A Quality Agreement, A Supply Agreement – Why Should I Care

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A Quality Agreement, A Supply Agreement – Why Should I Care About
Michael Finamore, CEO, Gemini Pharmaceuticals
As a Brand Owner/ Own Label Distributor, your mission is to market and sell your
products. Part of that equation is to buy from the Contract Manufacturing
Organization (CMO) the highest quality dietary supplements at a competitive
price. Historically, the Brand Owner/ Own Label Distributor sends a formula to a
CMO, gets a quotation, issues a purchase order, receives the finished product
with a Certificate of Analysis (C of A), and then is free to sell the product. A
formula, a quote, a purchase order, and a C of A – what other paperwork is
needed? Why clutter-up a straight forward process with other documents and
paperwork that are not mandated by the FDA?
Prior to the implementation of cGMPs for dietary supplements, this was the
accepted procedure. Product sales and marketing was the responsibility of the
Brand Owner/ Own Label Distributor and making the product was the
responsibility of the CMO – case closed. However, times have changed and this
is no longer the situation. As mentioned in our previous article, the Brand Owner/
Own Label Distributor can no longer abdicate the responsibility for the quality of
their product to the CMO.
While 21CFR Part 111 has codified many new and existing practices for the
dietary supplement industry, technically there is no requirement for either a
Quality Agreement or a Supply Agreement between the Brand Owner/ Own
Label Distributor and their chosen CMO. So why is the industry abuzz with
everyone talking about these detailed documents?
The first step is to understand the unique character of each document, and then
recognize how they together form a dynamic foundation for all aspects of a
business relationship. The Quality Agreement is a comprehensive written
agreement ( usually augmented with a checklist) that defines and establishes the
Quality and cGMP obligations of each party involved in the contract
manufacturing of dietary supplements.. In general, the Quality Agreement should
clarify which responsibilities are assigned to each party per the applicable
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requirements under 21 CFR Part 111 and per other current industry standards. It
will serve as the basis for dispute resolution, audits, and accessibility to product
For other aspects of the business relationship, a Supply Agreement is the
preferred document. In this case, items such as general business terms and
conditions, confidentiality, pricing or cost issues, delivery terms, or limits on
liability or liquidated damages are addressed. The Supply Agreement helps the
supply chain and upper management of both companies in working together, as
it removes ambiguity on a whole assortment of issues which might arise over
time. For instance, if things don’t go as planned with a certain project or order,
the Supply Agreement hopefully will provide a means or a frame work for
handling that issue. The partnership can continue working well since the next
steps are clearly defined and agreed to in advance by both parties. If constructed
properly, it can avoid any conflict between Terms and Conditions of Purchase
and Terms and Conditions of Sale, and alleviate the stress of how to handle an
unplanned conflict.
As was said earlier, Quality Agreements are not required at the present time, but
the FDA has offered a Guidance Document for creating a Quality Agreement.
/Guidances/UCM353925.pdf A careful reading of Warning Letters published by
the FDA shows that Quality Agreements are becoming a foundational
requirement across the industry. While this example is aimed at the
pharmaceutical industry, this excerpt is from an FDA Warning Letter issued in
2011 where the FDA stated “……specifically, your firm has not established a quality
agreement with the contract manufacturer ……the responsibilities between XXX Company and
the contractor have not been clearly defined. Additionally, a similar observation was made
regarding your failure to establish a quality agreement with your contract manufacturer of the
Again, while not yet required for our industry, historically the FDA
produces these documents as an official “look inside” the thinking of the Agency.
Prudent dietary supplement businesses should work to design programs in light
of these “suggestions” –since the key letter in “cGMP” is the “c” for “current”
drug, ….”
While there are a variety of templates available on the web that may be used as
the basis of a Quality Agreement, the FDA Guidance Document will help with the
fine-tuning of the chosen document and can help clear up ambiguity among
related regulatory positions.
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Within a typical Quality Agreement, there usually will be a series of statements
regarding the Quality Systems of both companies, and the document will relate
these statements to the various requirements from 21CFR Part 111. Additionally,
either in a written or checklist format, after each statement an indication will show
which party has the responsibility for completing that task. These requirements
can be assigned to either the Brand Owner/ Own Label Distributor, the CMO, or
shared among both parties. Since the CMO and the Brand Owner/ Own Label
Distributor have to agree to all aspects of the document, both parties are
responsible for reviewing and signing the Agreement. Also, the FDA has been
known to ask to see the Quality Agreement during an audit to ensure the
company does not try to push blame on other parties and answers their
questions truthfully and completely.
Because these two documents complement each other, the Quality Agreement
and Supply Agreement are usually signed in conjunction with each other to give
simultaneous coverage of all business issues, However, many examples have
combined the agreements into a singular document – although that is not a best
practice. If the FDA auditor asks to see the Quality Agreement, you would have
to then give the auditor the entire agreement so they can complete their review.
Please remember that no Quality or Supply Agreement will absolve the Brand
Owner/ Own Label Distributor from their product quality requirement as
mandated by 21 CFR Part 111 or from other regulatory responsibilities. The
biggest mistake made is when the Brand Owner/ Own Label Distributor attempts
to deflect those significant quality obligations to the CMO. Since they still bear
the ultimate liability for the product quality, the Brand Owner / Own Label
Distributor is still the party responsible for introducing the product into commerce.
While not yet specifically required by the FDA, it’s apparent that current industry
practices have an expectation of both a Quality Agreement and a Supply
Agreement to be present in a manufacturing relationship. This forward-looking
practice simply puts in writing the expectations the parties may already have, and
also more clearly defines responsibilities, which currently may be misplaced or
misunderstood. To both an auditor and the FDA, the presence of these
documents demonstrates pro-active thinking and conscious efforts by a company
to address responsibilities rather than simply ignoring them - thus giving the FDA
that “feel good” impression critical for a successful audit. Although industry has
thrived without these documents for years, it is clear that for future growth and
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sustainability, a Quality Agreement and a Supply Agreement will be necessary
documents for successful business relationship.