Global Supply Chain Quality Management

Prepare now to ensure compliance in FDA’s new reign of enforcement

By Bob Rhoades

Quintiles

Zealous FDA enforcement is gradually taking the place of the historical trend for deregulation and self-regulation of global pharmaceutical supply chain. A morevigorous program of foreign FDA inspections has resulted from issues such as the 2008 heparin crisis and melamine-contaminated baby formula and pet food.These issues placed the public spotlight on FDA’s inadequate monitoring of foreign producers, creating a backlash of more aggressive enforcement.

Drug and device manufacturers need to take a proactive approach to foreign inspections to avoid negative attention from the FDA. This must include compliance of outsourced functions.

Globalization presents numerous challenges:

•Increasing volume and greater complexity of imported products,

•More foreign facilities supplying the U.S.,

•Incomplete regulatory information about supply chains,

•Patchwork of foreign, federal and state oversight ofproduct safety,

•Greater opportunities for economic fraud,

•National security threats,

•Workload that has outstripped FDA resources, and

•Limited legal authorities and enforcement tools.

Key factors driving the trend towards global outsourcing include the need for:

• Competitiveness in the global marketplace,

• Greater productivity and flexibility,

• A global manufacturing presence,

• Expanding capacity,

• Cost reduction,

• Improved asset utilization, and

• Reduced capital assets.

This trend brings a range of risks. These include inefficient management, information gaps due to IT infrastructure asymmetry and disconnects, hidden costs, dependence on third party logistics (3PL) providers, lack of control over 3PLs, problems in evaluating and monitoring 3PL performance, incompatibility of participating firms cultures, lack of direct control over product, possible loss of key intellectual property, and increased legal compliance and reputation costs.

“The growing challenges of globalization have far outstripped the nation’s resources for inspection and quality monitoring . . . Addressing these challenges will require a paradigm shift — to a focus on prevention,on stopping threats before they ever become reality.The border must be viewed as a final checkpoint for preventive controls, rather than the primary line of defense against unsafe imports.”

—FDA Strategic Priorities 2011 – 2015: Responding to the Public Health Challengesof the 21st Century1

The FDA has greatly expanded its foreign presence, opening new overseas offices and boosting the number of visits to international facilities (Figure 1). However, two recent Government Accountability Office (GAO) reports claim that there is an urgent need for still more inspections of foreign drug manufacturers.2,3 They also claim that the agency’s overseas offices are not yet making a significant contribution to the agency’s ability to conduct those inspections.

GAO notes that the FDA increased the number of foreign drug inspections done from fiscal year 2007 to 2009, but still conducts relatively fewer foreign than domestic drug inspections each year.4 In fiscal year 2009, FDA conducted 424 foreign inspections, compared to 333 and 324 inspections conducted in fiscal years 2007 and 2008, respectively. Inspections on mainland China increased from 19 in FY 2007 to 36 in FY 2008 and 52 in FY 2009; the FDA had 920 Chinese establishments in its FY 2009 inventory.

Need for a Risk-Based Approach

This lack of FDA oversight clearly leaves much in the hands of the U.S. pharma executive working to manage supplier quality. Rather than apply a single quality management approach to all suppliers — which is often unworkable and invariably inefficient — companies should develop a robust, risk-based approach. This is based on the fact that the greatest rewards are likely to come from mitigating the risks with potential to cause the greatest damage. Each supplier situation should be addressed individually, but always within the context of a carefully thought-out overall quality management system. Industry-leading supplier management practices need to take into account the following important elements:

•Supplier selection:

oRisk evaluation of products, materials, services

oRationalized supplier base, including considerations for quality, ethics, history/stability, cost of quality, and contingencies for supply interruption

oWell-defined roles and responsibilities

oFormalized Quality Agreements

•Monitoring:

oInitial review, based on risk, matched to the criticality of product/material supplied, and taking into account the supplier’s historical non-conformance data and on-time delivery data

oPeriodic performance evaluation

oReliable communications

•Realtime controls and manpower:

oWell established metrics (from Quality Agreement)

oFrequent analysis

oResponsiveness to deviations from agreement

oStaffing levels that support size and complexity factors

oResources sufficient to manage a global supply base.

FDA Initiatives

Numerous initiatives are in place or under development at the FDA with the aim of safeguarding the global supply chain. One area of activity is Interagency Coordination, including the Action Plan for Import Safety (November 2007) and Draft Guidance on Good Importer Practices (January 2009). The Draft Guidance is a joint effort by eight federal agencies based on four guiding principles:

•Establishing a product safety management program,

•Knowing the product and applicable U.S. requirements,

•Verifying that product and suppliers in compliance with U.S. requirements throughout supply chain and product lifecycle, and

•Taking corrective and preventative action when theimported product or firm does not comply with U.S. requirements.

A second area centers on Interactions with Foreign Governments, for example a memorandum of understanding between the U.S. and China (December 2007), other cooperative arrangements, and the “Beyond Our Borders” Initiative, under which the FDA has established offices in China, India, Europe, Latin America, and the Middle East.

A third project is the Secure Supply Chain Pilot Program, announced in January 2009, and intended to run for two years. This voluntary program aims to promote safety of drugs and active pharmaceutical ingredients produced outside U.S. and to help FDA determine the practicality of developing a secure supply chain program.

A fourth program is the Economically Motivated Adultera-tion (EMA) Focus, examining “the fraudulent, intentional substitution or addition of a substance in a product for the purpose of increasing the apparent value of the product or reducing the cost of its production.” The FDA has set up an internal working group on the topic, and held a public meeting in 2009.

Legislative developments include: debates on drug imports, focusing on the safety of the supply chain; legislation introduced to address drug supply chain issues such as quality risk management, registration, inspections, importation, labeling and documentation.

In conclusion, the benefits of supply chain quality management go far beyond regulatory compliance, making the process manageable even if it involves hundreds of suppliers worldwide. Establishing a risk-based system ensures compliance and avoids costly recalls, regulatory and quality problems and liability. A well-managed supplier quality management system improves operational efficiency and can boost a product’s competitiveness in the global marketplace.

References

1 http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/ ucm227527.htm

2 GAO report, Food and Drug Administration: Response to Heparin Contamination Helped Protect Public Health; Controls That Were Needed for Working With External Entities Were Recently Added, October 29, 2010 (available at: http://www.gao.gov/new.items/d1195.pdf)

3 GAO report, Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress Is Needed (available at: http://www.gao.gov/new.items/d10961.pdf)

4 GAO report, Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress Is Needed (available at: http://www.gao.gov/new.items/d10961.pdf)

Robert A. Rhoades is the practice leader in Quality Systems Consulting at Quintiles. Within his 32-year career, Bob has been a preferred advisor to senior pharmaceutical executives in the U.S., Europe, China and India regarding compliance and its impact on corporate direction and strategy.He can be reached at [email protected]