On 27 September 2020, and following on from the amended Drug Administration Law, which came into effect on 1 December 2019, China’s National Medical Products Administration (NMPA) published the new Guidance on Quality Agreements for Contract Manufacturing Arrangements of Drugs in China (the Guidance). The Guidance includes a template quality agreement and also sets forth the regulatory aspects of contract drug manufacturing that the NMPA will focus on in its audits and inspections.

1. Reform of market authorisation holder system

As part of the reform initiatives to encourage R&D and facilitate the commercialisation of drug products in China, the NMPA introduced a nationwide market authorisation holder (MAH) system in the amended Drug Administration Law. Historically, only drug manufacturers that have good manufacturing practice (GMP) level manufacturing facilities and capabilities could hold the registration of drug products in China. The NMPA now allows qualified non-manufacturing entities, such as R&D institutions that develop drug products but do not have their own GMP facilities, to become the MAH by engaging a qualified contract manufacturing organisation (CMO) to produce the drugs1 under a contract manufacturing arrangement. The Drug Administration Law further provides that the MAH and CMO must, as a minimum, sign a contract manufacturing agreement and a quality agreement to govern the manufacturing activities and the NMPA shall develop related guidelines.

2. Overview of Guidance

The Guidance outlines NMPA’s current thinking on defining, establishing, and documenting the manufacturing activities of the parties involved in contract drug manufacturing, subject to current GMP requirements and all applicable laws and regulations. In particular, the Guidance clarifies the difference between the contract manufacturing agreement and the quality agreement, sets forth the key elements of a quality agreement in the sample agreement, and clarifies the allocation of the parties’ responsibilities with respect to such manufacturing activities.

3. Highlights of Guidance

a. Contract manufacturing agreement vs. quality agreement

The contract manufacturing agreement will be the principal commercial agreement that covers all the commercial terms and conditions agreed by the parties. These commercial terms usually include pricing and costs, volume, manufacturing schedule, delivery, confidentiality and non-infringement, non-compete, termination, limitation of liabilities and damages for breach.

The quality agreement will be the key regulatory document that focuses on GMP requirements and other regulatory aspects, sets forth technical details and quality standards, and specifies how parties will work together to control drug quality, safety and efficacy. It will not include commercial terms and conditions, which will be covered in the separate contract manufacturing agreement. The quality control departments of both the MAH and CMO are expected to actively participate in the drafting of the quality agreement and the technical and quality/technical details therein must be drafted by the technical experts who are familiar with production process and GMP requirements. The quality agreement will be subject to audits and inspections by the NMPA.

The Guidance includes a sample quality agreement setting forth the key elements. (We are happy to email a copy of the bilingual version of the agreement via email upon request.)

b. Key responsibilities of MAH

The Guidance re-emphasised that the MAH is legally responsible for the safety, efficacy, and quality control of drugs throughout their entire lifecycle, including the development, production, operation and use of such drugs, and must not delegate any such obligations or responsibilities to the CMO. In particular, the MAH bears the following responsibilities as required under GMP requirements and Chinese laws and regulations:

  • Before the execution of the quality agreement, the MAH is required to conduct onsite due diligence on the CMO’s production facilities and its personnel, and assess the suitability and competence of the potential contractor.
  • The MAH is responsible for the selection, management and quality control of materials required for manufacturing.
  • Throughout the term of the contract manufacturing arrangement, the MAH is expected to provide guidance to and monitor the CMO’s performance to ensure the continued and stable production of drugs meeting all quality standards. The MAH must also conduct regular audits of the CMO’s quality management system during the manufacturing period.
  • The MAH is responsible for thoroughly evaluating and verifying the impact of any production change on the safety, efficacy and quality control of the drug.
  • The MAH is responsible for the release of drug products onto the market, while the CMO is responsible for duly completing all tests and inspections to confirm that the drug products meet all approved specifications prior to delivery from the manufacturing facilities.

c. Key responsibilities of CMO

The Guidance provides that the CMO must carefully perform all its obligations under the quality agreement, comply with all GMP requirements, and produce drugs strictly in accordance with national standards and the procedures approved by the NMPA. In particular, the name, dosage, specifications, production process, source of raw and auxiliary materials, packaging materials and containers in direct contact with the drugs, packaging specifications, labels, instructions, approval certificate number, etc. must be fully consistent with those indicated in the drug approval certificate held by the MAH, as approved by the NMPA. The CMO must also actively cooperate with the MAH in its audit and take measures to correct and prevent the recurrence of any deficiencies found in the audits.

4. Recommendations

The sample quality agreement provided by the NMPA only aims to cover each party’s fundamental and basic responsibilities. It is highly recommended that the MAH, who is legally required to take primary responsibility, negotiates in detail and conducts a thorough review of the quality agreement with the potential manufacturer before entering into the contract manufacturing arrangement. Such quality agreement should include sufficient details to provide a clear guideline on the parties’ subsequent performance. For example, the quality agreement is expected to include detailed SOPs to deal with the change control, deviance, OOS and OOT; set forth details of the production process, technical and quality standards, specifications and validation protocols; and list specific matters/documents subject to approval by the MAH/CMO.

It is also important for the parties to establish an effective means of communication and specify in the quality agreement the main contact and person in charge of technical and quality matters in case any issue arises in the performance of the quality agreement. The communication results and agreed solutions should be recorded in writing and properly signed by the authorised representatives of each party (who are usually the parties’ legal representatives or the duly authorised individuals in charge of quality control).