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Food and Drug Administration (FDA): What It Is and Does

File Photo: Food and Drug Administration (FDA): What It Is and Does
File Photo: Food and Drug Administration (FDA): What It Is and Does File Photo: Food and Drug Administration (FDA): What It Is and Does

What exactly is the Food and Drug Administration (FDA)?

The 1906 Federal Food and Drugs Act created the FDA. The agency’s departments handle most food, medicine, cosmetics, animal food, nutritional supplements, medical devices, biological commodities, and blood product duties.

Understanding the FDA

The FDA oversees medicine development. All new pharmaceuticals must undergo clinical trials under FDA regulations. Drugs must undergo four clinical trials before being sold to consumers. In the E.U., the European Medicines Agency (EMA) is the counterpart of the FDA.

As of November 2020, the FDA oversees the safe consumption of over $2.8 trillion in medicinal, food, and tobacco goods. The FDA budget for 2020 was $5.9 billion.

Investors in biotech and pharmaceutical firms should consider the FDA. Drug development businesses need FDA permission. FDA-regulated items cannot be sold in the U.S. without agency clearance.

The FDA approves or rejects biotech and pharmaceutical goods, which might affect finances.

The Impact of FDA Approvals on Industry and Market

Drug development and sales companies may lose money if their treatments fail to receive approval. FDA drug testing can affect the stock market. Investors may use test results as a sign of potential growth for pharma businesses.

The FDA inspects and reviews production sites that create FDA-regulated products. Examples include vaccine and medication factories, blood banks, food processing facilities, dairy farms, animal feed processors, and compounding pharmacies.

The agency inspects animal and clinical trial facilities. Regular inspections of used facilities are possible.

The FDA must check imported regulated items at the border. The agency announces product recalls with corporations and local partners.

New product applicants undergo preapproval inspections by the agency. Facility issues might trigger “for cause” inspections. Undeclared additives can cause recalls, putting allergy sufferers at risk. Product contamination or unsafe handling can also trigger recalls.


  • The FDA inspects and examines food, pharmaceuticals, tobacco, and other FDA-regulated production facilities.
  • FDA permission is required for U.S. sales of regulated items.
  • FDA can recall items for safety and other reasons.



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