Paula Katz is director, Guidance and Policy Staff in the Office of Manufacturing Quality, Office of Compliance; at the Center for DrugEvaluation and Research, FDA.

Paula Katz

FDA finalized its guidance on contract manufacturing, 

Contract Manufacturing Arrangements for Drugs: Quality Agreements

, in November 2016 (1). This document explains how parties that engaged in contract manufacturing can use quality agreements to delineate their roles and ultimately ensure compliance with current good manufacturing practice (CGMP).  
	
	In the months since FDA finalized this guidance, how has industry responded? Are manufacturers that establish contracts for specific manufacturing activities using quality agreements effectively? The answer is mixed; yes, many are, but there is room for improvement. In this article, the authors cover the scope and legal underpinnings of the guidance, as well as what FDA investigators may consider regarding a quality agreement during an inspection. The article also provides some examples of issues related to quality agreements that FDA has called out in warning letters since the guidance was finalized. 

	In talking about the parties involved in contract manufacturing of drugs, the term “owner” is used to mean manufacturers of APIs, drug substances, in-process materials, and finished drug products, including biological products and combination products. This excludes retail pharmacies, drug stores, supermarkets, discount warehouse stores, or other retailers who purchase finished drug products to sell over the counter (OTC) as a store brand. “Contract facilities” refers to parties that perform one or more manufacturing operations on behalf of an owner or owners.

	The guidance document emphasizes the need for good communication between owners and contract facilities. It also emphasizes the shared nature of the responsibility to comply with CGMP. Neither party can blame the other for its failure to meet CGMP. 

, FDA describes its current thinking on defining, establishing, and documenting manufacturing activities for all the parties involved in contract drug manufacturing. The drug product types include: 

		Drug constituents of combination drug/device products. 

	The scope of the guidance is limited to CGMP-related roles, responsibilities, and manufacturing activities between owners and contract facilities. The scope includes activities such as processing, packing, holding, labeling operations, testing, and quality unit operations.  

	Owners and contract facilities interact in a variety of ways. An owner could be a product sponsor or an entity that decides to make and market products. An owner could contract out all the manufacturing activities, but when an owner uses a contract facility, the owner’s quality unit remains responsible under CGMP for approving or rejecting drug products manufactured by the contract facility, including for final release.

	There are numerous reasons for owners to turn to contract facilities to outsource portions or all manufacturing activities. Owners typically benefit in terms of expertise, cost, efficiency, or capacity. To ensure CGMP conformance, product quality, and successful collaboration, all parties must clearly understand their CGMP-related roles and manufacturing responsibilities. Failure to define roles for manufacturing activities can lead to misunderstandings or misinterpretation by the owner and contract facility. These misunderstandings or erroneous assumptions can have significant consequences for product quality. Each party engaged in the manufacture of a drug is responsible for ensuring compliance with CGMP for the manufacturing activities it performs. Delineating the CGMP-related roles, responsibilities, and manufacturing activities to be performed by each party is paramount in assuring product quality. Above all, remember that quality agreements cannot be used to delegate responsibility to comply with CGMP. 

	After an owner and contract facility establish a quality agreement, they may find they need to adapt to changes that affect their manufacturing activities. Either party should be able to initiate a conversation as change can originate from various sources-changes to facilities, raw material sources, processes, test methods, specifications, or the site of production. The quality agreement should address how changes made by either party are communicated and agreed upon and which changes will require prior approval to implement. Although periodic reviews are useful to ensure the agreement remains current, these periodic reviews do not replace essential real-time communication of changes between the parties.

	Owners and contract facilities are responsible for ensuring that their quality agreements are working for them. Issues arise from poor communication, misinterpretation, assumptions on the scope of work or activities to be performed, terminology, escalation/notification procedures, and control of change over the project/product’s life cycle. To assure product quality, owners must take steps to fully understand the contract facility’s scope of activities and capabilities. Similarly, contract facilities should not over-promise or make assumptions about a client’s expectation. Quality agreements are not only a way of meeting CGMP requirements; they make sound business sense to assure all parties involved understand their role in producing a compliant product. 

	Drugs not manufactured in conformance with CGMP are deemed adulterated under Section 501(a)(2)(B) of the 

(FD&C Act). Under this statute, a drug is adulterated “if the methods used in, or facilities or controls used for, manufacturing, processing, packing, or holding do not conform with CGMP.”  Manufacture, processing, packing, or holding of a drug product is defined as “includ[ing] packaging and labeling operations, testing, and quality control of drug products” (2).

	In 2012, the Food and Drug Administration Safety and Innovation Act (FDASIA) amended Section 501 of the FD&C Act, clarifying that CGMP “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.” This amendment clarified the link between a firm’s quality management activities and CGMP. CGMP 

 require that the quality unit’s procedures and responsibilities are in writing, and that they are followed (3).

	The CGMP regulations recognize that many owners use contract facilities, such as production facilities, testing laboratories, packagers, and labelers, to perform manufacturing activities. FDA regards contract facilities as extensions of the owner. Contract facilities are responsible for ensuring CGMP compliance with the manufacturing activities they perform for the owner. While FDA’s regulations do not require quality agreements, they do require that firms put their quality unit procedures and responsibilities in writing and follow them. The regulations make clear that the owner’s quality unit is responsible for the drug products it manufactures, and such responsibility includes the approval or rejection of products manufactured, processed, packed, or held under contract by another company.

	What does FDA do with a firm’s quality agreement?

	When owners work with contract facilities, one way to ensure that both entities are CGMP-compliant is via quality agreements. “Quality agreements should clearly describe the materials or services to be provided, quality specifications, and communication mechanisms between the owner and the contract facility,” the guidance says (1). During an inspection, FDA may review and collect copies of quality agreements as a way of verifying compliance with FDA’s regulations. Quality agreements, however, are not the only mechanism for ensuring that owners and contract facilities comply with CGMP. What is important is that the respective parties’ quality unit responsibilities and procedures are in writing and are followed. 

	As noted earlier, FDA regards contract facilities as extensions of the drug owner. Owners’ quality units retain legal responsibility for approving or rejecting drugs manufactured by the contract facilities, including final release of drugs. That is to say, CGMP responsibilities cannot be contracted away with quality agreements. As FDA has made clear in numerous 

, owners are responsible for the quality of drugs they produce, regardless of the agreements in place with contract facilities (4). Similarly, contract facilities are responsible for the drugs they produce and activities they perform, regardless of the agreements in place with the product owner or application sponsor. If a party performs manufacturing activities, it is responsible for complying with CGMP, and no written instrument between the parties can remove or shift this obligation.

	It is important to note that, while FDA may uncover issues at a contract facility that extend to the owner, and vice versa, FDA sends warning letters only to facilities it has inspected. However, FDA may add the owner or contract facility as a CC line in a warning letter. In addition, findings at one facility may trigger an FDA inspection at another facility.

	Mistakes that a good quality agreement could prevent

	Since finalizing the guidance document, FDA’s Office of Manufacturing Quality (OMQ)--within the Center for Drug Evaluation and Research’s Office of Compliance--has issued at least a dozen warning letters that point out problems stemming from failure to fully comply with CGMP requirements and failure to communicate roles and responsibilities in contract manufacturing relationships (4). The following illustrate problems FDA sees when:

		The owner and contract facility failed to follow their quality agreement 

		Owners failed to ensure contract facilities were CGMP-compliant 

		Firms failed to communicate issues or changes 

		Firms attempted to contract away responsibility. 

	Many of these examples also illustrate how poor practices can put patients at risk due to the failure of the parties to ensure product safety and quality. In some of these cases, FDA sent warning letters to the contract facility with a courtesy copy to the owner. In other cases, both the owner and the contract facility received warning letters.

	In a recent case, FDA investigators found that a drug manufacturer failed to validate its manufacturing processes and to test components used in drug manufacturing. In response to the FDA 483 observations, the company claimed that it was not a manufacturing facility. It said that it “is a private label distributor, which has no manufacturing capabilities,” and noted that it uses a contract facility. Its contract facility happened to be located at the same address and shared personnel with the distributor. FDA put the firm on import alert and sent a warning letter saying, “it is important to note that quality agreements cannot be used to delegate statutory or regulatory responsibilities to comply with CGMP.”

	In another recent case, an owner contracted out product release testing, but failed to ensure that the contract testing lab’s methods were validated. FDA issued a warning letter to the owner saying, “Your quality assurance agreement with [contract facility] does not specify method validation responsibilities … You and [contract facility] have a quality assurance agreement regarding the testing of your products. You are responsible for the quality of drugs you produce, regardless of agreements in place with your contract testing laboratory. You are required to ensure that drugs are made in accordance with section 501(a)(2)(B) of the FD&C Act for safety, identity, strength, quality, and purity.” 

	FDA investigators found that a contract manufacturing facility had shipped drugs to the United States without expiration dates. In response to the FDA 483 observations, the firm said, “As we understand, our customers conduct testing to confirm stability and expiration dating.” The firm also responded that it was contacting its customers to confirm responsibilities and OTC drug product expiration dating. FDA put the company on import alert and sent a warning letter with a courtesy copy to the owner. In this example, the contract facility made a bad assumption. This illustrates why all parties must be aware of their roles and responsibilities to ensure adulterated product is not marketed. 

	In another example, FDA cited a contract facility making OTC drugs with numerous violations the same as or similar to those in past inspections, such as failure to validate processes and failure to verify the suitability of analytical methods. In its warning letter, FDA told the firm, “FDA is aware that many pharmaceutical product manufacturers use independent contractors, such as production facilities, testing laboratories, packagers, and labelers. FDA regards contractors as extensions of the manufacturer. You are responsible for the quality of drugs you produce, regardless of agreements in place with product owners. You are required to ensure that drugs are made in accordance with section 501(a)(2)(B) of the FD&C Act for safety, identity, strength, quality, and purity.” 

	In one recent matter, both the owner and contract facility received warning letters explaining their shared responsibilities. The contract facility used the same facilities and equipment for manufacturing toxic car-care products and oral solution drugs and received an FDA warning letter citing three CGMP violations. FDA also sent a warning letter to the product owner, saying, “You are responsible for ensuring that all your products are manufactured in accordance with CGMP, including oversight of the manufacturing operations conducted by your contractor … on your behalf. Contractors are extensions of the manufacturer, and you are required to ensure that your drugs are made in accordance with section 501(a)(2)(B) of the FD&C Act.” 

	In another situation, FDA found that an owner and contract facility had released product even though neither the owner nor the contract facility had conducted release tests. The FDA warning letter said, “You explained to our investigator that you make finished product release decisions over the phone with your contract manufacturer, based on whether test results meet pre-established specifications … During the inspection, you confirmed that your contract manufacturers do not make your OTC drug products in conformance with drug CGMP. For example, you have released some drugs for which neither you nor your contract manufacturers conducted release tests for identity and strength of active ingredients. As a result, some of your drugs are distributed without confirmation that they meet specifications for identity and strength of their active ingredients.”

	‘We didn’t think we needed to share that information’

	Issues can arise through the failure to communicate a product quality issue. In this example, a contract facility was producing bottles of a sterile solution. Over a four-year period, it received more than 1500 complaints about leaking, under-filled, and empty bottles. The firm investigated and attempted to correct the problem, but failed to notify the owner about the complaints. In its warning letter, FDA said, “Your failure to follow the provisions of your quality agreement and appropriately notify your customer of the quality problems discussed in this letter may have delayed your customer’s ability to take important actions to ensure the quality, safety, and efficacy of its products, including notifying FDA via a field alert report (FAR) under 21 

	In another example, a contract facility used certain materials in production of a drug substance for a sterile drug product. In addition to failing to thoroughly investigate product quality deviations, the contract facility did not communicate with FDA about changes in its materials, even though the changes should have been reviewed and approved by FDA before being implemented. FDA issued a warning letter and sent a courtesy copy to the owner. “You and your customer, …, have a quality agreement regarding the manufacture of … Regardless of this agreement, you and … are both responsible for the quality of drugs released and ultimately administered to patients. You are required to ensure that drugs are made in accordance with section 501(a)(2)(B) of the FD&C Act to ensure safety, identity, strength, quality, and purity.” 

	Neither owners nor contract facilities can contract around CGMP. FDA recommends that owners and contract facilities use quality agreements to help ensure that both parties understand and document the actions they will take to ensure compliance with CGMP. Without a well-drafted quality agreement, the quality of products manufactured under contract may be affected and patient safety may be jeopardized.

Contract Manufacturing Arrangements for Drugs:Quality Agreements, Guidance for Industry

 (CDER, Silver Spring, MD, November 2016).
	2. 

, United States Code, Title 21.
	3. Food and Drug Administration Safety and Innovation Act, 

12-144, July 9, 2012.
	4. FDA, Warning Letters, 


	Vol. 42, No. 3
	March 2018
	Pages: 48-51

	When referring to this article, please cite it as P. Katz et al., "Good Quality Agreements Support Compliance with CGMP," 

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Drug manufacturers can improve use of quality agreements in contract manufacturing.