Time to Revisit Supplier Quality Management

Ensuring the integrity and quality of the biopharmaceutical supply chain has never been more difficult for life sciences companies or more scrutinized by regulators. With globalization, the path that products take from source materials to consumers has grown increasingly complex. Many companies now must manage more relationships than ever with third parties, many of which operate in jurisdictions with weak regulatory systems. And as drug prices increase and supply chains become more complex, suppliers have more economic incentives and more opportunities to substitute ingredients or take shortcuts.

James R. Darnell, Jr.

Monitoring the supply chain is much more than simply testing the quality of raw materials or components. As all companies know, the US FDA expects sponsor companies to see that their contract manufacturing organizations (CMOs) are cGMP compliant, but with contract facilities often located far away and having complicated supply chains of their own, the challenge can be daunting. What is perhaps less well known is that you must also adequately monitor your third-party logistics and distribution providers. When those providers are the final link in the cold chain, effective monitoring is critically important. But because a typical cold chain involves moving a product through multiple storage locations and forms of transportation, which often include multiple flights, ground vehicles, and staging areas, monitoring these suppliers presents its own unique challenges.

Meanwhile, regulators in many parts of the world, recognizing the increased vulnerabilities in the medical product supply chain, have stepped up their joint efforts at prevention and enforcement through increased information sharing, the leveraging of third-party auditors, and harmonization as referenced in the International Conference on Harmonization guideline Q10 Pharmaceutical Quality System. In the US, the FDA has recently embarked on an ambitious supply chain safety initiative that includes, among other things, developing good importer practices, launching a Secure Supply Chain pilot program, setting out a foundation for a track-and-trace system, dedicating a larger portion of its resources to international inspections (opening offices in China, India, Latin America, and Europe), increasing domestic inspections, and increasing enforcement. Faced with this new emphasis on regulation and enforcement of supply chain security, biopharmaceutical companies would be well advised to re-examine their current practices in managing supplier quality.

THE CONSEQUENCES OF POOR SUPPLIER QUALITY MANAGEMENT

Organizations that lack the resources, requisite capabilities, or determination to rigorously manage supplier quality may increasingly find themselves subject to the pitfalls of lax oversight. At the extreme, we have recently seen CMOs that have "show" factories where the product is purportedly manufactured when in fact it is being supplied by a "shadow" factory without the knowledge of the sponsor company. The sponsor's inadequate audit of the show factory finds nothing wrong, and the supplier continues to supply product from another location. Somewhat less blatantly, a supplier may move material from its initial place of production to a non-GMP compliant factory to save money, without notifying the sponsor company.

Suppliers also may change their own suppliers of raw materials used to manufacture drug substance or other critical materials. For example, a supplier of vials might alter its manufacturing process, which in turn could lead to problems of glass breakage and contamination. If the sponsor has no mechanism in place for monitoring such changes, quality problems are difficult to anticipate and pinpoint.

Lax oversight also may result in a decline in compliance over time. Because the supplier's quality performance has not been adequately or consistently tracked and measured, the sponsor company fails to notice when the supplier's compliance begins to trend downward. Quality problems that could have been prevented are instead allowed to fester until they eventually affect the quality of the sponsor's product. Sound quality supplier management also can save suppliers from themselves, helping them avoid regulatory actions—and helping the sponsor ensure an unhindered supply of needed materials or services.

The consequences of poor supplier quality management can be profound. In addition to exposing companies to enormous financial liability and reputational damage, defective products can cause unquantifiable human tragedy in harmed patients. Valuable product also can be wasted or lost, resulting in unreliable supply to market, lost revenue, regulatory action, and the high costs of finding and fixing problems.

Despite the potentially catastrophic consequences of poor supplier quality management, many organizations neglect it. In some cases, they may lack adequate human and technical resources to adequately monitor their suppliers. In other cases, they may monitor suppliers but neglect to follow up on concerns. Or, despite having an entire department dedicated to supplier quality, as in some large companies, a particular site still may not have received adequate attention. In other cases, the company may not have established clear and standard operating procedures (SOPs) and organizational mechanisms for supplier quality monitoring.

LAYING THE CORNERSTONE

According to the FDA's July 2009 report to Congress, "The cornerstone of a prevention-focused approach in the sourcing of ingredients or components and the manufacturing and distribution of medical products is the implementation of a quality management system (QMS)." As with many FDA requirements, the agency does not explicitly codify how to institute such a system, but provides only general guidance about what is expected, namely, that the QMS addresses "safety, quality, and security responsibilities of all persons who manufacture products, including starting materials . . ." In our experience, a robust supplier quality management system (SQMS) should include, at a minimum, some key elements.

• Formal supplier qualification program: This is the foundation of an SQMS. It should define cGMP requirements and SOPs for suppliers of all kinds: CMOs, third-party logistics providers, and component and raw materials suppliers, and should take into account through due diligence and quality agreements these suppliers' suppliers. The supplier agreement should spell out quality standards and expectations, the communication of out-of-specification results, and a schedule of supplier audits. The agreement also should include a requirement that suppliers report to the company any changes in the way they do things, including their manufacturing methods and their sources of supply and transportation. Suppliers also should be required to report to the company any FDA observations that could affect the company's product.

It's not necessary to treat all suppliers equally. Given the sheer number of suppliers that many companies employ, enforcing the same audit schedule for all is extremely difficult. Label suppliers, for example, would not need to be audited as frequently as the suppliers of more critical elements like raw materials or equipment. This approach not only makes the task more manageable but also allows the company to concentrate resources and effort in areas where the risk and the return are greatest.

One should also note that when a supplier is qualified, it is qualified for a particular material or service. Just because a supplier meets the requirements to provide one particular product, does not necessarily mean that it meets the requirements to supply another.

• Supplier quality metrics: Metrics should be focused solely on the quality and compliance performance of suppliers and considered separately from financial measures. These metrics might include the number of rejected items, temperature excursions, right-the-first-time rate, as well as observations from audits. Particular metrics will of course depend on the nature of the goods or services being supplied.

• Continuous monitoring and follow-up: Most companies do some level of monitoring, but sometimes fail to follow up on poor performance trends or observations made during audits. But if something is worth writing down, it is worth following up. Follow-up audits should be conducted to determine if deficiencies have been corrected.

• Supplier certification: Some companies often execute an internal supplier qualification program. These programs allow companies to formally qualify, rank, and monitor suppliers and their products or services. Sponsor companies can have a high level of trust in suppliers who meet and maintain the rigorous requirements of these certification programs. Conversely, these programs should contain a mechanism for de-certification of a supplier if compliance problems arise.

For large companies, with dedicated supplier quality departments, establishing a more effective SQMS may entail only formalizing and enforcing existing policies and procedures. For other companies, it may be a matter of expanding oversight to take into account suppliers' suppliers or to include logistics providers in the program. Companies that lack resources may want to add them or look for ways to use their existing resources more efficiently. Many companies, of all sizes and in all circumstances, will draw on external consultants to do continuous monitoring and conduct audits. The advantage that these third-parties offer is they have nothing else on their plates; they are specialists, they are objective, and they may be less expensive than internal personnel. In any case, they should be as carefully qualified as any other supplier.

With the number of suppliers companies use, the increasing complexity of the supply chain, and increasing regulatory scrutiny, biopharmaceutical companies can no longer afford anything less than world-class supplier quality management.

James R. Darnell, Jr. is a managing consultant at Tunnell Consulting, Inc., King of Prussia, PA, 610.337.0820, darnell@tunnellconsulting.com