Globalisation leads to new FDA authorities over drug supplier quality  



FDA Commissioner Margaret Hamburg, along with the most senior FDA drug compliance officials, sounding the alarm bell, declared at a public hearing on 12 July 2013 that the increasing globalisation of the manufacture of the US drug supply has spawned the need for and creation of many new enforcement authorities in the Food and Drug Administration Safety and Innovation Act (FDASIA) of 2012, including new part 711 concerning supplier controls. For many years, current Good Manufacturing Practices (cGMPs) have provided the backbone of the regulatory structure around the manufacturing of drugs for US distribution. FDA relied on use of the term ‘current’ as the legal basis for its expectation that industry would modernise manufacturing techniques and controls as necessary. This worked relatively well for a number of decades; however, in the last decade the complete outsourcing of manufacture of API, excipients and packaging to third-party suppliers in emerging markets has caused major strains on FDA resources, and caused sleepless nights among FDA regulators. The lengthening, complexity and fragmentation of the supply chain has increased the threat to the integrity of product coming into the US, according to John Taylor, FDA Acting Deputy Commissioner for Global Regulatory Operations and Policy. 

Congress strengthens legal authority for FDA Regulation of the drug supply chain

Under Section 301 of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. § 331, manufacturers are prohibited from introducing or causing the introduction of adulterated or misbranded drugs into US interstate commerce. A product is adulterated if it is not manufactured, processed, packed, or held pursuant to current cGMPs.See 21 U.S.C. 351(a)(2)(B). However, cGMP statutory provisions did not specifically address suppliers. To address this gap, in 2012 Congress included in new legislation (FDASIA) Part 711 specifically to include“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 manufacture of drugs, and finished drug products”. See Pub. Law 112-144 (9 July 2012). The term cGMP is now statutorily defined in Section 501(a)(2)(B) to require the oversight of raw and other materials used in drug products. 

Where do the cGMP Regulations address supplier controls and quality?

Notwithstanding the new law, the cGMP regulations do not yet prescribe controls for ‘supplier quality’. Rather, the cGMP regulations require that manufacturers have a quality control unit that has the responsibility and authority to approve or reject all components, containers, closures, in-process materials, packaging, labelling and drug product, as well as to approve or reject any product manufactured, processed, packaged, or held under contract by another party. 21 C.F.R.§ 211.22(a). FDA has recently reasserted that manufacturers cannot outsource their responsibility to approve and release drug components and finished pharmaceuticals. The cGMP regulations also require that manufacturers have adequate procedures and inspections/sampling controls to ensure the quality of raw materials. 21 C.F.R. § 211.80. FDA is, for example, considering systems which will verify certificates of analysis. 

Most recently, FDA issued a draft guidance on Quality Agreements for Suppliers (May 2013) which describes FDA’s current recommendations on defining and documenting the responsibilities of parties that manufacture drug products. 

What are the elements of an adequate supplier quality program?

FDA’s new guidance identifies several essential elements of a well-managed supplier quality program:

Risk evaluation of suppliers and services. FDA recommends that, before outsourcing a manufacturing activity, the owner should conduct a risk evaluation of both the extent of controls necessary for the particular activity and of the supplier. Factors that manufacturers should include in ranking the risk include the specific component being sourced (API, excipient, labels, inner versus outer packaging, laboratory testing), complexity of process and/or equipment, geographic location and regulatory oversight of the supplier’s site, regulatory and quality history of the supplier, and the financial status of the supplier. FDA stated at its public hearing that in its enforcement and inspection efforts for suppliers, it does not intend to use ‘lagging metrics’ (i.e., number of recalls) to determine which suppliers are high risk, but rather real time metrics such as number and rate of batch failures, out-of-specification levels, etc. Therefore, it advisable for manufacturers to consider reviewing similar types of data in qualifying their suppliers.

A Quality Agreement. Per its new guideline, FDA now requires that manufacturers have Quality Agreements with their suppliers. The Quality Agreement should be separate or severable from the master services agreement and should be written with the active participation of the company’s Quality Unit. The Quality Agreement should also have the following components: (i) comprehensive allocation of responsibilities of each party; note only the owner can approve final product release; (ii) communication plan between the parties for oral and written communications; (iii) routine and for-cause auditing rights; (iv) facilities and equipment specifications, validation and maintenance responsibilities; (v) materials management, including which party will set specifications for raw materials, audit and qualify sub-suppliers, conduct sampling and testing, and inventory management (e.g., segregation, quarantine); (vi) product-specific terms, including specifications, and operational requirements such as batch numbering, expiration dating, process validation and technology transfer; (vii) laboratory controls, including requirements for validating equipment and methods, sampling protocols and testing timelines, and investigating deviations and out-of-specification (OOS) results; (viii) documentation and recordkeeping requirements, including as to electronic document systems and their validation; and (ix) change control processes, including identification of changes requiring prior approval by the owner.

Considerations relating to enhanced supplier quality programs

The regulatory expectation that relationships between owners and suppliers will be better, documented and managed will have significant commercial consequences. These include: 

Unrealistic expectations. Some supplier companies will be tempted to offer more than they can reasonably deliver. Owners must therefore conduct adequate supplier due diligence using appropriate metrics to determine if it is capable of meeting its quality commitments. Although it might be commercially advantageous for an owner to strike a ‘hard deal’ with the supplier, supplier failure will cause serious regulatory and financial consequences for the owner. 

Demands for proprietary information. Owners will demand under the auspices of FDA’s new guidance the need for significant information concerning suppliers, and their quality systems and resources. The parties must create mechanisms for the exchange of relevant information such as non-disclosure agreements, third party exchanges of information, password protected databases, use of Drug Master Files, or other mechanisms that protect both parties. 

Timing. In view of FDA’s strong recommendation for a separate Quality Agreement, the supply contract negotiation process will be extended. 

Transparency about filings. Especially in partnerships involving new product filings, the parties must be transparent about their status to ensure credible communications with FDA during pre-approval or other inspections and transfer of information into filings. 

Use of third-party auditors to qualify suppliers. The parties must agree on whether, and the extent to which, they will rely on third party auditors, who the auditors will represent, and who will pay for them.

Alternative suppliers. Owners must make adequate preparations for alternative suppliers if there is a serious GMP deficiencies with a supplier. 

Sub-supplier diligence. Both owners and suppliers must be willing to vet their sub-suppliers as to performance history and experience, and demand documented evidence of quality operations. 


Supplier quality is the new frontier. Supplier quality issues should be front and centre for review and enhancement in all compliance and quality plans to avoid serious regulatory enforcement actions and business disruption, in 2013 and beyond.


Kathleen M. Sanzo is a partner at Morgan, Lewis & Bockius LLP. She can be contacted on +1 (202) 739 5209 or by email:

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Kathleen M. Sanzo

Morgan, Lewis & Bockius LLP

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