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Risk Management: Mergers & Acquisitions

Getting the most value out of Mergers or Acquisitions requires proper upfront legwork, risk management and risk assessment.

 

risk managementIn the business press, discussions of mergers and acquisitions (M&As) invariably include percentages of deals that did not create their expected value. Failure numbers, ranging from 60–80%, are surprisingly high. Many companies seem to pursue mergers or acquisitions without a clear picture of their potential risks. A due-diligence process that’s too high-level or superficial is often to blame.

 

For example, when a life-science company considers a merger or acquisition, the due-diligence team typically looks for 483s, Warning Letters, notified-body findings, and product recalls to find any signs of potential problems with FDA. But when a deal does not deliver value, the real causes are often strategic, cultural, or technical.

 

Risk Assessment

 

Due diligence is not the same as risk management or conducting a quality assurance compliance audit. But in the life-science industry, it’s easy to confuse the two. The executives or the private-equity firm structuring the deal do not necessarily understand the companies’ operations or FDA sanctions.

 

At the same time, if a CEO or CFO is enamored with M&As as a perceived means to expand into a new business or enter a new market, the due-diligence team typically lacks the business expertise to ask the right questions or the clout to raise objections.

 

Risk Assessment Example

 

For example, Company A might want to buy Company B because of its superior sales force. Company A’s marketing department contends that sales would double; the finance department believes that redundancy would allow Company A to reduce payroll by 10%.

 

Both predictions are correct, but no one calculates the extra manufacturing capacity needed to produce a larger portfolio and volume of products. The expected value of the deal could be canceled out by unanticipated costs in another part of the organization.

 

Level of Compliance

 

The fundamental questions asked during due diligence should go beyond FDA compliance and tackle the business reasons for closing the deal. This approach requires having the right people (not necessarily those who happen to be available) on the due-diligence team.

 

Technical executives might be asked about open citations, but they’re rarely consulted about the likely costs of integrating factories, supply chains, or distribution centers—or whether these integrations can be done at all. But if integration costs more or takes longer than expected, customer relationships and product quality can suffer.

 

Checklists for Due Diligence

 

Often in a merger or acquisition, using a checklist to gouge the personalities of the two companies are not considered relevant. But stress and tensions can build when the cultures of two organizations are incompatible. The possible triggers of a poor “culture fit” are limitless: management style, risk tolerance, flexibility, talent, technology, and geography, to name a few.

 

Some life-science companies are risk-takers; others are conservative. Some are entrepreneurial; others are hierarchical. Some are obsessed with “zero incidents” quality; others have a “find a problem, fix a problem” management style. If the two cultures can’t be blended, the cost of a significant restructuring (including recruiting and hiring new executives) needs to be included in the M&A price tag.

 

Technology Due Diligence

 

Post-M&A integration is often the cause of extra, unplanned costs. For instance, a seller often ends up supporting sold-off processes or IT systems long after the deal is done. When this happens, the buyer can end up with a poorly managed function, and the seller can end up with disgruntled clients and extended costs. The deal’s stakeholders, each with different goals and agendas, need to talk to each other. External stakeholders can also be drawn into the due-diligence process to reduce such risks.

 

Transition services agreements (TSAs) should be drawn up carefully to protect buyers and sellers from value destruction. For the buyer, a TSA might specify that the seller’s employees will be available to talk to regulatory authorities during the integration time period. For the seller, the TSA might detail roles and responsibilities for the sold business or division. A key executive or consultant should ensure that TSAs are followed and that the buyer takes over on schedule.

 

Commercial Due Diligence

 

Any life-science company considering a merger or acquisition should consider the following five steps to ensure that its due-diligence process helps manage business risks and prevent value destruction.

 

FDA Compliance

 

Put the right people on the team. You have to be compliant with your notified bodies at any moment in time. A life-sciences company typically has multiple locations, some in other countries, as well as complex supply-and-distribution operations. The time available to understand compliance while making the deal value can be short. The due-diligence team therefore should be structured to quickly obtain real-world answers to fundamental questions.

 

This means including experts who can look at limited data and draw reasonable conclusions about areas such as: manufacturing, product portfolios, supplier relationships, IT capabilities, R&D and engineering, marketing and sales, and environmental compliance. A quality assurance specialist cannot cover all this ground alone. Perhaps most important, the team needs a senior executive who has the power to champion the right answer for the deal, even when that answer is “no.”

 

Risk Analysis Process

 

Consider the following example. A US company wanting to acquire a high-growth product line made a play for a successful company headquartered in Australia. The rewards matched the company’s objectives: revenue from sales outside the US would jump from 15 to 40%.

 

However, the risks would be just as great: registrations and patents would require global management, and the success of the venture depended on keeping the seller’s key people and infrastructure.

 

Technical Risk Assessment

 

The-due-diligence team included the COO as well as senior people from manufacturing, finance, legal, quality assurance, business development, and R&D, and an independent consultant to question assumptions. In addition to working with a virtual data room, the team spent two days interviewing seven of the seller’s top executives and one day touring the main production facility.

 

The team included a senior executive who would be in charge of the postmerger integration crucial to future revenue and earnings. Because the due-diligence team had the right people, the process contributed significantly to the immediate and long-term success of the acquisition.

 

Risk Evaluation

 

Ask the right questions. In many ways, due diligence is a detective’s game: the analysts need to look at clues (often from only partial data) and solve the mystery by defining the business case for the merger or acquisition, identifying the ways each facility or function would contribute to (or detract from) the realization of the business benefits, and pinpointing risks to processes, functions, or the enterprise. Even companies that do a lot of deals are wise to treat each one as a new and unique experience.

 

Find weak spots and define fixes. The due-diligence team needs to address areas of risk management, such as the costs and efforts required to harmonize operations, the timetable for fixing problems, and the investment needed for postmerger integration. For example, upgrading an acquired company’s enterprise resource planning system would be expensive and resource-consuming; its costs should be acknowledged.

 

Hazards Assessment

 

Use facts to negotiate. The financial decision makers want to know of any issue large enough to stop the deal. But even problems that are not dealbreakers could be used in negotiations. The due-diligence team needs to be prepared to talk to C-suite executives, bond-rating agencies, investment bankers, and the sellers about issues, potential solutions, a course of action and as its timing and estimated price tag.

 

Regulatory Compliance

 

Bring in the regulators early. The postdeal organization should inform FDA or other appropriate regulators of plans to fix recognized problems. Regulators know that M&As can create confusion and inconsistencies, and they look for them during inspections. Even if there are no risk management problems, it is a good idea for the buyer to connect with regulators to help ensure a smooth transition. Due diligence is a strategy for risk management and return on investment. When done right, it helps ensure value creation in a merger or acquisition.

 

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FDA Inspections: Frequently Asked Questions

Experts Steven J. Lynn, executive vice-president, Pharmaceuticals for Regulatory Compliance Associates, Inc., and Susan J. Schniepp, distinguished fellow for Regulatory Compliance Associates, Inc., provide simple answers to frequently asked questions regarding FDA inspections, although many of the concepts can be applied to internal and supplier audits as well.

 

Q. What documentation should I have ready to present to the inspectors?

 

regulatory complianceA. There are a number of documents and supporting evidence that can be staged prior to an inspection whether it is in-person or is being handled remotely. The objective is to make the inspection process go smoothly for both parties.

 

At a minimum, there should be a list of all current standard operating procedures (SOPs) provided to the auditor so they can choose the specific ones they are interested in reviewing, a listing of customer complaints for the past two years, a list of current closed and open deviations and corrective and preventive actions (CAPAs) for the past two years and the site’s quality manual, the current organizational charts, a copy of the employee training program, and a map of the facility. In addition, it is advisable to have a short introductory presentation (5–10 minutes) that describes the facility, the products produced, and the operating hours of the facility. This information can be provided up front for the inspectors.

 

Q. How long should an inspection/audit take?

 

A. There is really no specific time frame defined for an audit or regulatory inspections in general. Typically, supplier and internal audits should take between one to two days and a regulatory inspection typically takes three to four days.

 

Any inspection/audit can be extended depending on what the auditors/inspectors observe during the inspection. If things go well, the inspection will be completed quickly. If problems arise, the auditors may wish to extend the inspection and pursue the issue. This time frame is consistent whether the audit is done in-person or remotely.

 

Q. Do I need to make copies of everything the inspectors request?

 

regulatory compliance

A. In organizing for an inspection, it is advisable to track all audit documentation provided to the inspector. This is an important activity whether the inspection is performed in-person or remotely.

 

The inspection tends to run more smoothly when both parties are looking at and discussing the same documents. Whatever documentation is provided and kept by the inspector, it is advisable that the hosting site keep a record of the documentation.  For instance, being able to provide specific data when responding to observations associated with that documentation.

 

Basically, the hosting site needs to have an accurate log to recreate the audit activities after the inspector leaves. This is especially important when responding to the audit observation. It eliminates any questions about which document/information was discussed. Audits are fast paced, and anything that increases data integrity helps people remember what was discussed. In addition, it helps the regulatory inspections team respond to observations associated with the documentation.

 

Q. How much time do I have to answer a question after the inspector asks it?

 

A. There really isn’t a defined time frame to answer the questions. Questions that can be answered immediately should be answered immediately. Questions that need a little more investigation or clarification before answering should be responded to in a timely manner.

 

Let’s look at an example. If the inspector is reviewing a manufacturing processes technical document, they may ask to see a previous version to compare the improvement. Your QA team should know if this document is stored off site or may take time to retrieve it.

 

The delay is acceptable as long as you inform the inspector why the time is needed to provide the requested information. Bottom line, all regulatory compliance documentation should be delivered as soon as possible. If there is a delay, it is important to be transparent with the FDA inspector and explain the reason for the delay.

 

Q. If an inspector makes an observation, do I need to have a corrective action in place before the inspection ends?

 

A. No, there is no reason to have a corrective action in place before the FDA inspection ends. In some cases, the observation may be easily corrected. It can be possible to have the corrective action in place before the conclusion of the inspection. If the correction is acceptable to the inspector, this can help remove that observation from the final inspection report.

 

On the other hand, the best advice is to wait until the FDA inspection is completed before you implement any corrective action. This way you can be sure the action is appropriate for the observation. The entire team can use the time to make sure related documentation and team communication has been mass produced.

 

Article Details

 

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Pharmaceutical Technology
Vol. 45, No. 2
Page: 58

 

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Supplier Quality Agreement

Robust supplier quality agreements and good communication scheme can help avoid and alleviate regulatory concerns.

 

Managing the relationships between clients and contract manufacturing organizations (CMOs) can be difficult as the pharmaceutical landscape and its related supply chains become more global and complex. One of the best tools to achieving a good working relationship between a client and their CMO is the use of well-drafted, clear and concise quality agreements. To accomplish this, it is important to understand the different types of clients as well as the types of CMO models existing in today’s environment.

 

FDA Quality Guidance

 

In May 2013, FDA published draft guidance on quality agreements, which was finalized in November 2016 (1). Although written quality agreements are not explicitly required under existing CGMP regulations, they are required by the European regulations. Chapter 7, Outsourced Facilities, in EudraLex Volume 4 states:

 

“There must be a written Contract between the Contract Giver and the Contract Acceptor which clearly establishes the duties of each party”.

 

The FDA final guidance is titled Contract Manufacturing Arrangements for Drugs: Quality Agreements and, like all final guidances, represents FDA’s current thinking on the topic. The need for quality agreements is underscored by 21 Code of Federal Regulations (CFR) 200.10, Contract Facilities that states,

 

“Section 704(a) of the Federal Food, Drug, and Cosmetic Act specifically authorizes inspection of consulting laboratories as well as any factory, warehouse, or establishment in which prescription drugs are manufactured, processed, packed, or held”.

 

Lab Testing

 

This section of the regulations goes on to state,

 

“The Food and Drug Administration is aware that many manufacturers of pharmaceutical products utilize extramural independent contract facilities, such as testing laboratories, contract packers or labelers, and custom grinders, and regards extramural facilities as an extension of the manufacturer’s own facility.”

 

And finally, 21 CFR 211.22, Responsibilities of the Quality Control Unit, states:

 

“The quality control unit shall be responsible for approving or rejecting drug products manufactured, processed, packed, or held under contract by another company”.

 

The emergence of CMOs and virtual companies has been at the forefront of some of the challenges the industry is experiencing. With the finalization of the FDA guidance, it is an opportune time to revisit the concepts and ideas regarding quality agreements.

 

Quality Agreements

 

Quality agreements should not be limited to what is meant by traditional manufacturing but should be expanded to include the support activities necessary to producing a final product. It is important to put into context what is meant by “manufacturing”. For the purposes of this article, “manufacturing” will be considered anything to do with the manufacturing, testing, processing, packaging, or holding of the product including the procurement of the active ingredient, excipients, and packaging materials, including labeling, used to assemble the product.

 

Outsourced Staff

 

Another important issue to understand is the different client and CMO business models existing in the industry today. The various outsourcing models range from staff augmentation for a single activity to the full range of activities to produce the product. Partners in the contract-manufacturing niche also include the full spectrum from small to large and from early development to late-stage generic drug companies.

 

Quality Control

 

The complexity of the business models emphasizes the need of the consulting industry to employ a meaningful quality agreement. Quality control would focus on defining who is responsible for what in the relationship and what the communication scheme will be between the organization(s). 

 

Vendor Contracts and Vendor Agreements

 

Often the consistent issues within vendor contracts and vendor agreements often include the actual logistics of the agreement itself.  While there is obviously no one model for format and content, each party usually would like their own format for consistency. The real issue, however, is to agree on the scope and level of detail.

 

Manufacturing Operations

 

Looking at the situation from both sides might help in understanding the complexity of the issue. A CMO will have multiple clients. Each client will have different information they want highlighted in their quality agreements and will want to use their own quality agreement template.

 

Quality Management System (QMS)

 

Clients should look for a robust quality system and an open and communicative culture when choosing a contract organization to perform work for them. CMOs should look for clients who understand the regulations and can evaluate the CMO’s systems against those regulations rather than demanding the CMO conform to their way of doing things. Keeping track of numerous commitments can cause regulatory risk for the CMO, particularly if one client wants to have a different approach to an issue than another client. 

 

Vendor Contract Agreement

 

Let’s look at a vendor contract agreement example where robust quality agreements and a good communication scheme would have helped avoid and alleviate a regulatory concern. Keep in mind that the contracted parties involved in this scenario are unaware of the multiple contracts negotiated by the client, none of the contracts specify which party is responsible for investigations, and there is no mention in the quality agreement about how the parties will communicate in the event of an issue.

 

Clinical Manufacturing

 

The CMO was manufacturing clinical-trial materials for a client. The CMO was scheduled to perform the sixth manufacturing run of the clinical material when they noticed a different physical appearance to the API during incoming inspection.

 

The Certificate of Analysis accompanying the API indicated the material met the necessary specifications. The CMO was only capable of performing an incoming identity test because the client had contracted for the API release testing to be performed by a contract test laboratory (CTO).

 

Supplier Quality Agreement

 

The CMO contacted the client and expressed their concerns with the appearance of the incoming API. The client said that they were not concerned with the physical appearance of the API and told the CMO to manufacture the clinical-trial material. Once the manufacturing run was completed, the CMO, per the supplier quality agreement, sent the final product to a different CTO. The product failed final product release testing, and the CTO opened an out-of-specification investigation.

 

Scientific Services

 

The CTO found no error attributable to the laboratory. They contacted the client and discussed the scientific services team thought there was a problem with the manufacturing run. The client contacted the CMO and told them to investigate the incident at their facility only.

 

During the investigation, the CMO documented that they felt the failure of the product to pass the final product testing was due to the unusual appearance of the API and requested permission from the client to talk with the API manufacturer. The client denied the request; the clinical trial batch was placed on hold by the CMO; and the investigation was never closed out.

 

Quality Assurance Agreement

 

During a regulatory inspection, the inspector wanted to know what the outcome of the investigation was. The CMO had to tell the inspector that they could not complete the overdue investigation included in the quality assurance agreement because they were unable to talk to the API manufacturer. The client had told them that they investigated the API manufacture and could find nothing wrong with the API.

 

The CMO said the investigation was still open because the most probable root cause identified was the API, but it could not be verified. The result was that the CMO, the client, and the API manufacture were all issued FDA 483s and the product approval was delayed until the issue could be resolved.

 

Communication Plan

 

How could a more robust quality agreement and a communication plan have helped resolve the situation? There are a couple of recommendations to be made. The first is when there are multiple quality agreements involved, the client should make sure each of the parties are aware of each other through their quality agreement.

 

The client should also define that they will facilitate any communications between the various parties involved in the manufacturing including the testing laboratories, packagers, etc. In addition, the quality agreements should state who is responsible for the various activities including the facilitation and resolution of investigations.

 

Technical Quality Agreement

 

There is no right or wrong in crafting quality agreements. A good technical quality agreement will take into consideration the needs of the CMO, the client, adherence to compliance, and regulatory commitments of both parties. If both parties keep these principles in mind, they will have a great working relationship despite the quality agreement.

 

 

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Article Details

Pharmaceutical Technology
Vol. 41, No. 3
Pages: 58-61

 

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Supplier Quality Engineering

A risk-managed approach to the global supply chain is more important than ever for life science manufacturers. The process is often easier said than done.   It has been half a decade since ISO 14971 listed the device requirements for a risk management system. Since then, manufacturers have struggled to implement this approach into the Quality Management System (QMS) and enhance supplier quality.

 

As the industry continues to be challenged with supplier quality, Regulatory Compliance Associates, Inc. (RCA) brought together four industry leaders to discuss best practices. These medical device quality leaders share their experiences in implementing risk managed supplier quality, driving superior outcomes and leading change in their organizations. 

 

The roundtable participants include Matt Anderson, vice president, North America quality for Merz Inc., Angel Estrada, vice president of quality and regulatory affairs for Zimmer Surgical, and Mark Iwicki, an independent consultant in life science supplier quality. The discussion is moderated by Mike Miller, director of program management for RCA

 

Miller: What is changing in supplier quality?

 

Estrada: Supplier quality is becoming more complex. We have all seen the globalization of the supply chain and the growth of outsourcing. For many of us, supplier quality used to mean managing raw components and now it can mean managing outsourced finished goods. Some suppliers own the entire production process and the device manufacturers are merely distributors who supply their label.

 

We used to focus on supplier qualification, incoming inspections and certifications of compliance. Now, with the vertical integration of suppliers, supplier quality has become much more complex and more regulated. FDA now requires registration of Tier 1 suppliers.

 

Miller: How are device manufacturers responding to the challenges?

 

Anderson: A few years back when supply chain contamination within pharmaceuticals was making front-page news, life science quality organizations focused on the GMP elements such as audits, quality agreements, and incoming inspections. These are all good things but they did not always make a huge impact on the quality coming in the door.

 

Today, many manufacturers are using more of a risk-managed approach to supplier quality. This approach addresses each supplier situation individually by evaluating the areas of greatest risk to the manufacturer, developing plans to mitigate this risk and focusing on areas that provide the greatest bang for the buck.

 

Miller: How do you see risk management playing out in your supply chain organizations?

 

Anderson: Many companies with a large supplier base are focused on compliance and trying to take care of everything. This results in diluting resources and missing what is most important. For example, many individuals felt the entire supply chain should be audited. For a large company to audit the entire vendor base, it could mean doing 50,000 to 70,000 audits per year, with each costing $5,000 and taking an entire man-day. That is not realistic. A risk-based approach to supplier quality adds value because you focus on efforts where risk is greatest.

 

You also have to incorporate business risk as well as compliance. Today that could mean ensuring continuity of materials, environmental issues, and child safety concerns versus a straight GMP compliance lens. Each organization needs to define its risk drivers and levels in order to develop a corresponding program to mitigate those risks.

 

Miller: How do you prioritize risks? How does this theory play out in practice?

 

Iwicki: RCA sponsored a paper (http://bit.ly/SJ8u8p) on the topic of risk management within the global supply chain featured in Pharmaceutical Technology. This paper outlined a prioritization schema for typical GMP elements such as patient risk, volume of product manufactured, quality data like complaints and supplier history. Combined with supplier FMEA (Failure Mode Effects Analysis), risk can be assessed and supplier control plans can be established.

 

In doing a business-based risk management, I also look at factors such as high risk of failure or uniqueness of the supplier. For example, earlier in my career I had a sole supplier for whom we could not identify a back-up alternative. With this high risk, we escalated the control plan for this supplier.

 

Miller: What can we learn from other industries?

 

Anderson: It is no secret that the automotive and aerospace industries are further along the supplier quality learning curve than the life science industry. This is due, in part, to necessity. These industries have been challenged by eroding margins and the unsustainable cost of poor quality.

 

In particular the automotive industry has raised the bar so that manufacturers partner with their suppliers to drive both greater efficiencies and higher quality. They have largely accomplished this by focusing on technical variation and true process capability within the supply chain.

 

Miller: How does this work in life science?

 

Anderson: Manufacturers need to understand their key supplier’s processes, what is critical to quality and ensures a good process capability. It means thinking of your key supplier as an extension of your own manufacturing process.

 

Iwicki: It starts with supplier qualification. In the past, we looked at this as a process in which engineering and purchasing screened suppliers, handing a short list off to quality engineering and supplier quality for approval. This can lead to suboptimal quality. The better approach is to include quality engineering and supplier quality upfront in vendor selection.

 

Anderson: As you are evaluating the supplier manufacturing process, you need to bring in technical knowledge as well as a review of the quality system. Truly partnering with your supplier means you understand their process just like you would understand your own.

 

Estrada: Essentially you are overseeing the supplier’s quality management system not just managing a supplier.
Anderson: We had an example with batteries that were passing our incoming voltage acceptance tests but were experiencing some product failures post market. When our engineer was working with the supplier, he noticed that storage temperatures were exceeding 120 degrees, which is known to shorten battery life. This may not have been detected in a typical GMP audit.

 

Estrada: Our industry tends to do a good job on the mechanics of quality such as risk management, FMEA, fault tree analysis, but we see problems in the handoffs.

 

Iwicki: One common problem in handoffs is clear communication of final specification requirements to the supplier. The manufacturer and supplier typically have early conversations. The supplier may not see the final requirements specification in print until just before they are asked to produce actual production volumes. This can uncover tolerances that are too tight for large-scale production. Since the supplier has already invested time and effort and does not want to lose the manufacturer’s business, they may agree to the requirements and figure out later how to actually meet them.

 

Estrada: All too often the yield rate is low because the manufacturing transfer is not critically examined until deviations are experienced in the first supplier run.

 

Iwicki: I see growing importance of process control with variable measurement data so you can see when something is starting to deteriorate. It is much more efficient than acceptance sampling which only tells you if there’s a catastrophic failure on hand.

 

The evaluation process of a new supplier needs to go beyond the initial approval of the supplier at a point in time, and as requirements change, a candid reappraisal must occur on both sides before approval is given for full production volumes. Adding to Matt Anderson’s statement about the supplier’s manufacturing process being an extension of the manufacturer’s, the same is true about the manufacturer’s design control process and its extension to key suppliers.

 

Estrada: To sum it up, the cross functional team on the manufacturer’s side and the suppliers need to be talking early and throughout the project to avoid these handoff issues. Early investment in the supplier relationship can pay dividends in averting future potential problems.

 

Miller: How does this shift to supplier partnering impact your culture?

 

Anderson: Establishing deep relationships with suppliers significantly alters the business climate. Now we work together on shared goals. In the past, our focus on audits and quality agreements were not real friendly to suppliers. They did not build the relationship. Rather we tend to use quality agreements as a legal document to punish when the supplier made a mistake.

 

Iwicki: I see organizations placing more importance on sustaining supplier relationships over time. It is so much easier to continually improve quality with a trusted supplier than continually seek and onboard new suppliers.

 

As personnel changes out on both sides of the manufacturer and supplier, the replacement staff needs to understand the culture and respect the prior relationships. The culture should be about quality above cost, not cost above quality.

 

Miller: How do you instill a culture of cross-functional teamwork?

 

Estrada: This is a leadership issue and must come from the top. Quality is a team sport, and everyone at Zimmer understands that. As functional leaders we lead by example and our departments understand we all play on the same team.

 

Cross-functional training and exposure builds on this foundation. Our trainers are subject matter experts (SMEs) , so they have immediate respect with the trainees. When you do not have SMEs, you take early adopters and train them to be trainers.

 

Another best practice we have seen in the military is co-location. Pilots and servicemen work in the same environment. I saw this work well at Abbott Diagnostics where quality, R&D, and quality engineering were co-located. They did a remarkable job with design transfer into manufacturing. Maybe it is because communication is in real-time and the team meets more informally. With work teams located all around the globe, we have seen SharePoint and other collaboration tools bring cross-functional areas together.

 

Miller: How does this impact your staffing considerations?

 

Iwicki: Experience matters. The supplier quality area is attracting more tenured personnel instead of being known as the jump-off point for new hires. The focus is on people who understand the true supplier quality instead of trying to get a feather in their cap for nitpicking the suppliers. I see many organizations pair up the new hires with experienced staff.

 

Estrada: We seek cross-functional team players and continue to cross-train. For example, the purchasing personnel are trained by the quality organization in the areas of GMP, change control, obsolescence and areas for the elevation of issues. Our purchasing team has become more “big picture” in their thinking. It is not just about the pursuit of a low price; It is about cost, quality and delivery.

 

About the Experts

 

Mike Miller is Director Program Management at Regulatory Compliance Associates, Inc. (RCA) and is the moderator of this paper. He is a senior quality management professional with over 25 years in the medical device industry. Before RCA, Mike held a variety of quality roles at Baxter and The General Services Administration (GSA), an independent agency of the United States government, established in 1949 to help manage and support the functioning of federal agencies. 

 

Matt Anderson is the VP, Quality Operations at Merz Aesthetics Inc. He has over twenty years of experience in quality management in the pharmaceutical industry with a focus on global supplier quality. Before Merz, he held a variety of senior Quality roles at both Baxter and Hospira. 

 

Angel Estrada, PhD is the VP of Quality and Regulatory Affairs at Zimmer Surgical. He has over twenty years of experience in quality management, starting his career in the automotive industry before transferring to medical devices. In addition to quality management, his roles include compliance and regulatory affairs. Before Zimmer, he held senior positions at Hospira, Kimberly-Clark Healthcare, Covidien, Abbott and Baxter. 

 

Mark Iwicki is a Senior Consultant at Avarent, LLC. His background includes 25 years as a quality professional in medical device and pharmaceutical manufacturing corporations. He has a strong technical background in the development and remediation of quality systems at both the direct product line manufacturing and business unit overview levels. Previously Mark was Director of Quality at Baxter.

 

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Sterile Manufacturing

Q. I am a small-scale parenteral manufacturer and have been approached to support a clinical program through Phases II and III.  What sterile manufacturing considerations are important for the small-scale production lots?

 

A. The sterile manufacturing situation always raises some interesting discussions. The statistical assurances for sterility for normal commercial lots are not available because of the usually small lots during clinical production. At the same time, the need to minimize any unanticipated clinical risks remains high. The best advice is to consult the regulations and determine what requirements you must meet to help ensure the clinical material you are manufacturing is safe. 

 

FDA Aseptic Processing Guidance

 

Sterile ManufacturingClinical trial material batches can range from as few as 200 to as many as 5000 units or more. It may not be feasible for these small-size batches to be produced on a traditional manufacturing line. In fact, some of the batches might be manufactured under a laminar flow hood by manual aseptic processing.

 

Sterility Assurance

 

It is important to remember that sterility assurance of the product must be maintained even when the clinical-trial materials are being prepared by hand because of the small lot sizes required.

 

For these small-scale batches, manufacturers need to adhere to the recommended requirements for control of the environment as defined in FDA’s aseptic processing guidance, the Parenteral Drug Association’s Technical Report #62 on manual aseptic processing, and in EudraLex Volume 4, Annex 1. In other words, the environment must be maintained and monitored with the recommendations specified in the documentation governing aseptic processing. 

 

Aseptic Pharmaceutical Manufacturing

 

Properly maintaining an aseptic pharmaceutical manufacturing environment suitable for drug products regardless of batch size is not as clear-cut as it seems. Quality personnel responsible for batch release need to take into consideration a number of factors before the lots in question can be released. These factors include assuring appropriate use of disinfectants before, during, and after manufacturing; proper gowning and aseptic technique of the operators; and making sure the environmental and qualification data support the operations.

 

So, what does this all mean? It means the company must have a robust program in place to support the sterility of the batch regardless of the lot size.

 

Sterile Pharmaceutical Manufacturing

 

There needs to be a cleaning program defining the proper use of disinfectants/sporocides before, during, and after processing. Sterile pharmaceutical manufacturing includes a gowning qualification/requalification program for personnel responsible for the product manufacturing. The gowning program should define how operators are initially qualified, how they are monitored for microbiological excursion during gowning, during manufacturing, and upon completion of manufacturing activities.

 

Aseptic Technique

 

It should also define how operators will be periodically requalified and how operators will be requalified in the event of an out-of-specification result. Operator aseptic technique should be tested through the conduction of media fills representative of the actual manufacturing runs. At a minimum, media fills should be performed annually.

 

Sterile Production

 

There also needs to be a facility maintenance program that challenges the appropriateness of the air handling system during sterile production. Establishing a periodic maintenance program for your high-efficiency particulate air (HEPA) air filtering system and performing periodic smoke studies to make sure the airflow is suitable for aseptic operations should provide quality assurance that the airflow system is in control and is functioning appropriately. 

 

In addition to the above recommendations, the company should have a program to control incoming components. Components used in the manufacture of aseptic processing on a small scale need to be rendered pyrogen free before being introduced into the manufacturing area.

 

Sterile Products

 

Small-scale batches of sterile products will not be taking advantage of continuous processes associated with large-scale lot manufacturing, so consideration must be given to how the materials and components will be introduced manually into the manufacturing area. This will require even greater emphasis on operator technique.

 

In some instances, the manufacturing equipment used in small-scale batch production is portable, so this program should also encompass the introduction of the necessary manufacturing equipment into the production area.

 

Environmental Monitoring

 

There needs to be an established environmental monitoring program. The environmental monitoring program for small-scale batch production should provide the information on the quality of the aseptic processing environment including any ancillary areas such as the equipment/component processing area, gowning rooms, laminar flow hoods, floors, ceilings, walls, and equipment surfaces including those that come into contact with the product components as well as the product itself.

 

Sterile Product Manufacturing

 

Determining the appropriate monitoring locations should be determined through a comprehensive risk evaluation. Sterile product manufacturing should periodically be reviewed and updated to reflect the most current operating conditions.

 

Finally, there needs to be consideration to final product testing and the appropriate number of product samples needed to ensure the product is sterile and safe for patients. The samples needed for testing should be taken from the beginning, middle, and end of the manufacturing run and the number taken should be reflective of the batch size.

 

Controls

 

Successfully manufacturing small-scale parenteral batches suitable for patients requires many of the same procedures and controls needed for large-scale parenteral manufacturing. If you keep in mind-regardless of batch size or manufacturing process-that the ultimate goal is to assure the sterility of the product throughout the manufacturing run and you use the data collected to determine the suitability of your processes, you should be able to produce any size batch in accordance with regulatory expectations.

 

Article Details

 

RCA

 

Pharmaceutical Technology
Vol. 41, No. 2
Pages: 82, 81

 

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Quality Risk Management Plans

Q: I am in the quality assurance department at my company. We are a small start-up, and one of my jobs is to develop a quality risk management plan. Can you give me some advice on what I need to consider when putting this plan together?

 

A: A well-written and well-implemented quality risk management plan is an integral and valuable element of an effective quality system. During the development and manufacturing of pharmaceutical products, the bottom line is that things can and will go wrong.

 

The purpose of a quality risk management plan is to help ensure continued compliance with regulatory requirements, such as good manufacturing practices or good laboratory practices, when events occur during manufacturing that potentially impact patient safety and product quality.

International Council for Harmonization (ICH) Q9 states,

 

“Two primary principles of quality risk management are: the evaluation of the risk to quality should be based on scientific knowledge and ultimately link to the protection of the patient; and, the level of effort, formality, and documentation of the quality risk management process should be commensurate with the level of risk” (1).

 

As an RCA risk management consultant is developing your company’s plan, we consider all aspects of the operation that impact the product. Managing your company’s risk with a well-defined plan may help reduce the activities associated with poor quality and inefficiencies associated with the product and the process, such as scrap or wasted materials, customer complaints, product yield and fewer deviations.

 

Risk Evaluation

 

The best risk advisory firms will tell you to evaluate all aspects of the manufacturing process and identify areas of vulnerability. These vulnerabilities need to be evaluated during the risk assessment for impact on the operation and the potential level of risk they pose. A well-written quality risk management plan is an ongoing process requiring rigorous documentation throughout the product lifecycle.

 

It provides a solid rationale for how to improve efficiency and spend resources on the important activities to improve product quality rather than on low-risk activities that have little to no impact.

 

Risk Assessment Audits

 

The collective risk assessment team will begin the process by evaluating four basic elements that should be included in a quality risk management plan. The first element is to perform an analysis of the identified risk associated with the operations. For example, if your product is being produced using an older manufacturing line, there is a risk that the line will experience frequent breakdowns.

 

Product Quality

 

The second step is to evaluate the risk in terms of its impact on your ability to supply a quality product. In this case, frequent shut downs can lead to product rejections, yield loss, and potential drug shortages. Top risk advisory firms will identify the risk and the impact of controls to mitigate the potential situation.

 

Some of the possible mitigation control strategies might include ensuring there are appropriate change parts for the line in inventory or plans to qualify the product production on a new more modern manufacturing line.

 

Risk Management Procedure

 

The last key element needed is data input and risk management procedure design. Conducting a risk assessment audit annually with your internal team can help evaluate your data sources and when you need to employ one of your control strategies.

 

In this simple scenario, an increase in down time on the line or a steady decrease in yield could be indicators that the manufacturing line is headed for a catastrophic failure and steps need to be taken to prevent a drug shortage situation.

 

Risk Assessment

 

The above discussion is only an example of a risk assessment in one area of an operation. Other areas of the process need to be evaluated for potential vulnerabilities and risk. These areas include an evaluation of:

 

  • the raw material reliability from suppliers,
  • stability and compliance of contractual suppliers (e.g., contract manufacturing organizations, contract test organizations),
  • age and reliability of laboratory test equipment

 

In other words, a solid, well-written and dynamic quality risk management plan will evaluate the overall organization, identify high-risk vulnerabilities, identify strategies for mitigation of the high-risk vulnerabilities, and rely on data to perform continuous monitoring of the vulnerabilities. And, of course, the plan will provide the appropriate documentation and rationale for the decisions.

 

Risk Based Monitoring

 

Implementing a quality risk management plan in an organization can also be challenging. It needs to be introduced and discussed with all applicable function personnel involved in the operations including, but not limited to, finance, manufacturing, regulatory affairs, purchasing, auditing, and senior management. The plan should be dynamic and should be modified as situations change.

 

Quality System

 

Let’s say you produce a product and you have a single-source supplier for one of your excipients. You have audited the supplier and have identified some significant gaps in their quality system. You identify this vulnerability in your quality risk management plan and indicate it is a high-risk item because of the lack of compliance of the excipient vendor.

 

One of your mitigation strategies might be to qualify an alternate supplier for the excipient. Once you have qualified that alternate supplier, you need to update your plan to downgrade the risk because you have taken the appropriate steps to mitigate it and eliminate the identified vulnerability.

 

Quality Assurance

 

Quality risk management plans are important because they help improve a company’s ability to provide quality product to patients. They are contingency plans with identified actions that help to ensure a continuous supply of product to the market that meets the expectations of being safe, effective, and available. They are dynamic documents that require integration into and data inputs from all departments in order to be successfully implemented at a company.

 

 

Article Details

Pharmaceutical Technology
Volume 43, Issue 8, pgs. 49, 50

 

To begin the Regulatory Compliance Associates scoping process today, please enter your information in the blue form below and click the submit button at the bottom of the webpage. You may also email us at [email protected].