Quality Agreements: Part I, Why They are Critical

Quality agreements between drug companies and the contract manufacturing organizations (CMOs) they employ have been the subject of controversy and FDA scrutiny for many years, prompting the drafting and release of FDA guidance on that topic in 2016. Warning letters and other regulatory actions have resulted from the lack of a quality agreement where one should be in place or poorly written ones that do not ensure the parties have appropriately delineated responsibilities to ensure compliance with GMP regulations.

[Related: Download a comparison of two of the top CDMOs, that compares GMP enforcement actions, primary citations, and secondary citations.]

At the International GMP Conference held virtually in early March 2021 co-sponsored by the University of Georgia at Athens and FDA, Alan Minsk, Partner and Leader of the Food and Drug Practice team at the law firm, Arnall Golden Gregory (AGG), provided a detailed look at quality agreements and his firm’s experience working with clients on the agreements.

Minsk has been with the AGG for over 20 years and is Leader of the firm’s Food & Drug Practice Team. He focuses his practice on advising pharmaceutical, biologic, medical device, cosmetic, food, and dietary supplement companies on legal and regulatory FDA matters.

A detailed review of his presentation, “Legal and Regulatory Issues Related to Quality Agreements,” is presented in two parts: In Part I, Minsk covers:

• The content of a quality agreement
• Why they are important
• Who should be involved in writing them
• Dealing with unexpected complications
• A detailed examination of the FDA guidance and how to comply with it
• Who has the ultimate responsibility for quality

In Part II, further insights are provided on:

• Developing a quality agreement
• Incorporating the basic sections from the FDA guidance
• Oversight and involvement
• Impact of the EU privacy regulations
• Practical issues
• The importance of using common language
• Involvement by rank-and-file QA and RA personnel
• Recommendations made by his firm resulting from work with clients on quality agreements

What is a Quality Agreement?

What is a quality agreement? That term is not found in the Federal Food, Drug, and Cosmetics Act (FD&C Act), or in the implementing regulations. It can be thought of as a contract meeting of the mind.

“You and I decide to agree to do something and hopefully it is going to be in writing,” Minsk explained. “In this case, it is a quality agreement. We are deciding to write down who is going to be responsible for what, specifically delegating responsibilities to ensure compliance with current good manufacturing practices.”

A quality agreement describes specific requirements regarding the product—a drug or biological—and services that are to be provided through specifications. It establishes the roles, responsibilities, and procedures between the parties’ respective regulatory affairs or quality assurance groups.

Why Have a Quality Agreement?

The overall goal is to ensure the quality, safety, and effectiveness of products. A quality agreement aims to minimize—not necessarily eliminate, because that is almost impossible—problems, confusion, errors, and regulatory deficiencies by trying to write down things in advance. That is one of the major goals.

Another reason to have a quality agreement is to make sure that the parties, whether it is internal to an organization or external, are literally and figuratively on the same page and in agreement.

It aims to try to minimize the confusion between the two parties and within the organization, and to try to minimize potential litigation by defining expectations.

A quality agreement describes specific requirements regarding the product

“I have done this for about 28 years in the FDA space,” Minsk said. “You try to allocate and delineate roles and responsibilities and the risks between the parties. The focus is on the specific project at hand, setting timelines for the completion of the specific actions, and writing it down.”

The agreement defines the communication and documentation between the parties. The intent is to reduce the internal frustration of being told what to do without sponsor input and possibly not being able to live up to those expectations. The agreement also tries to anticipate one-offs.

Timing is Important

“As the outside counsel,” Minsk explained, “I focus on the FDA. I have other partners who deal with the corporate side. I look at a lot of quality agreements. I often am brought in, if we are talking about a nine-inning ball game, typically in the eighth inning of the ball game. Sometimes, it is the bottom of the 9th.”

His experience is that often quality and regulatory personnel are brought in in the late innings—maybe the 7^th or 8^th inning—and yet the commercial team or business development team may have already started the negotiations and almost finalized the agreement. Quality and regulatory are often brought in extremely late, even though they are ultimately responsible for most provisions of the quality agreement.

Those functions may be told that they will be responsible for things like adverse events or out-of-specification investigations—things that may even have deadlines from the FDA perspective.

The agreement defines the communication and documentation between the parties

“They are telling you what you will be doing, and you may be saying, ‘That’s sweet, but you know what? I have my own obligations. I have FDA obligations’,” or even DEA obligations or state obligations, Minsk emphasized.

Quality and regulatory professionals may be frustrated regarding why they were not brought into the process earlier.

“I am the service provider and I am the lawyer,” Minsk commented. “Nobody really cares about my feelings. But you have a certain frustration that you feel about being brought in earlier and that you may even not be able to live up to the expectations, and that is only going to manifest itself when there may be corrective action later or because the company may have product delays, shipment delays or delivery delays, which then, of course, frustrates the entire company.”

Unexpected Complications

When companies sign the quality agreement, “everyone is happy. It is like newlyweds. But then reality sets in, and, inevitably, although no fault of anybody, stuff happens,” Minsk commented.

If you are in QA, you must deal with the “what ifs.” Although the quality agreement is not specifically defined in FDA law, FDA may ask during an inspection to review documents that describe the way the contract service provider was managed or audited.

It is important to understand that changes to the product without proper regulatory approval can make the product violative. For example, if someone changes the product specifications of the drug or biologic, it can make the product an unapproved new drug or biologic.

On the device side, the agency may require a new 510k for the product. If it required a premarket approval application it could become an adulterated product. Or you could make changes that would result in inadequate directions for use or inadequate wording that could also misbrand the product. So, it is important that the agreement attempts to minimize that risk. Not all changes require FDA prior approval.

It is also important to make sure that the agreement is in place before performing GMP activities. “But I am well aware that, often, the agreement is signed ahead of time or the ship has left the dock or whatever the expression may be, and no one wants to be the person in the meeting who raises their hand to say, ‘There may be a problem.’”

Quality and regulatory are often brought in extremely late, even though they are ultimately responsible for most provisions of the quality agreement

Under a quality system, the manufacturer should be sure the contract firm is qualified as the result of due diligence before signing an agreement with the firm.

The contract firm’s personnel should be adequately trained and monitored for performance according to the quality system. Make sure that everyone is on the same page. If the CMO is making a product for the company according to its specs, “it is nice to think that you have your own quality systems or our own GMP SOPs. But this is your product, and the contract firms and contract manufacturer’s quality systems should not conflict,” Minsk emphasized.

The quality agreement should be specific to particular products. One size does not fit all. Often, companies will ask for a template agreement, or companies will often have their own template agreement, Minks said. It is fine to start with that, but you do not finish with a template agreement. While it does help with cost efficiencies, there is no reason to reinvent the wheel. Every project is different.

FDA Guidance

The 2016 FDA guidance on contract manufacturing agreements for drugs is limited to human, veterinary, and biologic drug products. Even though it is specific to drugs, biologics, and veterinary drugs, others, including device manufacturers, can refer to it for guidance and best practice.

The guidance attempts to offer recommendations to industry to minimize quality surprises and to maximize regulatory compliance by building quality into the process early on. That was one of the things FDA talked about a few years ago—trying to be less reactive and fixing the problem at the end, to building compliance into the process earlier.

FDA’s final guidance applies to contract facilities, including analytical testing labs, which package, hold, label, test, or operate any part of the manufacturing process for active pharmaceutical ingredients, drug substances, in process materials, finished drug products, combination products, drug constituents of combination of drug/device products, and biologic drug products.

Commercial manufacturing is covered by the guidance. It does not cover research and development activities, manufacturing of materials for investigational new drug studies, or manufacturing of material for veterinary investigational drugs. However, many of the principles described in the guidance can be applied in precommercial stages of the pharmaceutical life cycle.

Content of the Quality Agreement

Minsk shared a part of the FDA quality agreements guideline that provided key points he felt were important to reinforce (Figure 1).

Note the language in the second part of the first paragraph, “Representatives from each party’s quality unit and other relative stakeholders should participate actively in the drafting of quality agreements.”

Also note that the quality agreement should be separate or at least severable—separated—from the commercial contract, such as a services agreement or a supply agreement. As mentioned previously, the quality agreement may be reviewed by FDA during an inspection.

FDA recommends the quality agreement should include the following provisions:

• The purpose or the scope, which explains the contract manufacturing services to be provided
• The definitions, which would provide the precise meaning of terms in the quality agreement
• Resolution of disagreements or conflict, which would explain how the parties will dissolve the disagreements about product quality issues or other problems; “That one is very important because it determines who has the final say,” Minsk stressed
• Manufacturing activities, which would document quality unit and other activities related to production processes, quality equipment, facilities and equipment, materials management, change controls, etc.
• Manufacturing activities, which would document quality unit and other activities related to production processes, quality equipment, facilities and equipment, materials management, change controls, etc.; Described in detail here are all of FDA’s inclusions
• Lifecycle of and revisions to the quality agreement
• Documents to describe how parties will communicate information on traceability and prevention of cross-contamination in cases where the contracting manufacturing organization manufactures several different products
• How the contractor will report manufacturing deviations in drug manufacturing and how deviations will be investigated and resolved under CGMP requirements

The AGG attorney explained an issue he has seen with wording such as, “You will report promptly, as soon as possible, or as soon as practical.” He asked, “What does that mean? Is this biblically promptly or business promptly? I do not know what that means. Your promptly and my promptly are two different things. I think you need to be extremely specific.”

There could be regulatory implications. If you have an obligation to report to FDA within seven days, three days, or 15 days, whatever the issue is, and if there is a regulatory reporting obligation, and all the contract says is, “promptly,” timing of the communication may not fulfill the reporting mandate.

Your corporate counsel may not have been aware of that, and that is not a slight to the corporate counsel, he pointed out. They just may not have been aware that there was a regulatory obligation. That is where you must raise your hand and say, “Excuse me. There may be a regulatory reporting obligation that we have or that they have.” Probably you because you are the one who has the application. “We need to build in some time. We need to decide so we may need 24 hours or 48 hours. Therefore, we need to work backward.”

Expectations for reviewing and approving the documents, including SOPs and manufacturing records by the product owner and the CMO should be included. The quality agreement should be independent of all other business documents because the agreement should focus only on quality and compliance, not business or commercial issues.

Who Has Ultimate Responsibility?

FDA reiterates in the guidance through two hypothetical scenarios that the owners and the contracting facilities are both responsible for current GMP and regulatory compliance. A quality agreement does not exempt the parties from statutory or regulatory responsibilities. That said, the application holder remains ultimately responsible for ensuring that its products are made in compliance with CGMPs or Quality System Regulations (QSRs), even if the quality agreement delegates certain manufacturing activities at the contract facility.

If FDA finds problems at a contract facility, the regulators might determine that it is appropriate to inspect the owner, and owners could be in violation of CGMPs in their servicing of the contract facility’s manufacturing activities.

FDA reminds industry that quality agreements should be available for agency review when the agency conducts establishment inspections. FDA routinely requests to produce evidence of quality agreement or lack thereof.

Examples of FDA enforcement have occurred when a quality agreement was not followed or a problem arose because there was no agreement in place and gaps arose.

Minsk explained that the language the agency generally uses is not always direct.

“It was not that FDA said, ‘You violated GMP for lack of a quality agreement. It is not that black and white. What FDA will say is, ‘There was a violation of law. And if you had a quality agreement, that might not have occurred.’ Or ‘you had a quality agreement, and you did not follow it.’ Or FDA might cite a company for failing to have an effective QC unit if the product’s quality was negatively affected.”

Resource Link

FDA 2016 Guidance for Industry: Contract Manufacturing Arrangements for Drugs: Quality Agreements

[Related: Download a comparison of two of the top CDMOs that compares GMP enforcement actions, primary citations, and secondary citations.]