a judgmental selection of 35 applications from fiscal years 2017 and 2018. GAO also interviewed a non-generalizable selection of stakeholders. Applications and stakeholders were chosen to ensure variation in experience with the approval process.

GAO found that 12 percent of the 2,030 generic drug applications reviewed by the Food and Drug Administration (FDA) from fiscal years 2015 through 2017 were approved in the first review cycle. The first review cycle begins when FDA accepts a generic drug application for review and ends when FDA makes its first decision about whether the drug should be approved for marketing and sale. For applications that were not approved in that first cycle, the application must undergo one or more subsequent review cycles to obtain approval, delaying the generic drug's arrival to market.

GAO identified several factors that may have contributed to whether a generic drug was approved during the first review cycle. For example, certain types of complex drugs were less likely to receive approval in the first review cycle, such as eye drops or other drugs administered through the eye.

FDA has taken steps to increase the rate of generic drug approvals in the first review cycle. For example, FDA has increased communication with applicants and introduced templates for reviewers to improve the consistency and clarity of their comments. However, GAO's review of a judgmental selection of 35 applications found examples of variation in the clarity and content of FDA's comments to applicants. Such variation may have contributed to whether applicants could adequately address deficiencies within the first cycle, and therefore whether the applications were approved. In addition, stakeholders GAO interviewed expressed concern that changes to the brand-name drug's labeling mid-cycle could delay or prevent generic drugs' approval in the first review cycle, and some stakeholders said they believe that the labeling changes may be strategically timed to delay approvals. Although FDA officials noted that it would be difficult for brand-name companies to time labeling changes in this way, they said that the agency has not conducted analysis that would enable it to assess the validity of these concerns. Therefore, FDA lacks the information needed to respond to these concerns or address problems should they exist.

GAO recommends that FDA 1) take additional steps to address inconsistency in its written comments to generic drug application sponsors and 2) assess the extent to which the timing of brand-name drug companies' drug labeling changes affects the approval of generic drugs and take steps, as appropriate, to limit the effect. HHS concurred with GAO's recommendations.

Generic drugs, which are essentially copies of approved brand-name  drugs, can provide substantial cost savings for patients and third-party  payers, including government health programs. According to industry  estimates, in 2018 generic drugs accounted for nearly 90 percent of  prescriptions filled in the United States. In 2016 we reported that, on  average, generic drugs have retail prices that are 75 to 90 percent lower  than the retail prices of their brand-name counterparts, and new research  indicates that the gap between brand-name and generic drugs may be  widening. While estimates vary, studies have found that generic drugs  have collectively saved patients and third-party payers billions of dollars.  Such cost savings have resulted in widespread national interest in  facilitating the quick approval of generic drugs; however, the interest in  quick approvals must be balanced by the need for safety and efficacy.

Typically, when seeking to market a generic drug in the United States, a  drug sponsor who develops the drug, such as a drug company, submits a  generic drug application to the Department of Health and Human  Services’ Food and Drug Administration (FDA) for review. Through its  review, FDA seeks to determine whether the product is therapeutically  equivalent to the brand-name drug. For example, a generic drug  application includes data that are intended to demonstrate that the  generic drug has the same active ingredient and other key characteristics  and delivers the same amount of active ingredient in the same amount of  time as the brand-name drug.

Questions have been raised by generic drug applicants and trade  associations about the low percentage of applications approved within  FDA’s first review cycle—the time from when FDA accepts an application  for review to when FDA makes its first decision about whether it is  approved—and FDA has a stated goal to minimize the number of review  cycles for applications to attain approval. If FDA finds deficiencies in the  application that are not resolved during the first review cycle, then it  returns the application to the applicant and informs the applicant of the  deficiencies. Once those deficiencies are addressed, the applicant can  amend the application and seek another full review—the second review  cycle. According to FDA, in recent years (fiscal years 2013–2017) it took  an average of three review cycles for a generic drug application to reach  approval, which can take years, including the time it takes for the  applicant to make changes to the application in response to FDA’s  comments and the time it takes for FDA to review the changes. While the  first review cycle is typically 10 months for a standard generic drug  application, each subsequent cycle can be anywhere from 3 to 10  months, according to FDA.

In response to the Generic Drug User Fee Amendments of 2012  (GDUFA), FDA committed to take steps to increase its capacity for  generic drug application reviews, and in response to the Generic Drug  User Fee Amendments of 2017 (GDUFA II), FDA committed to make  changes to its review process. These changes included commitments  related to FDA’s communication with generic drug applicants. FDA stated  that one goal of these changes was to minimize the number of review  cycles. In addition, the FDA Reauthorization Act of 2017 included a  provision for us to study various issues regarding the approval of generic  drug applications in the first review cycle. In this report, we examine  1.  the first review cycle approval rate of generic drug applications in  recent years and factors that may have contributed to whether  applications were approved in the first review cycle, and  2.  changes FDA has made to increase the first review cycle approval  rate.

To examine the rate of generic drug applications approved during the first  review cycle and factors that may have contributed to whether  applications were approved in the first review cycle, we analyzed FDA  data on generic drug applications that were first submitted to and  reviewed by FDA in fiscal years 2015 through 2017—the most recent  available data at the time of our analysis. For the purpose of our report,  approvals during the first review cycle include both final and tentative  approvals. The data we examined included, among other information,  application characteristics such as the route of administration of the drug,  the dosage form of the drug, the priority review status of the application,  the number of applications submitted by the applicant in fiscal years 2015  through 2017, and the outcome of the first review cycle. Using these data,  we identified the number of applications that were approved in the first  review cycle and determined the rate of approval in that cycle for  applications with certain characteristics. We assessed the reliability of  FDA data we received by reviewing related documentation, performing  data reliability checks (such as examining the data for missing values and  checking values against other documentation), and interviewing relevant  agency officials. On the basis of these steps, we determined that the data  were sufficiently reliable for the purposes of our reporting objectives.

To supplement this analysis and to identify characteristics of applications  that may have contributed to whether they were approved in the first  review cycle, we also reviewed documentation from the first review cycle  for a judgmental selection of 35 generic drug applications that were  submitted to FDA in fiscal years 2017 and 2018. Specifically, we selected  30 of these applications for variation in (1) applicant size, determined by  either the number of applications submitted in fiscal years 2015 through  2018 or whether the applicant had any approved applications as of fiscal  year 2018, (2) application priority review status, (3) first review cycle  outcome, and (4) application complexity status. We selected five  additional applications that had similar characteristics to applications  within our initial selection in order to review and compare comments from  FDA reviewers for similar applications.

To examine changes FDA has made to increase the first review cycle  approval rate, we reviewed relevant FDA guidance, regulations, and other  documents related to the review and approval of generic drug  applications, such as FDA’s Center for Drug Evaluation and Research’s  Manual of Policies and Procedures. In addition, we interviewed FDA  officials, including generic drug application reviewers and officials  responsible for overseeing the review and approval process to learn  about any changes made since the enactment of GDUFA in 2012. We  compared FDA’s efforts to relevant standards for internal control in the  federal government.

We also interviewed a non-generalizable selection of 10 stakeholders that  we selected based on various criteria to obtain their views on FDA’s  actions to increase the first review cycle approval rate. Specifically, we  interviewed officials representing five generic drug applicants selected for  variation in (1) size, determined based on FDA’s definition of applicant  sizes for its fee structure for GDUFA II in fiscal year 2018, and (2) the  types of generic drugs submitted by the applicant that had been approved  in calendar years 2016-2018. Some of these applicants also submitted  applications for brand-name drugs. We also interviewed officials from five  trade associations that represented groups involved in the generic drug  application review and approval process, which we selected based on  their engagement with FDA during GDUFA (in effect from October 2012  through September 2017) and the beginning of GDUFA II (in effect from  October 2017 through September 2022).

We also reviewed publicly available documents related to the  implementation of GDUFA and GDUFA II, such as comments submitted  to www.regulations.gov, to identify perspectives of stakeholders— applicants and trade associations—related to our objectives. We  supplemented the information obtained from these documents and  interviews with information observed in our review of documentation from  the first review cycle for 35 generic drug applications mentioned above.  For four of the 35 applications, we conducted a detailed review of FDA’s  comments to assess the clarity of reviewers’ comments to applicants and  to determine how, if at all, these comments may have affected whether  the applications received approval in the first review cycle. To assess the  clarity of comments, we compared reviewers’ comments to FDA’s Manual  of Policies and Procedures, which specifies how reviewers should  communicate with applicants.

We conducted this performance audit from July 2018 to August 2019 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

GDUFA and GDUFA II both provided supplemental resources to FDA by  giving it the authority to collect user fees from the generic drug industry, in  addition to its regular appropriations, in order to make improvements to  the generic drug application review process. GDUFA was enacted in  July 2012, in part, to provide funding for more generic drug application  reviewers at FDA in order to handle an increase in the volume of  application submissions and speed up reviews. GDUFA II was enacted in  August 2017 to reauthorize the generic drug user fee program from fiscal  year 2018 through fiscal year 2022. In return, FDA provided Commitment  Letters to Congress that detailed its plans to implement program  enhancements and meet certain performance measures related to the  review of generic drug applications. For example, in its Commitment  Letter for GDUFA II, FDA stated that, for applications in the first review  cycle, it would review and act on at least 90 percent of them within  specified timeframes—8 months for certain priority applications and 10  months for all other applications. FDA stated that it met this  performance measure for fiscal year 2018. The Commitment Letter also  indicated that one of the goals of GDUFA II is to minimize the number of  review cycles for applications to attain approval.

FDA’s generic drug application review process includes a number of  steps. The process begins when a generic drug application is submitted  to FDA for review by the Office of Generic Drugs and the Office of  Pharmaceutical Quality within FDA’s Center for Drug Evaluation and  Research. The Office of Generic Drugs is responsible for providing  regulatory oversight and strategic direction for FDA’s generic drug  program to make safe, effective, and high-quality generic drugs available  to the public. The Office of Generic Drugs’ Division of Filing Review  determines whether the generic drug application is acceptable for review,  meaning that the application is sufficiently complete for FDA to review the  application, such as information about the amount of active ingredients  present in the drug. If the generic drug application is not acceptable for  review, FDA issues a Refuse to Receive letter to the applicant explaining  what additional information is required before the application can be  accepted for review. In response, the applicant can resubmit the generic  drug application with additional information and officials within the  Division of Filing Review will assess the information and determine if the  resubmitted application is acceptable for review.

Once the Division of Filing Review determines that a generic drug  application is acceptable for review, the first review cycle begins, and  FDA officials review the application across the following three review  disciplines:

Bioequivalence. Officials within the Office of Bioequivalence are  responsible for examining whether the generic drug application is  bioequivalent to the brand-name drug, meaning that the drug delivers  the same amount of active ingredient in the same amount of time as  the brand-name drug.

Labeling. Officials within the Division of Labeling Review are  responsible for ensuring that the proposed labeling language in the  generic drug application, including the drug’s prescribing information,  matches the language found in the labeling of the corresponding  brand-name drug.

Pharmaceutical quality. Officials within the Office of Pharmaceutical  Quality have responsibility for ensuring the quality of drug products  and assessing all drug manufacturing facilities, including both  domestic and foreign. Officials within this office assess the risk of toxic  substances or bacterial content in the drug, among other things.

All generic drug applications are reviewed by primary reviewers and  secondary reviewers. Primary reviewers assess the application to ensure  that the documentation meets regulatory requirements in their specific  disciplines. For example, primary reviewers within the Office of  Pharmaceutical Quality evaluate documentation related to the proposed  drug manufacturing process to ensure that the process produces quality  drugs consistently. Secondary reviewers ensure the quality and  consistency of primary reviewers’ assessments and the clarity of  communication to applicants.

During the first review cycle, FDA communicates with applicants when  issues arise during its review that may prevent the agency from approving  the generic drug application. This communication is typically made  through the issuance of information requests or discipline review letters:  Information requests. Information requests are letters sent to  applicants to request clarification or additional information that is  needed or would be helpful for FDA to complete its review. These  letters may be sent by any review discipline and can be sent at any  point after the Office of Generic Drugs accepts the generic drug  application for review.

Discipline review letters. Discipline review letters are letters issued  by each review discipline at about the mid-point of the review cycle to  identify possible deficiencies. FDA officials said they aim to issue  these letters no later than 6 months into the first review cycle.

In response to these letters, applicants can submit additional information  for FDA to consider before the end of the review cycle.

After FDA’s three review disciplines complete their review of an  application and any additional information the applicant has submitted in  response to information requests and discipline review letters, the agency  issues an action letter that informs the applicant of whether the  application is approved, marking the end of the first review cycle and the  end of FDA’s review if the application is approved. There are three types  of action letters:

Approval letter. Issued when the agency has concluded its review of  a generic drug application and the applicant is authorized to  commercially market the drug.

Tentative approval letter. Issued when the agency has completed its  review of an application and has concluded that the generic drug  application is sufficient, but patents or other exclusivities prevent  approval. A tentative approval letter does not allow the applicant to  market the generic drug.

Complete response letter. Issued at the completion of the review of  an application where deficiencies remain at the end of the review  cycle. The complete response letter describes any deficiencies that  must be corrected in order for the application to be approved.

For a generic drug application that receives a complete response letter,  the applicant can amend the application and seek another full review,  which begins the second or subsequent review cycles. During these  cycles, FDA officials review changes made to generic drug applications in  response to deficiencies that FDA identified.

FDA Approved 12 Percent of Generic Drug Applications in the First Review Cycle and Several Factors May Have Contributed to Whether Applications Were Approved

Our analysis of FDA data shows that 12 percent of the 2,030 generic drug  applications that FDA reviewed in fiscal years 2015 through 2017  received approval in the first review cycle. See figure 1.

We identified several factors, including certain characteristics of generic  drug applications, that may have contributed to whether an application  received approval in the first review cycle, including the sufficiency of the  application, deficiencies in drug quality, the type of drug reviewed, and  the application’s priority status.

Sufficiency of the application. We found that the sufficiency of the  generic drug application, including the completeness of the application  and the degree to which the applicants understood and fulfilled  application requirements, affected its likelihood of receiving an approval in  the first review cycle. According to FDA, one indication of the sufficiency  of the generic drug application is whether FDA had previously refused to receive the application for review because it was not substantially  complete upon its first submission. Our analysis of FDA data found that  applications that had previously been refused were slightly less likely to  be approved in the first review cycle compared with applications that had  not previously been refused, and rates of approvals decreased for  applications with two previously refused attempts. See table 1.

According to stakeholders we interviewed, the sufficiency of a generic  drug application may partially reflect the level of experience the applicant  has in submitting applications, and we found some evidence to support  this explanation. FDA managers and reviewers said that, in general, less  experienced applicants are more likely to produce lower-quality generic  drug applications compared to applicants with relatively more experience.  Our analysis of FDA data found that applicants that submitted just one  application during fiscal years 2015 through 2017 had a slightly lower rate  of approval in the first review cycle (10 percent) compared to the rate  across all applicants (12 percent). Additionally, in our review of 35  selected generic drug applications, we identified three applications that  were from applicants that had no previously approved generic drug  application submissions, an indication that they may have little or no  experience with these applications. None of the three applications were  approved in the first review cycle. One of these applications elicited  reviewer comments that outlined basic application requirements,  potentially reflecting the lack of experience of the applicant.

Drug quality deficiencies. Our review of documentation from the first  review cycle for 35 generic drug applications included 26 that were not  approved in that cycle. Among those 26 applications, the most common  deficiencies that remained at the end of the first cycle were related to the  quality of the drug—356 out of 435 deficiencies. These deficiencies  included issues related to the drug manufacturing facilities, which can  affect the quality of the drug produced and the stability of the drug over  time, among others. Officials from one large applicant told us that most of  the comments they received from FDA reviewers are related to the quality  of the drug. Three out of five applicants we interviewed also noted that  the results from inspections of drug manufacturing facilities—which FDA  includes as a component of its review of the quality of the drug—are a  factor that may cause an application not to be approved in the first review  cycle. Among the 26 applications we reviewed that were not approved,  eight had an outstanding deficiency related to the manufacturing facility.

Type of drug. We also found that the rate of approval in the first review  cycle differed based on certain characteristics of the type of drug  reviewed, including the route of administration, which may indicate the  complexity of the drug. Complexity can also be influenced by other factors  including, for example, the drug’s active ingredient or formulation. FDA  officials noted that some complex drugs—including those that combine  drug products with drug delivery devices, such as asthma inhalers—are  less likely to be approved in the first review cycle. Officials we interviewed  from one large applicant—which we identified based on the number of  approved generic drug applications it had in fiscal year 2018—reported  that their company had never submitted a generic drug application for a  complex drug product that received approval in the first review cycle  despite having significant experience with producing complex drugs.  Officials we interviewed from another applicant said that very few of its  dermatological products, which are considered complex, had received  approval in the first review cycle.

In our review of FDA data, we also found that applications for drugs with  certain routes of administration—the method by which the drug is taken,  such as oral, topical, or intravenous—had different rates of approval in  the first review cycle. In particular, from fiscal years 2015 through 2017,  FDA reviewed generic drug applications for 41 ophthalmic and 20  transdermal drugs—types of drugs that FDA considers complex—and  none of these applications received approval in the first review cycle. In  contrast, generic drug applications for topical drugs, which FDA also  identifies as complex, had higher approval rates. Specifically, our analysis  found that the rate of approvals in the first review cycle for generic drug  applications for topical drugs was 25 percent—more than double the rate  for all applications included in our analysis. FDA officials stated that in  recent years FDA released several product-specific guidances for topical  drugs—technical guidance intended to help applicants identify the most  appropriate methodology for developing certain drugs and generating the  evidence needed to gain approval. FDA officials told us these guidances  may have contributed to the higher rates of approval in the first review  cycle for topical drugs. See table 2.

Generic drug application priority review designation. In addition, we  found that a generic drug application’s priority review status may affect  the rate of approval in the first review cycle. FDA may grant priority review  status to applications under several circumstances, including for the first  generics of brand-name drugs and other designations, such as for drugs  that could help address public health emergencies. Our analysis of FDA  data found that the rates of approval in the first cycle were lower for  applications for first generics than for applications with no priority  designation—6 percent and 14 percent, respectively. One potential  explanation for the relatively low rate of approval is that for a first generic,  applicants have a financial incentive to be the first to submit an  application to FDA. Officials from one trade association stated that  applications for first generics may be of lower quality because the  applicants are rushing to submit their applications. In other cases,  priority designations were associated with higher first-cycle approval  rates. First-cycle approval rates for applications with other types of priority  designations were higher than for applications with no priority  designation—18 percent for applications that were marked as priority for  other reasons, such as drug shortages or public health emergencies. See  table 3.

FDA Made Changes That Could Increase the Rates of Approval for Generic Drugs in the First Review Cycle, but Opportunities Exist to Enhance Its Efforts

FDA Has Taken Steps to Enhance Communication with Applicants and Improve Reviewer Consistency to Increase the Rate of Generic Drug Approvals in the First Review Cycle

Our review of FDA guidance and regulations found that FDA has taken  steps to enhance communication with applicants to increase the rate of  generic drug application approvals in the first review cycle. Specifically,  since the beginning of fiscal year 2013 in response to GDUFA, FDA  increased communication with applicants prior to and during a generic  drug application’s first review cycle consistent with its goal of helping  applicants prepare approvable applications. These changes have  included the following:

Additional product-specific guidance. FDA has continued to  release new and revised product-specific guidance to support a  generic drug application’s approval within the first review cycle. Since  GDUFA’s implementation and at the time of our review, FDA told us  that it issued 993 new and revised product-specific guidance  documents that describe acceptable methodologies for developing  generic drugs and generating evidence needed to support a generic  drug application’s approval. FDA officials indicated that product- specific guidance helps streamline both application development and  review.

Additional regulatory guidance. FDA has also issued regulatory  guidance to communicate the agency’s expectations for the content  and format of generic drug applications, which can facilitate approval  in the first review cycle. In addition, in 2018, FDA issued draft  guidance that described common application deficiencies and sought  to promote approval during the first review cycle by providing  recommendations on avoiding these recurring deficiencies.

Presentations to industry. In presentations to applicants and others,  FDA officials have presented information about generic drug  application reviews and deficiencies frequently identified in generic  drug applications. FDA has posted some of these presentation  materials, including several video recordings, publicly on its website to  share the information with industry.

Communication during the review cycle. FDA has changed its  review process to encourage reviewers to communicate with  applicants at about the mid-point of the review cycle. FDA reviewers  now aim to issue discipline review letters at about the mid-point of the  first review cycle, rather than waiting until the end of the review cycle  to communicate deficiencies. According to FDA, these earlier  communications are intended to provide applicants with an  opportunity to address issues before the end of the first review cycle  and facilitate more approvals during that cycle.

Assistance with applications for complex drugs. FDA has taken  steps to assist applicants developing generics of complex drugs, such  as drugs with complex active ingredients, formulations, or routes of  administration. Beginning in fiscal year 2018 when GDUFA II was  implemented, applicants developing complex drugs may request  meetings with FDA prior to submitting a generic drug application and  at the mid-point of the review cycle. In addition, FDA officials told us  that since fiscal year 2013 when GDUFA was implemented, the  agency has released 378 product-specific guidance documents  focused on complex drugs.

While all five applicants we interviewed generally described FDA’s efforts  to increase communication as helpful, they offered opportunities for  improvement. For example, four out of the five applicants said that  product-specific guidance helps them understand exactly what the  requirements are for product development, which can facilitate approval  in the first review cycle. However, two of these applicants also said that  FDA does not obtain sufficient input from the generic drug industry when  developing product-specific guidance documents. To increase  transparency, stakeholders said that FDA could solicit industry input to  avoid proposing unrealistic guidance and one stakeholder suggested that  FDA could create a workgroup to prevent unintended consequences  following the implementation of new and revised guidance. However, FDA  officials told us that draft guidance documents have a public comment  period for stakeholders to provide comments on guidances before they  are finalized.

In December 2017, we similarly found that stakeholders indicated they  would benefit from greater transparency in FDA’s process for developing  guidance. We recommended that FDA publicly announce the agency’s  plans for issuing new and revised product-specific guidance for  nonbiological complex drugs within the next year. FDA agreed with this  recommendation and published a website in April 2019 that provides  information about upcoming product-specific guidance documents for  complex generic drugs.

In addition, all five applicants we interviewed said that FDA has improved  communication with them, such as by increasing the frequency and timing  of communications, and two applicants indicated that discipline review  letters add predictability to the review process. (See app. I for more  information on FDA’s changes to the generic drug application review  process to improve communication with applicants.) While all five  applicants we interviewed generally agreed that the increased  communications would help increase rates of first-cycle approval, they  also suggested that additional flexibility to communicate with FDA  informally mid-cycle, such as by phone, could further facilitate the review  process by helping applicants respond to questions or get clarity on  questions included in the information requests or discipline review letters.  FDA officials told us that applicants currently can request teleconferences  with FDA, such as after receiving a complete response letter; however,  they also noted that applicants generally prefer email communications  and such teleconferences are not frequently utilized.

FDA has also taken steps to improve consistency among reviewers.  These steps could facilitate more approvals in the first review cycle  because receiving consistent comments from FDA reviewers typically  makes it easier for applicants to respond more quickly, which—according  to some stakeholders—can result in approval in the first review cycle.  These changes include the following:

Creating review templates. Officials from FDA’s review disciplines  have developed templates to guide reviewers through the generic  drug application review process. According to FDA’s Manual of  Policies and Procedures, these templates are intended to increase  reviewers’ efficiency and improve assessment consistency.

Developing common phrases. FDA also issued internal guidance on  common phrases that reviewers may use to communicate generic  drug application deficiencies in their comments to applicants during  the first review cycle. For example, officials from the Division of  Labeling Review said they maintain a database of common phrases  and train reviewers on how to explain deficiencies to applicants.  Officials explained that the Division of Labeling Review is also working  toward pre-populating some parts of the review template to increase  efficiency and consistency in the review process.

Understanding the generic drug industry. FDA has taken steps to  increase reviewers’ and applicants’ common understanding of  industry practices and FDA review standards, such as through visits  to manufacturing facilities, to improve the quality and consistency of  reviewers’ comments in the first review cycle. However, all five  applicants we interviewed noticed inconsistency among reviewers.  FDA officials and two applicants suggested that this may be because  FDA reviewers have different professional backgrounds. One  applicant noted that some reviewers benefit from visiting  manufacturing facilities if they do not have prior experience in the  generic drug industry. Officials from a trade association said that such  steps improve applicants’ understanding of what FDA reviewers are  looking for in generic drug applications and may enhance their ability  to submit applications that are approvable in the first review cycle.

Opportunities Exist to Enhance FDA’s Efforts to Increase the Rates of Approval for Generic Drugs in the First Review Cycle

While stakeholders stated that the changes FDA made to improve  reviewer consistency were positive, they noted that inconsistency among  reviewers still remained, and we also found inconsistencies among  reviewers. In addition, while stakeholders we interviewed raised concerns  that the timing of brand-name labeling changes could affect whether  applications were approved in the first review cycle, FDA has not taken  steps to assess the validity of these concerns.

Inconsistency among FDA reviewers. While FDA has taken steps to  improve consistency among generic drug application reviewers,  stakeholders noted that inconsistencies persist, and these inconsistencies  may influence whether an application is approved during the first review  cycle. For example, most stakeholders we interviewed (three out of five  trade associations and four out of five applicants) indicated that they were  aware of examples when different FDA reviewers within the same review  discipline provided substantively different assessments of similar generic  drug applications, specifically by requesting additional information from  applicants for some applications and not others. For example, one  applicant cited an example of two similar topical drugs whose applications  relied on the same data set. The reviewer for one application required  additional data, while the reviewer for the other application did not. To  improve consistency, four applicants we interviewed suggested that FDA  improve its reviewer training and one suggested that FDA create a  workgroup to examine and address inconsistencies among reviewers.

Four of the five applicants we interviewed also reported variation in the  consistency of reviewers’ comments, including a lack of clarity in the  information required for the applicant to address the comments. For  example, one applicant said that they have received comments where  reviewers did not specify what further information was required, and  added that comments that suggest specific resolutions are extremely  helpful, which would be consistent with FDA’s Manual of Policies and  Procedures. This manual describes a standard process for FDA  reviewers to use when assessing the completeness of generic drug  applications, including clearly communicating with applicants about  deficiencies that must be corrected for their applications to be approved in  order to reduce the number of review cycles. According to the manual,  primary reviewers are responsible for assessing whether applications  meet the regulatory requirements for approval, while secondary reviewers  are responsible for ensuring consistency among assessments and quality  of communications to the applicant. Further, the manual advises primary  and secondary reviewers to ensure that comments to applicants about  deficiencies include similar content. The manual also indicates that  comments should include the following four elements: (1) refer to a  specific location within the generic drug application; (2) identify the  omitted information or explain the problem with the information submitted;  (3) explain the actions necessary to resolve the deficiency; and (4)  explain why the information or revision is needed. Finally, FDA provides  reviewers with plain language writing guidelines and other writing  resources to support the development of clear messages for external  communications.

In our review of documentation from the first review cycle for 35 generic  drug applications, we found variation in the clarity and specificity of some  reviewer comments that may have influenced the outcome of the first  review cycle. For example, some discipline review letters included clear  descriptions of potential remedies for some deficiencies, while others did  not clearly describe the deficiency or FDA’s expectations for an  approvable generic drug application. Of the 35 generic drug applications,  we conducted a more detailed review of four applications from fiscal year  2018—two that received approval in the first review cycle and two that did  not. In the two applications that were not approved in the first review  cycle, we identified 32 instances in which the comments did not fully meet  FDA’s criteria.

Two of the four applications we reviewed in more detail had similar  numbers and types of deficiencies identified in the discipline review letters  sent to the applicants mid-way through the first review cycle, such as  quality deficiencies related to the drug substance and drug product, but  the clarity and content of the comments included in the discipline review  letters varied considerably. For one of the applications, the comments were written clearly and, consistent with FDA’s Manual of Policies and  Procedures, identified options for addressing the deficiencies. For the  other application, the comments were less clear and did not clearly  identify ways to address the deficiencies. The applicant of the generic  drug application with clearly written comments resolved all of the  deficiencies raised in their discipline review letter and the generic drug  application was approved in the first review cycle. In contrast, the  applicant of the other application did not resolve all deficiencies raised in  their discipline review letter and was not approved in the first cycle. See  Table 4 for more detail on these two examples.

Inconsistency among reviewers could affect the rate of approvals in the  first review cycle if comments provided to applicants differ in content or  are not clearly communicated. For example, if some reviewers provide  unclear comments, it could be more difficult for the applicant to address  deficiencies in a timely manner, while applicants that received clear  comments could potentially address deficiencies within the first review  cycle. This could delay some generic drugs from entering the market if  applicants require more time, including potentially additional FDA review  cycles, to understand and respond to unclear comments. This has  potential impacts on patient access to generic drugs and on applicants’  abilities to effectively manage their expectations for when their generic  drug applications will be approved.

FDA officials explained that although secondary reviewers are  experienced, they do not consistently receive additional training to ensure  clarity and consistency among primary reviewers. They noted that FDA  offers training in clear writing for FDA employees but it is not required for  reviewers. FDA managers noted that some inconsistency among  reviewers may persist due to various factors such as tenure with the  agency and different professional backgrounds or interpretations of the  generic drug application information. They also said that standardizing  reviewers’ writing is challenging since each reviewer might have his or  her own writing style and scientific expertise. Two applicants and one  trade association we interviewed also said that the length of reviewers’  tenure with the agency could impact the substance of their comments in  information requests and discipline review letters and the likelihood of the  applicant attaining approval in the first review cycle. For example, one  trade association we interviewed said that inexperienced reviewers  typically request information from applicants that a more experienced  reviewer would already know, such as information about drug  manufacturing facilities.

Unknown effects of labeling changes. Three applicants we interviewed  noted that they believe FDA could improve the rate of approvals during  the first review cycle if they took steps to mitigate delays that  stakeholders said result from brand-name drug labeling changes that  occur mid-cycle. Because generic drug labels generally must match  brand-name labels, most applicants we interviewed said that changes  made by brand-name drug companies to the labeling of drugs during the  review process can delay or prevent approval of generic drugs in the first  review cycle because the applicant of the generic drug would likely need  to update the label before it is approved. In addition, five of the 10  stakeholders we interviewed said they believe such labeling changes  negatively impact the rate of first-cycle approvals, and three said they  believe that brand-name companies may strategically time updates to a  brand-name drug’s labeling to occur right before the approval of a generic  competitor in order to delay generic drug approvals.

Although our review of 35 selected applications did not identify examples  where labeling changes made during the first review cycle were the only  factor that prevented approval, we identified two instances where labeling  changes were among multiple factors that prevented approval.  Specifically, we identified two applications for which the complete  response letters noted recent changes in the brand-name drug’s labeling  as one of multiple factors that contributed to the generic drug application’s  failure to receive approval in the first review cycle. One of these  applications had successfully addressed several labeling deficiencies  during the first review cycle, but received a complete response letter that  included new labeling deficiencies because of recent changes in the  brand-name drug’s labeling.

Three applicants and one trade association identified labeling changes as  a concern during our interviews. Two of these applicants and the trade  association suspected updates are strategically timed to delay generic  drug approvals. However, FDA does not know whether there is validity to  these concerns because it has not conducted analysis that would enable  it to assess their validity. FDA officials noted that they were aware of  these types of concerns, but thought it would be difficult for brand-name  drug companies to successfully time changes in their drugs’ labeling to  affect applications under review, and that labeling changes for brand- name drugs must be justified, for example, to note an adverse reaction  identified after approval. However, FDA officials also acknowledged that  there may be an incentive for brand-name drug companies to change the  label on a drug frequently to make it more difficult for a generic drug  application to be approved.

FDA officials stated that the Office of Generic Drugs does not assess how  often brand-name companies change their labeling or track how often  such labeling changes occur because such changes are reviewed by the  Office of New Drugs. Further, while FDA officials noted that the two  offices have coordinated on the review of some labeling changes, they  stated that they do not coordinate on the timing of approval of brand- name drug label changes. This is inconsistent with federal internal control  standards, which state that agencies should identify risks that affect their  defined objectives and use quality information to achieve these  objectives, including by identifying the information required to achieve the  objectives and address related risks. In addition, FDA can approve a  generic drug application even though changes have been made in the  brand-name drug labeling that the applicant has not incorporated into its  proposed labeling, provided the applicant meets certain criteria; however,  FDA officials told us that applications rarely meet the required criteria.  Conducting an assessment of the extent to which the timing of such  changes affect the approval of generic drugs in the first cycle of review  would provide FDA with the necessary information to respond to  stakeholder concerns and take action, as appropriate, such as by  coordinating with the Office of New Drugs on this issue. To the extent that  brand-name companies’ labeling changes are creating unnecessary  delays in generic drug approval, such delays may impede generic drug  entry into the market, which would be inconsistent with FDA’s stated  goals of speeding up generic drug reviews.

The timely approval of safe generic drugs in FDA’s first review cycle can  provide substantial cost savings to patients and third-party payers. Since  the enactment of GDUFA, FDA has taken steps to help applicants submit  stronger generic drug applications and correct deficiencies within the first  review cycle. However, according to FDA its most recent analysis found  that the average generic drug application required three cycles of review  before approval. Opportunities exist to enhance FDA’s efforts to increase  the rates of approval for generic drugs in the first review cycle, including  improving the consistency and clarity of reviewer comments and  assessing the effects of the timing of brand-name companies’ changes to  labeling.

Taking such steps could help FDA meet the agency’s goals of minimizing  the number of review cycles necessary for generic drug application  approval and increasing the overall rate of approval, including within the  first review cycle. Increasing the rate of approval in the first review cycle,  while maintaining the efficacy and safety of generic drugs, can expand  consumer access to relatively lower cost medications and has the  potential to save patients and third-party payers billions of dollars.

We are making the following two recommendations to FDA.

The Commissioner of FDA should take additional steps to address  inconsistency in its written comments to generic drug applicants— including the clarity of writing and the content of comments—among  reviewers, such as requiring additional training for reviewers.  (Recommendation 1)

The Commissioner of FDA should assess the extent to which the timing  of brand-name drug companies’ drug labeling changes affect the approval  of generic drug applications in the first review cycle, and take steps, as  appropriate, to limit the effect of brand-name drug labeling changes on  pending generic drug applications. (Recommendation 2)

We provided a draft of this report to HHS for review and comment. In its  written comments, which are reproduced in appendix II, HHS concurred  with our recommendations. HHS stated that it will take steps to improve  the clarity and content of primary reviewers’ comments by, for example,  providing training on written communication. Additionally, HHS stated that  it will take steps to assess examples in which a brand-name drug  company labeling change impacted the timeline of a generic drug  approval and assess what actions could address this issue. In addition,  HHS provided technical comments, which we incorporated as  appropriate.

We are sending copies of this report to the congressional addresses, the  Secretary of Health and Human Services, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at 202-512-7114 or dickenj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix III.

Appendix I: Changes to the Generic Drug Review Process to Improve Communications with Applicants

The Food and Drug Administration (FDA) made several changes to its  review process for generic drug applications in its implementation of the  Generic Drug User Fee Amendments of 2017 (GDUFA II) that are  intended to improve communications with applicants, such as drug  companies, and included the following:

Additional communication with applicants. In its GDUFA II  Commitment Letter to Congress,  1. FDA committed to notify applicants of potential deficiencies in an  application that could prevent approval in the first review cycle  through information requests or discipline review letters by about the  mid-point of the review cycle; and  2. FDA committed to continue to issue additional information requests  or discipline review letters late in the review cycle as needed, and, in  certain circumstances, to work beyond the review timeframe to issue  an approval.

Pre-submission facility correspondence. In its GDUFA II  Commitment Letter to Congress, FDA committed to communicating  with applicants of priority generic drug applications before the  application is submitted. For priority generic drug applications, FDA  accepts information about facilities associated with an application,  such as manufacturing facilities, at least 2 months before the  application is submitted. If FDA finds the pre-submission facility  correspondence includes complete and accurate information, the  application may receive a review timeline of 8 months, rather than  10.

Figure 2 provides an overview of the timeline for the first review cycle for  generic drug applications under the Generic Drug User Fee Amendments  of 2012 (GDUFA) and the revised review process under GDUFA II.

Appendix II: Comments from the Department of Health and Human Services

In addition to the contact named above, Gerardine Brennan (Assistant  Director), Rebecca Rust Williamson (Analyst-in-Charge), Caroline Hale,  and Elizabeth Leibinger made key contributions to this report. Also  contributing were Kaitlin Farquharson, Cathy Hamann, Dan Lee, Laurie  Pachter, and Vikki Porter.

Companies that make generic drugs—which have the same active ingredients as brand-name drugs—have to apply for FDA approval to market them.

After reviewing an application, FDA may return it with comments. The company can address the comments and resubmit. On average, applications go through 3 of these review cycles before approval (which may take years).

We found FDA approved 12% of generic drug applications in the first cycle in 2015-2017.

FDA took steps to try to increase first-cycle approvals, but we found cases where FDA’s comments were unclear and potentially hard to address.

We made recommendations to help FDA address those concerns.