Quality Agreements Between Pharmaceutical/Biopharmaceutical Companies and Their Contractors

Published on: 
BioPharm International, BioPharm International-04-01-2005, Volume 18, Issue 4

During the past several years in the pharmaceutical and biopharmaceutical industries, conflicts and misunderstandings have arisen between companies and their contractors. Too often, productive working relationships have crumbled, resulting in expensive production delays with companies and contractors squabbling over their roles and responsibilities. Such conflicts may have their roots in the lack of a sound quality agreement (QAG). QAGs that clearly delineate good manufacturing practice (GMP) responsibilities between a sponsor and a contractor can help companies and their contractors avoid certain conflicts.

During the past several years in the pharmaceutical and biopharmaceutical industries, conflicts and misunderstandings have arisen between companies and their contractors. Too often, productive working relationships have crumbled, resulting in expensive production delays with companies and contractors squabbling over their roles and responsibilities. Such conflicts may have their roots in the lack of a sound quality agreement (QAG). QAGs that clearly delineate good manufacturing practice (GMP) responsibilities between a sponsor and a contractor can help companies and their contractors avoid certain conflicts.

Roby P. Blasini

The use of contractual agreements is a well-established business practice, but their use in the pharmaceutical sector is a fairly recent phenomenon. Their implementation is further complicated by the regulatory framework of the industry. Advance agreement to terms and conditions of the relationship is not only a concern of regulatory bodies but is advantageous to the companies themselves. QAGs are useful documents from a business perspective as well as from a GMP perspective. To establish successful business relationships and avoid misunderstandings, GMP responsibilities among all parties can be established in a QAG.


From a legal perspective, an agreement can be defined as an expression of assent by two or more parties, to the same conditions. A quality agreement can, therefore, be defined as an arrangement between two or more parties with respect to the quality responsibilities of the participants, with the business objective being a service or product supply. From the European Medicines Agency (EMEA) perspective, a QAG is also referred to as a technical agreement.


In the EU, QAGs or technical agreements are not only an expectation but a requirement — one that is regulated by legislation such as Directives 2003/94/EC


and 91/412/EEC,


and in the European Union GMP Guide.


The terms "contract giver" and "contract acceptor" are widely used in the EU. In the US, however, QAGs are an expectation, but not a requirement, of the Food and Drug Administration (FDA). While FDA has neither specific guidelines for QAGs in the pharmaceutical and biopharmaceutical industries nor a final rule on the subject, expectations of having implemented QAGs are now relatively common, and violations


have been recorded. In the US, the contract giver and contract acceptor are usually referred to as "the sponsor" and "the contractor" (contract laboratory, contract manufacturer, raw material supplier, etc.).


A given company is likely to have QAGs with a number of product and service vendors, such as a contract manufacturer, a contract-release testing laboratory, a distributor, etc. The agreements may be similar in content, even when the vendors are of very different natures, or they may contain subtle or substantial differences, even when the vendors supply similar products or services. Table 1 illustrates only a few of the possible types of contractors used in establishing QAGs.

Table 1. Types of Contractors Used in Quality Agreements


The company implementing a quality agreement should begin by considering its scope. The QAG should specify the product(s) or service(s) for which it is intended. For instance, a QAG with a biologics active pharmaceutical ingredient (API) manufacturer might include all aspects (cell banks, fermentation, and purification) of the production of an API, as well as its release testing (but not its stability testing). A QAG with a supplier may apply to only one item or to multiple items. A QAG with a stability storage facility may include only the receipt, storage, and shipping of samples, but not any testing.



Prior to writing the quality agreement, and to prevent later frustration and avoid wasting time and money, a company should decide whether the QAG will be a stand-alone document or part of the supply agreement or service agreement (business contract). This decision may depend on whether a supply/service agreement is already in place or is being negotiated.

Following the selection and qualification processes (including a quality audit) involved in choosing a supply/service provider, a company that decides to enter into a business contract with a provider should ideally include a QAG as part of the supply/service agreement. A QAG can be prepared and negotiated while the larger supply/service agreement is also being prepared and negotiated. The resulting QAG can then be incorporated into the larger agreement as an appendix or schedule. As such, the QAG will receive legal review when the entire document is evaluated. When the agreements are concurrently reviewed, conflicting information can be identified and resolved more easily and quickly than if the two are reviewed separately.

There are, however, various reasons why a company might implement a quality agreement as a stand-alone document. These include the lack of a finalized supply/service agreement, delays in the revision of a supply/service agreement, and inheriting a supply/service agreement without an existing QAG when licensing a new drug from another company that was using third-party contractors. Irrespective of the reason, if a QAG is to be implemented as a stand-alone document, there should be additional clauses or components (some which will be of a legal nature) in the QAG that are not necessarily included when it is a part of a supply/service agreement.


Format decisions are essential. A company may have pre-established templates and thus the format is already selected. In the absence of a pre-established template, the QAG may be legal style, tabular, or a combination of the two. In selecting a format, one must remember that it is not the format that makes a sound QAG, but its content.

Because the quality agreement is the responsibility of the quality assurance function, and because many quality assurance personnel have a scientific or technical background, most companies prefer a tabular format. The tabular structure provides quality assurance personnel with a familiar format by displaying information in a table or graph form, as opposed to the sentences-and-paragraphs structure of the legal-style format. Typically, the tabular format presents the QAG information in a manner that makes it easier for recipients and reviewers to examine tables and find the desired information.

When considering the option of a legal style QAG format, one should take into account the needs of the receiving group, department, or organization, and use a format that is easy for them to read, use, and understand. If the QAG is a stand-alone document, a good compromise for all users is a combination of both the legal and tabular formats, especially a structure that is mainly tabular with some sections presented in legal style format. The legal style sections may include, but are not limited to, signature pages, table of contents, introduction, and disclaimer pages. Obviously, when the QAG is part of a supply/service agreement, much of the information on these legal style pages would already be included in the agreement.


Contractor-specific content is a critical piece of the quality agreement. While much of the QAG may exist in template form, particular requirements may need to be included for certain suppliers. The converse of this is true, as well, for some parts of the template may not apply to a specific supplier; thus, these should be deleted or clarified. Where pre-established templates exist, it is important to remember that no two QAGs are the same and that each business relationship is unique; therefore, a certain amount of flexibility is essential.

Templates should never include content that is etched in stone. Some large companies prefer that different business groups or sites use templates to provide consistency across the organization. While this practice is valuable, the QAG may need to satisfy the unique needs of a particular site or business group; therefore, the template may require additions and/or deletions.

The best templates are those that allow for some flexibility, in case, for example, during the negotiation process it is decided that particular language should or should not be included. Those companies creating unalterable QAG templates may encounter problems with suppliers that may not be willing to sign off on such rigid QAG. In addition, experience has shown that such flexibility can be very helpful during contract negotiations.

Table 2. Categories in Quality Agreements

Table 2 displays categories (listed in alphabetical order, not in order of importance) that should be considered as to their applicability for inclusion in quality agreements. The categories depend on the type of quality agreement, but they are not definitely limited to those presented.

Although the agreement is typically the responsibility of the quality assurance function, when drafting or reviewing QAG content the writer should solicit input from other groups such as technical, procurement, and legal. Throughout the writing, editing, and negotiating processes, it is essential that all parties involved with the QAG bear in mind the purpose and the scope of the agreement. When creating a QAG, the writer should remain focused on the objective and bear in mind that the QAG is neither a supply agreement nor a service agreement. It is, instead, a delineation, for the parties involved, of the GMP responsibilities and the scope of the specific supply or service.

Clarity of language in the QAG is essential. While some legal documents might have a place for ambiguity, QAGs do not. Clearly defined, specific expectations of GMP responsibilities should be described, understood, and agreed upon by both parties to the agreement.

Table 3 provides a generic example of a tabular QAG. It shows categories, areas of specific responsibilities, and descriptions of each responsibility. (Under "raw materials," only one example is given in Table 3, although of course others exist, such as raw material specifications, etc.)

Table 3. A Generic Example of a QAG Tabular Format


In large companies it is not uncommon for more than one functional area or project to send outsourced work to a single contractor. In such cases, more than one group may be represented in the QAG negotiations. It is of paramount importance in these instances that internal consensus precedes external discussion. When possible, a single functional unit should speak for the entire company. Most contractors prefer this approach because it lessens confusion that can result from diverse opinions or viewpoints. Nothing is as appalling at the negotiation table than members of the same company disagreeing in front of the potential contractor. This conduct is unprofessional and tells the other party that the company representatives are unable to concur among themselves. Inevitably the contractor will ask, "If they can't agree with each other, how are they ever going to reach agreement with us?"

The negotiation process, which may be relatively easy or extremely difficult, can be viewed as the most critical part of the QAG. Even with the best QAG, negotiations can break down. This is sometimes due to the inabilities of the negotiator. An impressive job title, strong technical ability, solid quality assurance background, or even experience in writing QAG content does not necessarily mean that one has the negotiating skills acquired through experience or formal training. So, if the negotiation process is to be successful, a skilled negotiator is vital.

Once the draft of the quality agreement is ready, it may be shared and discussed by all parties concerned via a variety of means, such as telephone, e-mail, fax, Webex conferencing, video conferencing, and face-to-face meetings. Conflicts and delays during the negotiation process can cost tens (if not hundreds) of thousands of dollars, so adequate planning is a proactive best practice. At the same time, the process should not be rushed. Close attention should be paid to specifics of a QAG during negotiations.

Sections, or subsections, of the QAG may require rewording, and sometimes a simple change of semantics may eliminate stumbling blocks in the negotiations. At other times, however, a change of language may be thought to alter the content substantially, and the sponsor or contractor may not be willing to make the modification. In such circumstances, further negotiation is required. Patience during initial efforts usually pays off in the long run, as extensive effort may be needed later on to correct mistakes made during the early negotiation process. The review process may begin via e-mail or fax, but at some point spoken negotiation will be required. In some cases a teleconference, coupled with Webex, may be a good option. Video conferencing, when available, might be sufficient to finalize QAG negotiations; however, final execution usually requires that representatives for both parties meet face-to-face to conclude the agreement. Although this meeting will not guarantee that conflict never surfaces, it can lower the probability. In some cases, a face-to-face negotiation is the only way to resolve some disagreements.


It is essential that a company put the final negotiated QAG draft through the legal review process; failure to do so can expose the company to potential liability. Often this review takes places when the business contract, to which the QAG has become an appendix or schedule, is reviewed. Just as qualified quality personnel should lend their expertise in the creation of the quality agreement, so must qualified legal counsel review the document with attention to potential liability as a result of the language used.

When a QAG is a stand-alone document and a company-approved format or template does not exist, the sponsor would be wise, once agreement has been reached between sponsor and contractor, to have the negotiated QAG undergo qualified legal review. In the event that a company template has already been approved by a company's quality and legal departments, the legal review is less critical. Nonetheless, it is still highly advisable to have the finalized QAG undergo legal review, especially to determine if any additions or deletions to the template could potentially cause legal liability to the company.

There should be a clear understanding by legal counsel of their role and function in the review process. When this understanding exists, the legal review process is likely to be relatively quick and not a stumbling block. It is important to note that a lack of such an understanding can cause unnecessary delays in finalizing QAGs, especially when they are stand-alone documents.

Legal personnel should not interpret GMPs nor change the context, unless there is a clear indication of language that can cause liability to the company in meeting the responsibilities of the agreement. They are not to write the QAG but are to look at it from a legal perspective to provide protection to the company. For example, ambiguous language that may create future difficulties can be mitigated in a proactive review by legal counsel. When the QAG is a stand-alone agreement, it is particularly important to bring it to legal counsel's attention for review.

The legal review process is intended to protect the company from potential liability as a result of the agreement. It is not, however, intended to change language, agreed to by both parties, that poses no liability threat to the company. It is also not intended to justify its existence by inserting unnecessary legal terms that may be intimidating to the sponsor or contractor.


Conflict costs money! Far too often, easily preventable situations grow into irreconcilable differences between a sponsor and contractor that fail to benefit either party. Putting a sound QAG in place at the start of the business relationship can prevent later problems.

The lack of a QAG that covers areas such as deviation management and change management can lead to misunderstandings and conflicts. Formal agreements with contractors not only make good regulatory sense in ensuring GMP compliance, they also make good business sense and can potentially save the sponsor time and money. QAGs are, thus, an effective bridge to a successful future for companies in the pharmaceutical and biopharmaceutical industries.

Roby P. Blasini is a corporate consultant at a multi-national pharmaceutical company. Tel: 317.730.3129, fiuman@earthlink.net.


1. European Commission Directive 2003/94/EC of 8 October 2003.

2. European Commission Directive 91/412/EEC of 23 July 1991.

3. European Union Guide to Good Manufacturing Practice (EudraLex Vol. 4):

  • Chapter 7. Contract Manufacture and Analysis.

  • Proposed Addition to Chapter 1, as 1.5. Product Quality Review: 2 - DRAFT.

  • Annex 13, Revision 1. Manufacture of Investigational Medicinal Products: 4.

  • Proposed Addition (Annex 19). Reference Samples and Retention Samples.

4. FDA Warning Letter. Automatic Liquid Packaging, Inc.; September 23, 2002.


1. Code of Federal Regulations, Title 21, Part 211. Current Good Manufacturing Practice for Finished Pharmaceuticals.

2. Cohen, J.S. GMP: Current Compliance Issues for Biologics. Seventh Annual FDA-OCRA Educational Conference; June 2-3, 2004; Irvine, CA.

3. Early Drafting Of Separate Quality Agreements With Contractors Urged. The Gold Sheet. November 2002;Vol. 36, No. 11:1-13.

4. Finkbohner, J. Risk-Based Quality for Emerging Biotech Processes and Products. Ninth Annual GMP By The Sea: Keeping the "C" in GMP; August 25, 2004; Cambridge, MA.

5. International Conference on Harmonization. Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients. Q7A, Chapter 16: Contract Manufacturers (Including Laboratories).

6. Using Risk To Determine Degree Of Supplier Control. The Silver Sheet. September 2004;Vol. 8, No. 9:6.