In late May, FDA published a draft guidance entitled, Contract Manufacturing Arrangements for Drugs: Quality Agreements, to clarify the agency’s current thinking on the obligations of each entity involved in the contract manufacturing of drugs and how such agreements may be used to outline responsibilities.1 The guidance applies to the commercial manufacturing of active pharmaceutical ingredients, finished drug products, combination products, and biological drug products. Additionally, the scope of the guidance is limited to drugs entering the market and not those intended for research. FDA uses the term “manufacturing” to include “processing, packing, holding, labeling operations, testing, and operations of the Quality Unit.” The guidance defines 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 [current Good Manufacturing Practice requirements]. In general, the Quality Agreement should clarify which of the CGMP activities are to be carried out by each party per the applicable regulations…

While the guidance is not legally binding, when it is finalized, it will represent FDA’s current thinking. Comments on the guidance may be submitted to FDA until July 29, 2013.

The drug manufacturing process may involve separate operations, all of which may be performed by the party that introduces the drug into interstate commerce (for example, the drug owner or sponsor). Often however, an outside contractor is engaged to complete certain of the operations. All parties involved must assure that the drug is not adulterated or misbranded due to the contractor’s actions.

FDA regulations do not explicitly require parties to document their responsibilities, although the regulations note, “[t]he responsibilities and procedures applicable to the quality unit shall be in writing . . . .”2 A written

quality agreement facilitates compliance with this CGMP requirement. The guidance notes that various ICH guidance documents also recommend companies monitor and audit their contract manufacturers and implement written quality agreements. In addition, while FDA does not routinely request or review business agreements, during an inspection it routinely requests and reviews evidence of the existence (or lack) of a quality agreement.3

FDA Recommendations Concerning Quality Agreements

This article highlights some of the FDA recommended provisions and sections a quality agreement should include but does not discuss the example scenarios included in the guidance.

The guidance’s recommendations include, but are not limited to:

  • Format: Quality Agreements should be separate or severable from commercial contracts, such as Master Service Agreements, and should track the applicable CGMP regulations to ensure all requirements are covered.
  • Sections: Most Quality Agreements should contain the following sections:
    • Purpose/Scope
    • Terms, including effective date and termination clause
    • Dispute Resolution
    • Responsibilities, including communication mechanisms and contacts
    • Change Control and Revisions The guidance notes that the latter two sections are the most significant.
  • Terms: The guidance suggests adopting the contractor’s terms to decrease the probability of error. Product-specific terms may be included in the Quality Agreement or an appendix and should include information on:
    • product/component specifications
    • manufacturing operations, including batch numbering processes
    • expiration/retest dating, storage and shipment, and lot disposition
    • process validation, including design, qualification, and ongoing monitoring.
  • Quality Unit Responsibilities: The Quality Agreement should establish who will handle these responsibilities and specify that the contractor will comply with CGMP. The guidance also recommends including a provision allowing the drug company sponsor to regularly audit the manufacturing site to ensure CGMP compliance, as well as for-cause audit rights. Obligations relating to regulatory inspections, including reporting inspection findings, should be delineated. Parties may choose to require reporting objectionable conditions observed during inspections and audits (presumably both external and internal) even if the products inspected were not those the Quality Agreement specifically covered.
    • Product Release: The Quality Agreement should be especially clear that the drug company sponsor is ultimately responsible for approving the finished drug product prior to its release. Under CGMP, this responsibility cannot be delegated to the contractor.
    • Communication: The Quality Agreement should establish communication plans between the parties, particularly if deviations occur, provide the parties’ key points of contact, and indicate how the parties will communicate to prevent cross-contamination and maintain traceability if the contractor handles drugs for multiple companies.
  • Facilities and Equipment: The Quality Agreement should include a section with the addresses for the site(s) and the specific services that will be conducted at each location. The Quality Agreement should identify the party responsible for equipment validation, qualification, and maintenance necessary to perform the contracted operations.
  • Materials Management: In the Quality Agreement, FDA recommends a section that, among other things, allocates responsibilities for managing materials, including setting specifications, monitoring suppliers, sampling, testing, labeling, preventing cross contamination, and maintaining the materials.
  • Laboratory Controls: Each of the parties to the Quality Agreement should have sufficient laboratory \ facilities available to test and approve/reject drug products. The Quality Agreement should establish procedures clarifying controls and testing over sampling and the roles that both the drug sponsor and the contractor should play to ensure the methods are validated. The contractor should be primarily responsible for the equipment to be qualified and maintained in a controlled state, but the drug sponsor should routinely audit the laboratory. If the contractor is used to store and test for stability and reserve samples, the frequency of testing and communication of the results should be indicated. The Quality Agreement should identify the party responsible for investigating deviations.
  • Documentation: The Quality Agreement should establish procedures for the drug sponsor to approve any documents related to the product and changes to these documents, and describe how the documents may be immediately retrieved and maintained under a certification or controlled copy procedure. If electronic recordkeeping systems are used, the Quality Agreement should state that electronic records will be stored to maintain their traceability, reliability, and integrity.
  • Change Control: The Quality Agreement should specify when the contractor may implement changes and whether each change requires the notification to, or approval from, the drug sponsor. The guidance recommends certain changes of which the contractor should notify the drug sponsor, such as changes in manufacturing processes. It also advises that the parties notify one another when certain actions occur because of associated changes, such as customer complaints.
  • Final Approval: The Quality Agreement should establish the party with the final approval for various activities.

Quality Agreements Do Not Relieve Parties of Liability

Although quality agreements are an important tool to ensure a drug’s safety and effectiveness, the drug sponsor and the contractor must comply with CGMP requirements, regardless of their inclusion (or not) in the Quality Agreement. The FDA guidance document refers to two U.S. Supreme Court decisions to remind industry of individual and criminal exposure for non-compliance with applicable law.4 As a result, a contractor cannot agree to manufacture under non-CGMP conditions, and the Quality Agreement will not serve as an excuse for manufacturing drugs in a non-compliant manner. If a Quality Agreement’s terms become inadequate, the contractor should cease operations, or bear the costs to modify operations to maintain regulatory compliance and seek redress from the drug sponsor. In addition, the drug sponsor cannot delegate final product release of finished goods for distribution.

Similarly, FDA may hold the drug owner or sponsor liable for failures if it finds quality-related failures at a contractor. As a recent example, FDA issued Warning Letters in April 2013 to dietary supplement owners who entered into agreements with contract manufacturers due, in part, to the owners’ failure to establish and follow written procedures for quality control operations, including written procedures for conducting a material review and making a disposition decision.5 FDA told the owners that although it may “contract out certain . . . manufacturing operations, it cannot . . . contract out its ultimate responsibility to ensure that the dietary supplement it places into commerce (or causes to be placed into commerce) is not adulterated.”

AGG Observations

FDA’s guidance document and its recommendations about quality agreements are attempts to help industry act proactively to ensure quality-related compliance when contracting with third party contractors. It also identifies those areas the FDA may review during an inspection. To some extent, FDA’s guidance is a roadmap on how to prepare a Quality Agreement and signals FDA’s interest in advancing quality manufacturing through the use of written agreements. The recommendations described in the guidance document are consistent with the advice AGG has provided to clients and outlined in presentations. There are other contractual provisions, not identified by FDA, that companies should consider, whether FDA- or non-FDA-related, to maximize regulatory compliance, minimize commercial disputes, and promote qualityrelated drug manufacturing. In light of the new draft guidance, companies should prepare or revise quality agreement templates with FDA’s expectations in mind and utilize counsel as appropriate.