Quality Agreements: An AGG Podcast Recap

A few weeks ago, AGG’s Food and Drug Practice Team launched its podcast series to discuss topics affecting the FDA-regulated industry. The series, called “I Wish I Knew What I Know Now: Conversations With AGG on FDA Issues,” employs a Q&A back and forth format, lasting no more than thirty minutes. The podcast includes members of AGG’s Food and Drug Practice Team and others from AGG who work with our life science clients. The title of the podcast is a nod to the 1973 classic, “Ooh La La,” by The Faces (keeping with Alan Minsk’s love of rock music).

The first podcast, led by Mike Burke, a corporate partner at AGG, and Alan, focused on quality agreements. We shared war stories, common mistakes we see companies make and, arguably, best practices to maximize the benefit of a quality agreement. While we will not summarize the entire podcast, because we want you to listen to it, you can find it by visiting here. However, here, we will highlight some of the issues we discussed. Due to the nature of an informal 30-minute podcast, we could not cover everything we believe relevant on the topic.

FDA Issues to Consider

Why Have a Quality Agreement?

• It’s a good idea to make sure that parties (internally and externally) are on the same page and in agreement. This helps minimize confusion and potential litigation by defining expectations. It also allocates and delineate roles, responsibilities, and risks between the parties. Companies can focus on the specific project at hand, set timeline for completion of specific activities, and define communication and documentation between parties.

• A quality agreement should anticipate the “what ifs” something goes wrong.

• Although a quality agreement is not specifically required or defined in the Federal Food, Drug, and Cosmetic Act or FDA’s implementing regulations, FDA may ask, during an inspection, to review any documents that describe the manner in which contract service providers are managed. The agency may request evidence of a quality agreement.

• Changes to the product without proper regulatory approval can make the product violative (e.g., adulterated or misbranded), so a quality agreement attempts to minimize this risk (but it is important to recognize that not all changes necessarily require prior FDA notice or approval).

Ultimate Responsibility

• FDA has made clear in guidance and enforcement letters that owners and contract facilities are both responsible for cGMP and regulatory compliance; a quality agreement does not exempt the parties from statutory or regulatory responsibilities.

• The application holder remains responsible for ensuring that its products are made in compliance with cGMPs, even if the quality agreement delegates certain manufacturing activities to the contract facility.

Developing a Quality Agreement

• Quality departments of both the sponsor and the vendor should be heavily involved.

• An agreement should make sure that the rights are specified in the agreement reflect expectations of parties (e.g., visits, inspections, audits).

• The agreement should be flexible so as to be functional and practical, but also detailed to ensure regulatory compliance.

• The agreement should be in place before doing any business or performing current Good Manufacturing Practice (cGMP) activity. Too often, things are started before everything is in place; while no one wants to delay progress, confusion and error can cost more and lead to problems in the future when specific expectations are not established in advance.

Roles and Responsibilities

• The agreement should be clear to delineate roles and responsibilities.

• If a chart or a matrix of roles and responsibilities is attached, make sure it is reviewed by the appropriate internal people to make sure everyone understands the commitments.

• If responsibilities are shared, the agreement should indicate which party has the final say.

AGG Observations

• FDA allows quality agreements and, in fact, these agreements may be useful; however, they do not allow a company selling a product to abdicate its regulatory obligations — “one cannot pass the buck.”

• Companies should prepare quality agreements, but they must also have quality systems in place to ensure manufactured and distributed products are FDA-compliant.

• Quality unit representatives should be actively and proactively engaged in drafting quality agreements, along with counsel.

• Companies should audit and monitor contractors and suppliers for compliance; an agreement, without proper execution, is merely a piece of paper.

• Where FDA has defined terms, use them (e.g., recalls, adverse effects or adverse drug experience); while it is not divinely inspired, FDA’s terminology should be considered sacred. Companies make mistakes when they try to be too creative and summarize these terms rather than merely incorporating them verbatim; not only should such defined terms be included in the contract in the event that FDA inquires, but having a common vocabulary and one language reduces the risk of ambiguity and different interpretations.

• Clearly define who is responsible for handling FDA-related issues (e.g., cGMP regulations, out-of-spec investigations, complaint handling, corrective action, such as recalls). Ultimately, the holder of the application is on the hook.

• Companies should review existing quality agreements to make sure they comply with FDA guidance, and consider revisions as appropriate. It is also advisable to conduct periodic reviews of the agreements to make sure they are current and relevant.

Corporate/Contractual Issues to Consider

• The agreement should be very clear on timing, including timing of notifications between the parties and notifications to relevant regulatory authorities. Avoid using ‘prompt’ without a definite timeline.

• As discussed above, determine who has final say in making filings with regulatory authorities. Related to that, a manufacturer should have the right to review and comment on any communications with a regulatory authority.

• As stated above, parties may want to build in set review periods—once every two years, for example—to review and update the agreement.

• The agreement should build out a joint quality control committee, and be specific about roles, responsibilities, and leadership.

• Consider whose law should govern the agreement. Usually, but not always, it would be the law applicable to the manufacturer.

• Think about how disputes between the parties could be resolved, and think about a dispute under a quality agreement could affect, for example, a distribution agreement or a pharmacovigilance agreement.

• The agreement should have confidentiality language that is coordinated with non-disclosure obligations in related documents.

• In addition, the agreement should provide for audits and recordkeeping requirements.

• Relevant terms quality agreement should survive until after the last usage date of an item, sometimes up to a year after that date.

• As with any commercial agreement, a quality agreement should contain appropriate indemnification provisions.

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We hope you will listen to the next podcast, led by Brian Teras, a corporate partner at AGG, and Alan, on “Key Due Diligence Issues to Consider When Acquiring or Investing in Life Sciences Companies or Products.” You can find the podcast by visiting here. After that, our next podcast will be on “Pandemic Marketing 101: Dos and Don’ts to Market Your Brands, Products, and Services Safely,” by Anuj Desai (Intellectual Property) and Carolina Wirth (Food and Drug).