Quality Agreements for Medicinal Products

Anna Ivanova, Associate, BRACE Law Firm ©

March 28, 2023

Currently, due to the development of international ties and the transfer of many production processes to outsourcing, pharmaceutical companies conclude agreements under which medicinal product manufacturing technologies may be transferred, production sites provided, and services for the transportation and storage of medicinal products rendered, etc.

At the same time, current Russian legislation pays special attention to compliance with a number of requirements for the production of medicines. For example, according to Article 9 of Federal Law No. 61-FZ dated April 12, 2010, "On the Circulation of Medicinal Products" (hereinafter, the "Law on Circulation of Medicinal Products"), the subject of federal state control (supervision) in the sphere of circulation of medicinal products is compliance with mandatory requirements in the sphere of circulation of medicinal products, as well as licensing requirements for pharmaceutical activities. However, issues related to contractual relations between pharmaceutical market participants regarding the distribution of liability for the quality of manufactured medicinal products are not regulated in detail by current legislation.

To comply with all requirements for the quality of medicinal products, it is necessary to clearly consolidate the relevant quality requirements in contractual relations and conclude "quality agreements". However, there is no legislative definition of this concept. In general, a quality agreement represents a document between pharmaceutical market participants defining specific quality parameters of medicinal products, as well as the distribution of the parties' duties regarding specific aspects of quality assurance. Such agreements may be concluded between parties manufacturing medicinal products based on concluded contracts, between manufacturers and distributors, and between suppliers and buyers. Nevertheless, quality agreements play the most important role specifically at the stage of formalizing relations associated with the production of medicinal products and contract manufacturing.

Thus, a number of experts in the field of contract manufacturing note that in addition to the contract manufacturing agreement, the parties conclude a quality agreement specifying requirements applicable to the partner's quality management system, and defining the rights and duties of the parties regarding the medicinal product planned for production and supply. The agreement provides for the duties of the parties related to key quality parameters, including the supply of products and materials for contract manufacturing. As noted by quality directors of major pharmaceutical companies, "the development of a quality agreement is a crucial stage in organizing contract manufacturing. At the same time, the quality agreement should not only establish the customer's requirements but also determine bilateral partnership relations that will ensure further effective cooperation and interaction of the parties, which ultimately will allow not only avoiding serious problems that could lead to unsatisfactory quality of the manufactured products but also extracting mutual benefit" [1].

Despite the fact that quality agreements may be concluded in free form and conditions therein are established exclusively by the decision of the parties to the relevant agreement, it must not be forgotten that requirements for the quality of medicinal products are also consolidated at the legislative level.

For example, currently, the Rules of Good Distribution Practice, approved by Decision of the Council of the Eurasian Economic Commission No. 80 dated November 3, 2016, establish a requirement for an organization engaged in the wholesale trade of medicinal products to have a quality system. The organization's management appoints a Responsible Person empowered with authority and duties to ensure the implementation and maintenance of the quality system in an up-to-date state. In accordance with Recommendation of the Board of the Eurasian Economic Commission No. 136 dated August 6, 2019, a person authorized by a foreign manufacturer acts as an applicant when assessing the conformity of mass-produced products by issuing a power of attorney or concluding an agreement in accordance with the legislation of the Eurasian Economic Union member states. Thus, within the framework of Federal Law No. 449-FZ dated November 28, 2018, the liability of the distributor's authorized representative for the quality of imported medicinal products must be formalized in the relevant agreement or power of attorney from the foreign marketing authorization holder or manufacturer. Currently, there are no requirements for the education and work experience of said distributor's representative. However, based on the nature of the work performed and the liability imposed, they must possess the necessary information and be knowledgeable about issues of medicinal product quality and requirements for quality documentation. If the contract with the foreign manufacturer contains clauses defining the distributor's liability for accepting claims regarding supplied goods, a person responsible for the set of established measures for accepting goods and confirming their quality may be appointed by an internal order of the organization. The importer may be authorized via a standard power of attorney or in a quality agreement with the manufacturer, which is an integral part of the main contract [2]. Also, a number of requirements of the Good Manufacturing Practice Rules of the EAEU, approved by Decision of the Council of the Eurasian Economic Commission No. 77 dated November 3, 2016 (hereinafter, "EAEU GMP Rules"), can be applied to the quality contract/agreement.

Below, we examine in more detail the EAEU GMP requirements that are necessary and important to consider in quality agreements for medicinal products.

Quality Agreements for Medicinal Products within the Framework of EAEU Legal Acts

According to Clauses 17 and 21 of the EAEU GMP Rules, the manufacturer must regularly conduct quality reviews of all manufactured medicinal products to confirm the consistency of the existing process and compliance with current specifications for both starting materials and finished products, to identify trends, and to determine the possibility of improving products and the process. Such reviews must be documented and conducted, as a rule, annually, taking into account previous reviews. At the same time, if the legal entity in whose name the marketing authorization (registration certificate) is issued is not the manufacturer, an agreement determining the relevant duties of the parties regarding the compilation of the quality review must be concluded between said person and the manufacturer.

Chapter 7 of the EAEU GMP Rules also contains a number of requirements for outsourced activities, including regarding product quality.

According to Clause 237 of the EAEU GMP Rules, a contract between the Customer and the Executor is concluded specifying clearly defined duties of each party and provides for the procedure and liability of the Authorized Person (Qualified Person) for issuing a release permit for each batch of products.

It is recommended that the contract under which activities are outsourced includes indications of the products, works, or services, the implementation of which is transferred to outsourcing, as well as all technical and other agreements related to such activities attached to the contract.

If the legal entity in whose name the marketing authorization is issued and the manufacturer are not the same organization, appropriate agreements must be concluded between them, taking into account the provisions established by the EAEU GMP Rules.

In particular, the Customer's pharmaceutical quality system must include the control and review of any outsourced activities. The Customer guarantees the control of outsourced activities. This control must include quality risk management principles and take into account the provisions below.

Prior to outsourcing activities, the Customer must ensure the Executor's legal capacity (including the possession of the necessary license in accordance with the legislation of the Russian Federation), competence, and ability to fulfill obligations. It is also recommended to include provisions ensuring compliance with EAEU GMP Rules requirements in the contract.

The Customer must provide the Executor with all information and data necessary for the proper fulfillment of obligations provided for by the contract in accordance with the legislation and the registration dossier, as well as be responsible for checking and evaluating records and results related to outsourced activities.

In turn, the Executor must have the necessary knowledge, experience, and competent personnel, as well as possess appropriate premises and equipment for the proper fulfillment of obligations under the contract. Furthermore, the Executor must verify that all products, starting materials, packaging materials, and information provided to them are suitable for their intended use.

The Executor must not make unauthorized changes outside the scope of the contract, as this may adversely affect the quality of work performed for the Customer. Also, the Executor must understand that outsourced work, including analysis under the contract, is subject to inspection by authorized federal executive bodies.

It is recommended to define mutual obligations and information transfer procedures related to outsourced activities directly in the contract. The contract terms agreed upon by the parties and all technical and other agreements related to the contract must comply with the legislation of the Russian Federation and the registration dossier.

It is recommended to indicate in the contract which party is responsible for each stage of the outsourced activity (for example, knowledge management, technology transfer, supply chain security, concluding a contract with a third party, purchasing starting materials, materials and their quality, conducting tests and issuing a permit for the use of starting materials and packaging materials, carrying out production and quality control (including in-process control, sampling, and analysis)).

All records related to outsourced activities, for example, records of production, analysis, and sale of products, as well as relevant reference samples, must be kept by the Customer, or the Customer must have access to them.

Any records related to product quality assessment in the event of claims, suspected non-compliance with requirements, or during an investigation in case of suspected product falsification must be accessible to the Customer and precisely defined in their relevant procedures.

It is also recommended to provide in the contract for the Customer's right to audit the outsourced activity performed by the Executor or a mutually agreed third party.

The aforementioned requirements for outsourcing contracts and agreements apply to quality agreements as well. Detailed compliance with these requirements will allow regulating issues of compliance of manufactured medicinal products with legislation, including EAEU GMP.

Additionally, EAEU GMP establishes specific features for the production of biological pharmaceutical substances and medicinal products. In particular, it is established that an agreement must be concluded between the responsible parties (for example, manufacturers, tissue collection and/or testing organizations, sponsors, marketing authorization holders), which defines the areas of responsibility of each party (including the indication of responsible and authorized persons).

Particular attention in the EAEU GMP Rules is paid to product quality control. Namely, the storage location of reference and retention (archive) samples must be determined in an agreement between the sponsor and the manufacturer(s). Timely access of representatives of the authorized federal executive body to such places must be ensured.

Reference samples of the finished medicinal product must be stored in the Russian Federation or in a third country if agreements exist between Russia and the third country-exporter guaranteeing that the manufacturer of the investigational medicinal product adheres to good manufacturing rules, the requirements of which are not lower than the requirements of the EAEU GMP Rules. In exceptional cases, reference samples of the finished medicinal product may be stored at the manufacturer in a third country. In such a case, this must be justified and documented in the form of an agreement between the sponsor, the importer into the Russian Federation, and the manufacturer of the medicinal product in the third country.

Annex No. 18 to the EAEU GMP Rules establishes requirements for handling reference samples. They are stored to ensure the availability of a sample for analytical research or to ensure the availability of a sample of the fully finished product. If the person in whose name the marketing authorization is issued is not simultaneously the legal entity responsible for releasing the batch of products in Russia, the duty to select and store reference and retention samples must be defined in the agreement of the parties. This also applies to cases where any activity regarding the production or release of a product batch is carried out at a production site that does not belong to the manufacturer responsible for the product batch circulating on the Russian market. The procedure for selection and storage of reference and retention samples for each production site involved in production must be defined in an agreement between the manufacturers to whom these production sites belong. If several production sites belonging to different manufacturers are involved in the production of the finished product, the existence of agreements between said manufacturers is a key condition for compliance with requirements for the selection and storage location of reference and retention samples.

In addition to the mandatory requirements of the EAEU GMP Rules, the Board of the Eurasian Economic Commission, by Decision No. 151 dated September 7, 2018, approved the Guideline on Drafting a Normative Document on the Quality of a Medicinal Product. This establishes that the normative document on quality sets requirements for the quality control of a medicinal product (contains a specification and description of test methods or references to them, as well as relevant acceptance criteria for quality indicators, etc.) based on the expertise of the medicinal product conducted. It is approved by the authorized body of the EAEU member state during the registration of the medicinal product and is intended for quality control of the medicinal product in the post-registration period in the territories of member states. Such a normative document contains the following information: composition of the medicinal product, specification, description of test methods, packaging description, labeling, storage conditions, shelf life (storage period). This guideline does not contain requirements for potential quality agreements. However, we believe that it is advisable to take into account the parties' compliance with the requirements contained in the normative document in the quality agreement as well.

Thus, EAEU legal acts, particularly the EAEU GMP Rules, indirectly regulate issues related to exactly what conditions should be established in quality agreements.

However, it must be noted that the question of how detailed the above provisions will be established in quality agreements is determined directly by the parties to such agreements.

In general, quality agreements may be concluded:

• as separate agreements;
• as appendices to concluded contracts;
• by inclusion in the contract as a separate section.

Below, we examine in more detail the main provisions worth paying attention to in quality agreements.

Key Conditions of a Quality Agreement for Medicinal Products

In addition to EAEU legal acts, alternative rules regarding product quality control are established, which may be applied by pharmaceutical companies on a voluntary basis.

For example, a company may implement a quality management system within the framework of developed ISO (International Organization for Standardization) standards. For instance, according to Standard ISO 9001:2015 "Quality management systems — Requirements," an organization must establish, implement, maintain, and continually improve a quality management system, including the processes needed and their interactions. It is also necessary to establish, implement, and maintain a design and development process that is appropriate to ensure the subsequent provision of products and services. If such a standard is applied in the organization, it is recommended to indicate when concluding a quality agreement that the counterparty must also be guided by this standard.

If applying a general description of the main provisions of quality agreements, it is recommended to specify the following conditions therein:

• Legal acts with which medicinal products must comply (EAEU GMP Rules, Law on Circulation of Medicinal Products, ISO standards, etc.);
• Distribution of liability for product quality at each stage of production and supply;
• Requirements for the storage of medicines;
• Requirements for production premises;
• Requirements for transportation (if necessary);
• Procedure for implementing a quality control system (it is desirable that control be carried out with the participation of representatives of both parties);
• Requirements for the pharmaceutical quality system;
• Procedure for exchanging information and documentation between the parties to the agreement;
• Issues of handling reference samples of medicinal products;
• Other provisions directly affecting product quality.

Thus, the effectiveness of implementing a quality agreement is achieved not only when the medicinal product is produced qualitatively but also when all other conditions related to the product are met (for example, packaging, completeness, compliance with storage and transportation conditions, etc.). Accordingly, in a broad sense, it can be concluded that quality is directly linked to all these conditions.

Regarding quality agreements, a number of scholars conclude that the state pays little attention to quality issues. By establishing only imperative requirements for ensuring safety, it essentially does not stimulate entrepreneurs engaged in activities to improve product quality [3].

We believe that with the development of contract manufacturing, a more acute need will arise for legislative consolidation of requirements for the content of quality agreements. And due to the fact that the production and circulation of medicinal products are regulated by Russian legislation and EAEU legislation, requirements for quality agreements in the pharmaceutical sphere can be structured most fully.

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References

[1] How to ensure quality in contract manufacturing? November 16, 2021. Materials of the Annual ISPE EAEU Conference.

[2] Letter of the Federal Service for Surveillance in Healthcare dated November 28, 2019, No. 01I-2906/19 "On Release into Civil Circulation".

[3] Y.A. Kuznetsova. The condition on quality in civil law contracts. Abstract of the dissertation for the degree of Candidate of Legal Sciences. Moscow. 2015.