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CONTRACT MANUFACTURING AND THEIR AUDITING

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About Authors:
Arshad Hala*, Prof. Rajesh Dholpuria, Nilesh Sovasia
1Seth G. L. Bihani S. D. College Of Technical Education,
Institute Of Pharmaceutical Sciences & Drug Research,
Gaganpath, Sri Ganganagar, Rajasthan 335001
*Arshad_hala@yahoo.com

1. INTRODUCTION:-
1.1. Origin:-

Contract manufacturing is defined as the manufacture (or partial manufacturer) of a product to the order of one person or organization (the contract giver or customer) by another independent person or organization (contract acceptor or principle manufacturer). Manufacture in this context is identified as the act of processing or packaging a medicinal product or device to a given specification.(Shah, D.H., 2000)

Contract manufacturing should be consideration as an extension of the principal manufacturer’s operation. Consequently the principal manufacturer should require the same standards of good manufacturing practices (GMP) for a contractor’s operation as he would his own. In addition, the customer must ensure that the principle manufacturer holds the relevant legal authorizations for the work to be carried out.(Shah, D.H., 2000)

The responsibility and activities undertaken by each party need to be clearly stated in a formal agreement, separate from but additional to the legal business contract formed by the placement of an order. Commercial matters need to be appreciated as being distinct from technical matter and need to be detailed separately with due consideration for compliance with local legislation.(Shah, D.H., 2000)

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Reference Id: PHARMATUTOR-ART-1497

1.2. Types
Contract manufacturers can be classified into two types, i.e., those who ‘‘supply’’ and those who ‘‘toll.’’ Regardless of type, all contract manufacturers have the common denominator of providing one or more services for a fee. (McVean, D.E., 2007)

A contract manufacturer is one who supplies manufacturer’s materials for inventory. This supplier sells products from its inventory to one or more companies for their use or disposition. This type of contractor is sometimes known as an ‘‘original equipment manufacturer.’’ On the other hand, a ‘‘toll manufacturer,’’ or ‘‘toller’’, “contract accepter”, “principal manufacturer”, is a manufacturer who contracts to:
·         Receive a raw material from another company.
·         convert that material into another form, and
·         Return the converted material to the contracting company for its use or further disposition.

The basic difference between these two types of contractors is that one manufactures for its own inventory, while the other manufactures according to a custom order. To cloud this picture, either type of contractor may provide both functions. (McVean, D.E., 2007)

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1.2.1. Type of Contract Accepter (toller):-

1.2.1.1. Sellers of excess capacity:-
Companies that engage in toll manufacturing can be further classified into three fundamental types. First are companies that have more capacity than they need to produce an established product line. Rather than let that excess capacity stand idle, the companies use it for toll manufacturing to reduce the burden of salaries and overhead attached to the excess capacity while concurrently producing additional income. Pricing for services from these manufacturers are usually quite favorable, since their product line is absorbing their fixed costs. Only variable costs associated with the excess capacity are incurred. (McVean, D.E., 2007)

1.2.1.2. Providers of niche services:-
The second type of toller is comprised of companies that, rather than marketing an established product line of their own, have concentrated on a niche service. Their facilities, equipment, and personnel have been designed only to accommodate specialized operations such as lyophilization and production of parenterals. Their success is dependent upon being able to lease their facilities and technology for the production of products for one or more customers. Their focus is on making products without having to worry about heavy R&D and marketing. A positive advantage for the use of this type of company is that they are less likely to compete with their customers. (McVean, D.E., 2007)

1.2.1.3. Academic institutions:-
The last type is comprised of academic institutions that provide assistance with custom synthesis, dosage form development, pilot-scale production, and production of clinical supplies in order to obtain additional income to support their academic programs. They have no interest in, nor are they equipped for, commercial production. Companies seeking outsourcing should be aware that students and faculty could form part or all of the staff of their operations; this may be a disadvantage when considering using this type of contract manufacturer. (McVean, D.E., 2007)

1.2.2.Contract Giver: - General responsibility of Customer
The customer ultimately bears the general responsibility for ensuring that:
·         The product specification used by the principal manufacturer comply with the relevant legal requirement such as the marketing authorization and label declaration
·         The product, as manufactured, meets the specification
·         The required quality is maintained during transport, distribution and storage
·         All aspects of  the contract arrangement are carried out in accordance with good manufacturing practices and with the requirement of the marketing authorization and any license that the principal manufacturer holds for manufacture and assembly
·         All work is carried out in premises covered by appropriate license granted by appropriate local authorities

1.2.3. General responsibility of principal manufacturer:
The principal manufacturer bears the general responsibility for ensuring that:
·         There is continued compliance to the agreement
·         Compliance to regulatory and statutory requirements relating to warehousing and distribution practices is maintained.(Shah, D.H., 2000)

1.3. How To Determine When A Contract  Manufacturer Is Needed:-
The need for the services of a contract manufacturer can occur at any time during the developmental phases and/or commercial manufacture of a product’s life cycle. Such situations occur when
·         Specialized manufacturing capabilities are required that are not available in-house.
·         Assistance is needed with product and/or process development.
·         The need to establish the market potential of a new product is required before investing in specialized capabilities.
·         Difficulty is encountered in breaking into the manufacturing schedule in a timely manner to produce small research, clinical, or commercial batches.
·         Production requirements cannot be accommodated when sales exceed capacity. (McVean, D.E., 2007)

1.3.1. Advantages of Working with a Contractor
Developing companies especially can gain many advantages from working with a contract manufacturer. First, they gain access to production facilities without having to invest any of their own limited capital. Second, they instantly add a breadth and depth of expertise in pharmaceutical manufacturing to their operations that would have taken years to develop. Third, they gain the use of the contractor’s operating personnel. Depending on the special niche of the contractor, the contractor’s personnel will be experienced in one or more pharmaceutical specialties. These include custom synthesis; production of intermediates and active pharmaceutical ingredients; formulation development; lyophilization cycle development; aseptic processing; sterilization process development; regulatory assistance; sourcing of excipients; analytical methods development; validation of processes and methods; package development; and storage and testing of stability samples. (McVean, D.E., 2007)

1.3.2.Disadvantages of Working with a Contractor
But, a company seeking to outsource must also be familiar with negative aspects associated with working with a contract manufacturer. A major disadvantage to developing companies is that the client is entrusting to another entity its valuable intellectual property that before was a closely guarded secret. Clients also must consider that they are but one of the contractor’s many clients. As a result, due to competition for the contractor’s resources, projects may not move forward as fast as a client may desire. Finally, clients incur the costs of at least a portion of the salaries and overhead of the contract manufacturer. (McVean, D.E., 2007)

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1.4. How To Select A Contract Manufacturer

1.4.1. List of Requirements
Begin any search by developing a list of requirements that a potential contractor must satisfy in order to be considered. Provide this list of requirements to the purchasing department. The most fortunate situation that can occur in the selection process is finding that the Purchasing Department is already employing a contract manufacturer with the capabilities to perform the required task.

Major technical points which should be raised and investigated in the process of selecting a contract manufacturer for a given product, or a range of product, are listed below:
·         Statutory clearance/licenses
·         Adequate and appropriate facilities for storage, handling, manufacturing and testing of raw/packing materials, in-process materials and finished products.
·         Competence and experience of employees directly/indirectly responsible for the manufacture.
·         Competence and experience of employees entrusted with the job of quality assurance/quality control
·         Previous experience of the manufacture in manufacturing similar products
·         System of documentation, and adherence to them, so as to comply with cGMP requirements. (McVean, D.E., 2007)

1.4.2. Referrals from Colleagues
After developing the list of requirements, begin your search by seeking referrals from colleagues in the industry. There is nothing better than obtaining a recommendation about a particular contract manufacturer from someone that has successfully used its services. You can question your colleagues about any idiosyncrasies they experienced with the operations of recommended contractors. These queries can also explore the degree of satisfaction experienced regarding the manufacturer’s compliance with mutually agreed upon requirements. Finally, an opinion can be obtained regarding the qualifications of the contractor’s personnel assigned to projects. Be sure to solicit information as to how those personnel interrelate with customers. (McVean, D.E., 2007)

1.4.3. Use of Information Sources
Contract manufacturers can be identified by their specialty through the use of commercial information sources[1,2] and by review of advertisements in trade journals.[3] Commercial information sources solicit profiles of contract manufacturers for their databases. Contract manufacturers usually advertise their services in journals having the widest circulation within an industry. Many of these journals print annual buyer’s, guides in which their advertisers are grouped according to the services they provide. The Internet is also a useful tool to identify contract manufacturers. Several sites are listed in the Reference section.[4] Trade Shows Trade shows provide excellent opportunities to seek out and meet contract manufacturers. Contract manufacturers operate exhibits where literature on their companies can be obtained for later evaluation. Talking with the exhibitor’s personnel provides an opportunity to conduct preliminary discussions with contractors about the services they offer. You can determine on the spot whether or not a particular contractor will be suitable for your project. Trade shows often feature speakers on topics concerned with contract manufacturing. Attend such programs to familiarize yourself with the intricacies of contract manufacturing. You will find that your notes and handouts from the speakers will contain the latest information on this subject. (McVean, D.E., 2007)

1.4.4. The Interview Process
Once you have identified a list of potential contractors, begin communicating with them by telephone. Table 1 provides suggested questions that can be used during interviews. Begin the interview by explaining that you are conducting a search for a contractor, and that they have been preliminarily identified as having the capability to meet the requirements of your upcoming project. Then, request them to send the most current information about themselves and their capabilities. To assure due diligence in your search, include at the conclusion of each interview a request for them to give you the names of any other contractors that they feel might be able to meet your requirements. Additional contractors identified in this manner should be contacted and interviewed, especially those who were suggested by more than one other company. (McVean, D.E., 2007)

1.4.5. ‘‘Very Good’’ vs. ‘‘Excellent’’ Contractors
A few contractors have reached the point of being identified as being ‘‘very good’’ at what they do. Once this status has been reached, their business usually increases and downtime decreases. However, the nature of a contractor’s business poses problems with advancing further in status, i.e., involvement with many customers, frequent changeovers of equipment, and production of many batches of a multiplicity of products. Advancing to the status of being ‘‘excellent’’ presents a unique challenge, because an ‘‘excellent’’ contractor is one that manages schedules so that time is allocated for concentration upon the nuances of any one process, smoothing out the rough edges, and achieving perfection. Your search should strive to identify the ‘‘excellent’’ contractors. (McVean, D.E., 2007)

Agenda for First Meeting with Selected Contractor
The final step in the process is to select one of the finalists and to request a meeting to discuss the project in greater detail.

1.5. Developing A Contract:-
In many respects this term is a misnomer in the sense that a formal ‘contract’ may seldom exist. An order placed by one party upon another may constitute a legally binding contract. The ‘CONTRACT’ could be constructed as having a legal meaning in terms of a legally binding document. It may by deemed, in certain circumstance and in certain countries, therefore to be unacceptable and legal representative of both the principle manufacturer and customer, in addition to agreeing the contents, must decide what force in law the document is to have if the word contract is used. The use of the phrase ‘TECHNICAL AGREEMENT’ may be more acceptable to each party.(Shah, D.H., 2000)

1.5.1. Commercial Discussion
Initial contract may be at commercial levels, preferably with the involvement of technical personnel, to assess the viability of pursuing the use of particular principal manufacturer. At this stage, confidentiality or secrecy agreements should be established. Technical matters should also be discussed to ensure that the principal manufacturer’s technical staff are aware of new products and are able to make an assessment of the technical feasibility of the project. This technical assessment must be taken into consideration when commercial assessment is made.(Shah, D.H., 2000)

Commercial agreements include:
·         Exact definition of the products and activities that are to be given to the principle manufacturer
·         Financial responsibility for the supply of starting and packaging products
·         Financial responsibility for the cost of rejection, losses, rework and failures
·         Financial responsibility for destruction of waste and rejects with consideration of any environmental aspects
·         Terms and condition for payment
·         The basis of price revision
·         Financial standing of the principle manufacturer and customer with commercial references taken up
·         Assurances that the principle manufacturer continuously complies with ‘good business practises’ and relevant  legislation
·         Arbitration arrangements on commercial and technical issues
·         Insurance provisions
·         Product liability responsibilities
·         Access to the customer to the principal manufacturer’s premises
·         Stock levels to be held by the principal manufacturer
·         Planning, forecasting and lead time arrangements
·         Underwriting by the customer of the stock purchased and held by the principal manufacturer specifically for the customer’s work, if the work should cease
·         The period for which any agrraments will run and the arrangements for the their termination

1.5.2. Confidential Agreements:-
For the commercial well being of both parties, it is advisable to enter into legally binding agreements on matters of secrecy or confidentially. Such agreements serve to provide assurances, under law, that commercially sensitive information, which is the property of the principal manufacturer and not in the public domain, is protected. They should contain detailed information on technical responsibilities and quality matters relevant only to actual manufacture and/ or assembly.(Shah, D.H., 2000)

The principal manufacturer may also need to protect certain aspects of their customer’s operation. In particular, confidentiality of other customer’s work on the principal manufacturer’s site may come into question. For any principal manufacturer, this is a difficult area to address and it is worthwhile establishing with any customer, their views on the possibility of competitors, who may be using the principal manufacturer seeing their process.(Shah, D.H., 2000)

1.5.3. Transfer of information
Having established commercial contract and with a formal secrecy/confidentially agreements in place, technical information that is specific to the products under discussion needs to be transferred from the customer’s technical department to the principal manufacturer. It is not sufficient for the customer alone to make a judgement about the principal manufacturer’s ability to carry out processes other than to agree that they are not acceptable. In order that the principal manufacturer can make a valued judgement about their own ability to carry out satisfactorily the manufacture and/ or assembly, technical information is needed and this must include as much information as possible about the process. This will also enable trials to be carried out if necessary. It may be that acceptance of the principal manufacturer becomes dependent upon the satisfactory outcome of such trial production. initial basic information will include:
·         A copy of the marketing authorization if the process details contained therein are relevant to the principal manufacturer carrying out the process. The principal manufacturer’s qualified person should have this information at some point.
·         Master batch formula, method and intermediate bulk product specification to enable the principal manufacturer to ensure that the process is viable in their plant. At this stage the principal manufacturer will identify what new equipment needs to be purchased and agree whether or not this cost is to be adjustable into the price.
·         Starting materials specifications if the principal manufacturer is to purchase these.
·         Methods of in-process and intermediate bulk testing to enable the principal manufacturer to ensure that quality control can be carried out with their equipment and to be included into the cost price.
·         Master packaging , assembly and finished product specifications
·         Packaging materials specifications including text copy.
·         Delivery acceptance criteria for both starting and packaging materials supplied by the customer.
·         Special storage, handling and cleaning information.(Shah, D.H., 2000)

1.5.4. Technical Agreement:-
Having established the acceptability of the principal manufacturer, the customer and him must established the exact responsibilities of each party and state these in a formal agreement signed by representatives of all parties concerned. The customer and principal manufacture should each appoint competent representative (quality assurance or production).  In doing this, they should consider and state the person (s) responsible as relevant to the operation to be undertaken by each party. (Shah, D.H., 2000)

General Consideration:-
The following areas need to be addressed and stated:
The responsibility of the “Qualified persons” in the customer’s and the principle manufacturer’s organization
·         Assurance that the principal manufacturer continuously complies with ‘good pharmaceutical practices’ and relevant legislation
·         Provision of reasonable  access by the customer to the principal manufacturer’s premises
·         Arrangement for change or amendments to the technical aspects of  the agreement
·         Channel of communication
·         Statement of assurance that the principal manufacturer will not undertake processes or activities that could jeopardize the quality of the product
·         Supply of any relevant information following an official inspection of the principal manufacturer’s premises that could impact upon the supply of product.(Shah, D.H., 2000)

1.6. Working With A Contract Manufacturer
Finally the agreement should be approved, and the technical responsibilities accepted, by each party concerned with the agreement, preferably signed by the person responsible for quality in both the customer’s and principal manufacturer’s organization.(Shah, D.H., 2000)
Master Production Batch Information:-
·         Purchase and supply of starting materials
·         Sampling, testing and release of starting materials
·         Artwork for the text copy
·         Purchase and supply of  packaging materials
·         Sampling, testing and release for use of packaging material

·         Bulk manufacture
·         Sampling, testing and release of bulk product
·         Assembly of the finished pack
·         Sampling and testing of finished produc
·         Control and supply of information
·         Control and supply of samples
·         Finished product release
·         Transports and distribution
·         Complaints and recall
·         Safety information
·         Sub contracting
·         Miscellaneous responsibilities.

1.7. Regulatory Issues

1.7.1. Status of a Contract Manufacturer
From a regulatory standpoint, Regulatory agencies do not differentiate a contract manufacturer from any other manufacturer under their jurisdiction. A contract manufacturer must comply with the same federal, state, and local regulations as would any other manufacturer. In the United States, prior approval must be obtained from the U.S. Food and Drug Administration (FDA) before a contractor can be used as either the primary or alternative manufacturer for a registered pharmaceutical product. Even though a contractor is being used, the contracting company still retains primary responsibility for assuring that the contract manufacturer complies with all of the commitments that were included in the product’s registration and with all aspects of current good manufacturing practices (cGMPs). (McVean, D.E., 2007)

1.7.2. Inspections
Regulatory agencies inspect contract manufacturers on a regular basis to ensure that these manufacturers are in compliance with cGMPs. In the United States, all reports of inspections by regulatory agencies are available to anyone through freedom of information. Any company contemplating the use of a contract manufacturer should review the regulatory history of all companies under consideration as part of the selection process. Likewise, client companies, as part of their contractual relationship, should have a contractual requirement that the contractor notify them should there be an inspection involving their product, or should there be any adverse findings from any inspection which would affect the continued supply of their product by that manufacturer. (McVean, D.E., 2007)

1.7.3. Pre-Approval Inspections
Regulatory Agencies also conduct pre-approval inspections as part of the process of review of registration documentation. Prior to a pre-approval inspection, the client and the contractor should review all documentation that will be reviewed during the inspection. Clients should also assure themselves that the contractor is, indeed, in compliance with cGMPs. (McVean, D.E., 2007)

1.7.4. International Considerations
If the client is marketing the product internationally, the client should provide the contract manufacturer with copies of the regulatory requirements that might affect the client’s product in all countries in which the product is being marketed. A contractor cannot be held responsible for compliance with regulations with which the contractor is unfamiliar. (McVean, D.E., 2007)

1.7.5. Master Files
A contract manufacturer should be willing to provide its clients with authorization to permit the regulatory authorities to reference the facilities master file that the contractor maintains in the archives of the regulatory authority. Or, if a facilities master file is not an appropriate vehicle for a particular type of registration, the contractor should provide sufficient information about its processes and procedures to enable a client to satisfy the requirements for manufacturing information in its application for the registration of its product. Although it is convenient to be able to use contractor-supplied information in the preparation of an application for registration of a product, the client must always completely review that information to ensure that, from a regulatory viewpoint, control of the product has not been inadvertently transferred to the contractor. (McVean, D.E., 2007)

1.7.6. Dedicated Equipment
In some situations, the regulatory agency will require that dedicated equipment be used in manufacturing activities. Should this requirement be imposed, many contractors require the client to purchase this equipment. This becomes another initial expense that must be added to the total cost of using a contract manufacturer. (McVean, D.E., 2007)

1.7.7. Common Regulatory Theme
Regardless if the product is a ‘‘traditional’’ pharmaceutical or is a product of biotechnology, one common regulatory theme is always present. That is, the company employing a contractor retains responsibility for the product being manufactured and for ensuring that the contractor remains in compliance with the terms of the license and with cGMPs. (McVean, D.E., 2007)

1.7.8. History of Contractor’s Relations with Regulatory Agencies
Finally, before working with any contract manufacturer, potential clients must be assured that the contractor has a satisfactory history of cooperation with regulatory authorities. This type of information can be obtained from a review of several establishment investigation reports (available through freedom of information in the United States) involving that contractor. (McVean, D.E., 2007)

1.7.9. Cooperation with Regulatory Agencies
Should a contractor regularly take an adversarial stance when dealing with regulatory authorities, there is more at stake than just defending that contractor’s position. That contractor is potentially placing the continued production of the client’s products in jeopardy especially if the dispute involves processes or procedures related to those products. For that reason alone, a potential client should not select that particular contractor for their project. (McVean, D.E., 2007)

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1.8. Monitoring The Contractor

1.8.1. Quality Assurance Initial Audits
Prior to establishing any relationship with a contractor, the quality assurance staff of a potential client must audit the contractor’s facilities. During this audit, the contractor should be willing to provide a comprehensive tour of the facilities. Following the tour, the auditors need to review all of the contractor’s standard operating procedures that may apply to their company’s proposed project. In addition, the auditors need to review the quality improvement process being used by the contractor and the results of that process. Any concerns that have been identified during the audit should be discussed with the contractor at that time. (McVean, D.E., 2007)

1.8.2. Actions to be Taken upon Receipt of Audit Report
Upon completion of the audit, the auditors should provide the contractor with a report citing any problems which they have identified with the contractor’s operation that might interfere with the contractor being able to successfully work on their company’s project. The contractor should respond in writing to the audit report and address how they will handle each observation. Based on the results of their audit and the responses of the contractor, the audit team can then make a recommendation to the responsible personnel within their organization as to the acceptability of the contractor. (McVean, D.E., 2007)

1.8.3. Representatives in Contractor’s Facilities
Once manufacturing begins, most clients elect to have a representative present. The contractor should be willing to permit that representative to observe the processes in their entirety. Before any visit, however, the client must instruct its representative to comply with all of the standard operating procedures of the contractor while on the contractor’s premises. Further, the extent a representative can be involved in the production process needs to be negotiated between the client and the contractor prior to sending a representative to the contractor’s site. (McVean, D.E., 2007)

1.8.4. Periodic Audits by Quality Assurance Staff of Client
After a client has established a working relationship with a contractor, the quality assurance staff of the client should be allowed to audit the contractor’s facilities and operations on a regular basis, but usually not more frequently than once a year. Again, any observations concerning the contractor’s operations arising from these audits require a written response from the contractor. If the responses are not satisfactory to the audit team, then the upper management of both companies must be called upon to immediately resolve the differences. Should this be necessary, the management of both parties must ensure that any proposed resolution remains within the terms of the contractual agreement. (McVean, D.E., 2007)

1.8.5. Quarterly Meetings
Finally, it is good practice to hold quarterly meetings between the decision makers of both the client and the contractor. These meetings ensure that both companies are still aligned to achieve mutual goals. These meetings allow the contractor to participate in the client’s decision making process as performance for the previous quarter is reviewed and plans for the following quarter are presented. Topics for discussion should include the contractor’s conformance to the client’s expectations, regulatory issues concerning the client’s product(s), the contractor’s recent regulatory experiences, sales forecasts, and any other items appropriate to the occasion. (McVean, D.E., 2007)

2.      CONTRACT MANUFACTURE AND ITS AUDIT AS PER INDIAN GMP & WHO GUIDELINE:-
2.1. Principle.
Contract production and analysis must be correctly defined, agreed and controlled in order to avoid misunderstandings that could result in a product or work or analysis of unsatisfactory quality. (WHO, 2007)

2.2. General
2.2.1. All arrangements for contract manufacture and analysis, including any proposed changes in technical or other arrangements, should be in accordance with the marketing authorization for the product concerned.

2.2.2. The contract should permit the contract giver to audit the facilities of the contract accepter.

2.2.3. In the case of contract analysis, the final approval for release must be given by the authorized person. (WHO, 2007)

2.3. The contract giver
2.3.1. The contract giver is responsible for assessing the competence of the contract accepter in successfully carrying out the work or tests required, for approval for contract activities, and for ensuring by means of the contract that the principles of GMP described in this guide are followed.

2.3.2. The contract giver should provide the contract accepter with all the information necessary to carry out the contracted operations correctly in accordance with the marketing authorization and any other legal requirements. The contract giver should ensure that the contract accepter is fully aware of any problems associated with the product, work or tests that might pose a hazard to premises, equipment, personnel, other materials or other products.

2.3.3. The contract giver should ensure that all processed products and materials delivered by the contract accepter comply with their specifications or that the product has been released by the authorized person. (WHO, 2007)

2.4. The contract accepter
2.4.1. The contract accepter must have adequate premises, equipment, knowledge, and experience and competent personnel to carry out satisfactorily the work ordered by the contract giver. Contract manufacture may be undertaken only by a manufacturer who holds a manufacturing authorization.

2.4.2. The contract accepter should not pass to a third party any of the work entrusted to him or her under the contract without the contract giver’s prior evaluation and approval of the arrangements. Arrangements made between the contract accepter and any third party should ensure that the manufacturing and analytical information is made available in the same way as between the original contract giver and contract accepter.

2.4.3. The contract accepter should refrain from any activity that may adversely affect the quality of the product manufactured and/or analysed for the contract giver. (WHO, 2007)

2.5. The contract
2.5.1. There must be a written contract between the contract giver and the contract accepter which clearly establishes the responsibilities of each party.

2.5.2. The contract must clearly state the way in which the authorized person, in releasing each batch of product for sale or issuing the certificate of analysis, exercises his or her full responsibility and ensures that each batch has been manufactured in, and checked for, compliance with the requirements of the marketing authorization.

2.5.3. Technical aspects of the contract should be drawn up by competent persons suitably knowledgeable in pharmaceutical technology, analysis and GMP.

2.5.4. All arrangements for production and analysis must be in accordance with the marketing authorization and agreed by both parties.

2.5.5. The contract should describe clearly who is responsible for purchasing, testing and releasing materials and for undertaking production and quality controls, including in-process controls, and who has responsibility for sampling and analysis. In the case of contract analysis, the contract should state whether or not the contract accepter should take samples at the premises of the manufacturer.

2.5.6. Manufacturing, analytical, distribution records and reference samples should be kept by, or be available to, the contract giver. Any records relevant to assessing the quality of a product in the event of complaints or a suspected defect must be accessible and specified in the defect/recall procedures of the contract giver.

2.5.7. The contract should describe the handling of starting materials, intermediate and bulk products and finished products if they are rejected. It should also describe the procedure to be followed if the contract analysis shows that the tested product must be rejected. (WHO, 2007)

2.6. QUALITY AUDITS:- (WHO, 2007)
2.6.1. Principle.

A quality audit consists of an examination and assessment of all or part of a quality system with the specific purpose of improving it. A quality audit is usually conducted by outside or independent specialists or a team designated by the management for this purpose. Such audits may also be extended to suppliers and contractors

2.6.2 .Items for inspection
Written instructions for self-inspection should be established to provide a minimum and uniform standard of requirements. These may include questionnaires on GMP requirements covering at least
The following items:
(a) Personnel;
(b) Premises including personnel facilities;
(c) Maintenance of buildings and equipment;
(d) Storage of starting materials and finished products;
(e) Equipment;
(f) Production and in-process controls;
(g) Quality control;
(h) Documentation;
(i) Sanitation and hygiene;
(j) Validation and revalidation programmes;
(k) Calibration of instruments or measurement systems;
(l) Recall procedures;
(m) Complaints management;
(n) Labels control;
(o) Results of previous self-inspections and any corrective steps taken.

2.6.3. Inspection team
Management should appoint a inspection team consisting of experts in their respective fields and familiar with GMP. The members of the team may be appointed from inside or outside the company.

2.6.4. Frequency of inspection
The frequency at which inspections are conducted may depend on company requirements but should preferably be at least once a year. The frequency should be stated in the procedure.

2.6.5. Inspection report
A report should be made at the completion of a self-inspection. The report should include:
(a) Inspection results;
(b) Evaluation and conclusions;
(c) Recommended corrective actions.

2.6.6. Follow-up action
There should be an effective follow-up programme. The company management should evaluate both the inspection report and the corrective actions as necessary.

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3.      CONTRACT MANUFACTURE AND ITS AUDIT AS PER UK LEGISLATION (ORANGE GUIDE) & TGA GUIDELINE & EUROPEAN GUIDELINE &NEW ZEALAND FOOD  SAFETY AUTHORITY &PIC/S GUIDE  :-

3.1.Principle:
Contract manufacture and analysis must be correctly defined, agreed and controlled in order to avoid misunderstandings which could result in a product or work of unsatisfactory quality. There must be a written contract between the Contract Giver and the Contract Acceptor which clearly establishes the duties of each party. The contract must clearly state the way in which the Qualified Person releasing each batch of product for sale exercises his full responsibility.(PIC/S, 2006) 

3.2.General:-
There should be a written contract covering the manufacture and/or analysis arranged under contract and any technical arrangements made in connection with it.

All arrangements for contract manufacture and analysis including any proposed changes in technical or other arrangements should be in accordance with the marketing authorisation for the product concerned.(PIC/S, 2006)

3.3.Contract Giver:-
3.3.1. The Contract Giver is responsible for assessing the competence of the Contract Acceptor to carry out successfully the work required and for ensuring by means of the contract that the principles and guidelines of GMP as interpreted in this Guide are followed.

3.3.2.The Contract Giver should provide the Contract Acceptor with all the information necessary to carry out the contracted operations correctly in accordance with the marketing authorisation and any other legal requirements. The Contract Giver should ensure that the Contract Acceptor is fully aware of any problems associated with the product or the work which might pose a hazard to his premises, equipment, personnel, other materials or other products.

3.3.3. The Contract Giver should ensure that all processed products and materials delivered to him by the Contract Acceptor comply with their specifications or that the products have been released by a Qualified Person.(PIC/S, 2006)

3.4.The Contract Acceptor:-
3.4.1. The Contract Acceptor must have adequate premises and equipment, knowledge and experience, and competent personnel to carry out satisfactorily the work ordered by the Contract Giver. Contract manufacture may be undertaken only by a manufacturer who is the holder of a manufacturing authorisation.

3.4.2. The Contract Acceptor should ensure that all products or materials delivered to him are suitable for their intended purpose.

3.4.3. The Contract Acceptor should not pass to a third party any of the work entrusted to him under the contract without the Contract Giver’s prior evaluation and approval of the arrangements. Arrangements made between the Contract Acceptor and any third party should ensure that the manufacturing and analytical information is made available in the same way as between the original Contract Giver and Contract Acceptor.

3.4.4. The Contract Acceptor should refrain from any activity which may adversely affect the quality of the product manufactured and/or analysed for the Contract Giver.(PIC/S, 2006)

3.5.The Contract:-
3.5.1 A contract should be drawn up between the Contract Giver and the Contract Acceptor which specifies their respective responsibilities relating to the manufacture and control of the product. Technical aspects of the contract should be drawn up by competent persons suitably knowledgeable in pharmaceutical technology, analysis and Good Manufacturing Practice. All arrangements for manufacture and analysis must be in accordance with the marketing authorisation and agreed by both parties.

3.5.2. The contract should specify the way in which the Qualified Person releasing the batch for sale ensures that each batch has been manufactured and checked for compliance with the requirements of Marketing Authorisation.

3.5.3. The contract should describe clearly who is responsible for purchasing materials, testing and releasing materials, undertaking production and quality controls, including in-process controls, and who has responsibility for sampling and analysis. In the case of contract analysis, the contract should state whether or not the Contract Acceptor should take samples at the premises of the manufacturer.

3.5.4.Manufacturing, analytical and distribution records, and reference samples should be kept by, or be available to, the Contract Giver. Any records relevant to assessing the quality of a product in the event of complaints or a suspected defect must be accessible and specified in the defect/recall procedures of the Contract Giver.

3.5.5.The contract should permit the Contract Giver to visit the facilities of the Contract Acceptor.

3.5.6.In the case of contract analysis, the Contract Acceptor should understand that he is subject to Inspection by the competent Authorities.(PIC/S, 2006)

3.6.CONTRACTOR  AUDIT:-
3.6.1. Inspections should be conducted in order to monitor the implementation and compliance with Good Manufacturing Practice principles and to propose necessary corrective measures.

3.6.2. Personnel matters, premises, equipment, documentation, production, quality control, distribution of the medicinal products, arrangements for dealing with complaints and recalls, and self inspection, should be examined at intervals following a pre-arranged programme in order to verify their conformity with the principles of Quality Assurance.

3.6.3. Self inspections should be conducted in an independent and detailed way by designated competent person(s) from the company. Independent audits by external experts may also be useful.

3.6.4. All self inspections should be recorded. Reports should contain all the observations made during the inspections and, where applicable, proposals for corrective measures. Statements on the actions subsequently taken should also be recorded.(PIC/S, 2006)

4.      CONTRACTER AUDIT AS PER USFDA, EU, AND ISO:- (Steinborn, L., 2003)
4.1.
Contractor Audits
Contractor quality-assurance audits are performed to evaluate the status of a manufacturing operation, laboratory, testing service, or any other function performed by one company for another. It is important to recognize the reasons a company employs a contract manufacturing facility so that the auditor can determine what unique elements need to be taken into consideration in performing quality audits of these facilities.

4.2.Audit Steps
There are three critical steps in performing contractor audits.

4.2.1.    Preparation
The auditor needs to review the specifics of the contractual agreement to perform a quality audit efficiently. As European Good Manufacturing Practice (GMP) requirements have long recognized, the specific contractual relationships between the contracting parties must be in writing that clearly delineates the responsibilities of each.

The International Organization for Standardization (ISO) series and new U.S. Quality System Regulation (QSReg.) also place strong emphasis on such formal agreements. It would be substantially embarrassing for someone to audit a contract manufacturing facility only to Fnd that the contractor was not required to perform a specific function. It could be even more embarrassing and problematic if the function were necessary but neither the contractor nor the procuring company was performing the function due to misunderstandings. For example, who will retain samples of the Finished product? If the contracting company assumes that the client is retaining samples while the client is assuming that the contractor is retaining samples, none may be retained.

4.2.2.    Performance
A contractor audit is somewhat like a supplier audit and an internal-facility audit combined. The supplier-audit approach should be employed from the planning perspective. The auditor should establish a clear purpose for the audit, obtain as much information as possible about the contractor, and employ a formal checklist. As in the case of internal audits, one needs to determine whether announced or unannounced audits should be employed.

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