Last week, FDA released a draft guidance document entitled “Contract Manufacturing Arrangements for Drugs: Quality Agreements.” The guidance addresses relationships between the entities that introduce a drug into interstate commerce (the “Owner”) and third parties that perform some or all of the manufacturing operations for the product (the “Contracted Facilities”). The guidance describes how Owners and Contracted Facilities can use Quality Agreements to define responsibilities associated with manufacturing activities in a manner that is consistent with regulatory requirements.
The draft guidance expands on existing guidance contained in ICH Q7, Q9 and Q10 that collectively recommend supplier quality agreements, effective oversight and monitoring of outsourced operations. Briefly, ICH Q7 advises drug manufacturers to establish formal agreements with their contractors on current good manufacturing practice (CGMP) responsibilities.1 ICH Q9 provides guidance regarding supplier quality management, including supplier qualification, audits and implementation of quality agreements.2 ICH Q10 clarifies that the “pharmaceutical company,” described in the new draft guidance as the Owner, bears ultimate responsibility for outsourced activities and for the quality of the product.3
The new draft guidance contains more explicit recommendations regarding quality agreements, defining a quality agreement as “a comprehensive written agreement that defines and establishes the obligations and responsibilities of the Quality Units of each of the parties involved in the contract manufacturing of drugs subject to CGMP” and not a commercial or business agreement. In addition, while the draft guidance makes clear that CGMP regulations do not require quality agreements, it reminds industry that 21 C.F.R. § 211.22(d) requires written documentation of quality unit responsibilities and procedures. The draft guidance also states that “implementing a written Quality Agreement facilitates compliance with 211.22(d).” The guidance outlines the basic elements of a quality agreement and provides case studies in which quality agreements improperly shifted or attempted to exempt a party from CGMP compliance obligations. Most importantly, the draft guidance emphasizes that parties cannot, by agreement, shift responsibilities that are established by regulation. The guidance also reminds Contracted Facilities that they “cannot essentially agree to manufacture under non-CGMP conditions.”
For example, with respect to batch release, the draft guidance makes clear that, under 21 C.F.R. § 211.22(a), owners are ultimately responsible for release of finished product into interstate commerce and cannot delegate this responsibility to a Contracted Facility. The draft guidance does not discuss the consequences of improperly attempting to shift this responsibility. It is, however, important to note that outsourcing quality assurance by allowing a Contracted Facility to independently release product or to make determinations about non-conforming products arguably places an Owner at greater risk under Section 711 of the Food and Drug Administration Safety and Innovation Act (FDASIA).4 As a reminder, Section 711 amended the Federal Food, Drug and Cosmetic Act (FDCA) by adding the following language:
For purposes of [Section 501] (a)(2)(B), the term ‘current good manufacturing practice’ includes the implementation of oversight and controls over the manufacture of drugs to ensure quality, including managing the risk of and establishing the safety of raw materials, materials used in the manufacturing of drugs, and finished drug products.5
Section 711 is significant because it gives FDA the statutory authority to require finished product manufacturers to establish new standards for appropriate oversight and controls over its suppliers, including Contracted Facilities. Moreover, if a finished product manufacturer fails to establish oversight and controls related to raw materials, components and contract manufactured finished products, its distributed products are deemed to be adulterated and the introduction of those products in interstate commerce is a prohibited act under 21 U.S.C. § 301(a).
Coincidentally, FDA issued the draft guidance within weeks of issuing a series of Warning Letters to dietary supplement distributors for violations resulting from attempted outsourcing of CGMP regulatory responsibilities.6 Those Warning Letters cited United States v. Park and United States v. Dotterweich, hinting at the possibility of criminal prosecution.7 Given the recent expansion of FDA’s authority under Section 711 of FDASIA for drug products, it seems likely that FDA could begin citing the Park doctrine in drug product Warning Letters as well.
Drug product Owners and Contract Facilities are advised to pay close attention to negotiation of Quality Agreements, and should understand which responsibilities can be outsourced and which cannot. FDA is clearly expecting that such agreements should be reasonably detailed and should address matters such as purpose/scope, effective date, termination, dispute resolution, responsibilities, change control and revisions, communication plan, availability of records and audit. Moreover, Owners and Contract Facilities should be prepared to provide copies of their Quality Agreements, which may be requested by investigators during FDA inspections, and should understand the risks that can flow from a poorly developed agreement. This guidance reinforces our experience that the negotiation of a quality agreement calls for attention to regulatory considerations and possible pitfalls in parallel with the establishment of a commercial relationship.