1. Strategies and Concerns in the Sourcing of FDA-Regulated Products, Components & Services Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct., Suite 229 Encinitas, California 92024 760-815-4762 ♦ 760-454-2979 (fax) mswit@fdacounsel.com FDA Counsel.com

2. BIO 2001 Procurement and Supply Chain Management Seminar Monday, June 25, 2001 San Diego Marriott Hotel and Marina San Diego, California FDA Counsel.com

3. 3 Why Worry About FDA Compliance? FDA Compliance Can Make or Break a Deal Recent Examples: Abbott/Alza Merger Guilford/Gliatech Merger When sourcing you become a “partner” with your vendor -- their problems are yours FDA Counsel.com

4. 4 Why Worry...? FDA mandates you worry about your vendor/partner’s compliance Poor Suppliers May Delay or Void an Approval Active Pharmaceutical Ingredient (“API”) Supplier Sponsor’s application will not be approved if deficiency at API maker FDA Counsel.com

5. 5 Why Worry? Poor Suppliers May Delay or Void an Approval … Active Pharmaceutical Ingredient (“API”) Supplier …. Special tactics/concerns: be extremely careful with first-time suppliers special concern -- if never used before, FDA foreign inspection may delay approval process as well FDA Counsel.com

6. 6 Why Worry…? FDA will make you worry … Poor Suppliers May Delay/Void Approvals... Clinical researchers sponsor’s application may not be approved -- data may be excluded if discovered post-approval, can lead to formal withdrawal of the approval FDA Counsel.com

7. 7 Why Worry? FDA will make you worry … Poor Suppliers May Delay/Void Approvals... Clinical researchers … Special tactics/concerns area of high interest today due to 1999 gene therapy death @ U. of Penn. & problems at other major clinical research centers (e.g., Duke, U. of Colo.) sponsors can not avoid FDA liability via contract -- have to have systems in place to ensure compliance FDA Counsel.com

8. 8 Why Worry…? FDA will make you worry … Poor Suppliers May Delay/Void Approvals … Contract Manufacturers must be GMP compliant or FDA approval can be refused Special tactics/concerns tied directly into your application -- their changes will trigger a regulatory duty that may require an FDA filing/approval may be high volume/low margin producers -- pressure on production may lead to errors FDA Counsel.com

9. 9 Why Worry…? FDA will make you worry … Supplier or component qualification -- Required -- explicitly or implicitly Drugs -- 21 CFR 211.22(a) “…The quality control unit shall be responsible for approving or rejecting drug products manufactured, processed, packed or held under contract by another company.” FDA Counsel.com

10. 10 Why Worry? FDA will make you worry … Supplier or component qualification -- Required -- explicitly or implicitly … Devices -- 21 CFR 820.50 “Each manufacturer shall establish and maintain procedures to ensure that all purchased or otherwise received product and services conform to specified requirements.” FDA Counsel.com

11. 11 Why Worry…? FDA will make you worry … Supplier qualification … Devices -- 21 CFR 820.50(a)(1) -- Evaluation Duty applies to suppliers, contractors and consultants -- evaluated as to abililty to meet specified requirements must define the “type and extent of control” over products, services, suppliers, contractors, and consultants” keep records of acceptable suppliers, contractors & consultants FDA Counsel.com

12. 12 Why Worry…? FDA will make you worry … Supplier qualification … Devices -- 21 CFR 820.50(b) -- Purchasing Data Duty keep data that “clearly describe or reference the specified requirements, including quality requirements, for purchased or otherwise received product and services.” Note: “product” includes components, manufacturing materials, in-process devices, finished devices and returned devices [21 CFR 820.3(r)] FDA Counsel.com

13. 13 Why Worry...? FDA will make you worry … Supplier qualification … Devices -- 21 CFR 820.50(b) -- Purchasing Data Duty Documents “shall include, where possible” an agreement requiring a supplier/contractor/consultant to notify the manufacturer of changes “so that the manufacturer may determine whether the changes may affect the quality of a finished device. FDA Counsel.com

14. 14 Why Worry...? FDA will make you worry … Supplier qualification … Biologics -- 21 CFR 600.12(e) -- Records in “divided” manufacturing each participating manufacturer shall furnish the “last” manufacturer “all records relating to the manufacturing operations performed by such manufacturer insofar as they concern the safety, purity and potency of the lots of the product involved FDA Counsel.com

15. 15 Why Worry? FDA will make you worry … Supplier qualification -- Biologics -- 21 CFR 600.12(e) -- Records in “divided” manufacturing … Tactics/concerns if you’re the “last” mfr. -- defining the records needed re “safety, purity, and potency” -- e.g., does that mean “effectiveness”? be as specific as possible in the supply agreement FDA Counsel.com

16. 16 Why Worry…? FDA will make you worry... Receipt of Components -- Procedures Drugs -- 21 CFR 211.84 -- Testing and Approval or rejection of components, drug product contaniers, and closures number to be tested will depend on … “the past quality history of the supplier” testing can be avoided if: For drug components: ** vendor supplies a Certificate of Analysis showing test results + you do at least one specific identity test ** buyer must establishe reliability of supplier’s analyses via “appropriate validation … at appropriate intervals” FDA Counsel.com

17. 17 Why Worry…? FDA will make you worry... Receipt of Components -- Procedures Drugs -- testing can be avoided if: For container/closure systems -- ** vendor supplies a Certificate of Testing + does visual ID on the container/closure systems ** buyer establishes reliability of supplier’s testing via “appropriate validation of the supplier’s test results at appropriate intervals” FDA Counsel.com

18. 18 Why Worry…? FDA will make you worry... Receipt of Components -- Procedures Devices -- 21 CFR 820.80(b) -- must have procedures for accepting incoming product tested, inspected or otherwise verified to meet specified requirements acceptance or rejection must be documented nonconforming product -- must notify 3rd party manufacturers -- arguably, there must be an investigation Tactics/concerns -- having leverage to make the manufacturer do such an investigation FDA Counsel.com

19. 19 Why Worry…? FDA Problems Can Be Hard to Fix FDA statutory and other powers against violative companies/products may delay or preclude a fix Inspection -- type will determine impact routine vs. directed short vs. lengthy Seizure -- can be least intrusive Injunction consent decrees -- e.g., Abbott litigated orders FDA Counsel.com

20. 20 Why Worry…? FDA Problems Can Be Hard to Fix... Criminal Prosecution -- The sins of your partner may visit upon you -- The E-Ferol Case does not technically preclude supply, but can be so disruptive as to undermine the effectiveness of a vendor Application Integrity Program (AIP) -- [formerly known as the “Alert List” or “Fraud List” if your supplier is on it, can be a lengthy, very subjective process for getting through FDA Counsel.com

21. 21 Why Worry…? FDA Problems Can Be Hard to Fix... Examples Regulatory hurdles -- to cure a problem with an approved product, may require FDA sign- off depending on the nature of the problem. Examples Active pharmaceutical ingredient maker unable to supply: Apparent Solution -- get a new one Problem -- will require prior approval by the agency and additional scientific data to support change Best approach -- have two qualified as early as possible FDA Counsel.com

22. 22 Why Worry…? Products Liability Examples where a supplier caused the problem: Tryptophan -- raw material problem E-Ferol -- poor formulation Carbamazapine -- API process change Securities Liability -- worst case, deal caves; investors (i. e., their lawyers) sue Economic disruption -- you can’t sell if they don’t sell to you FDA Counsel.com

23. 23 Keys to Preventing & Mitigating Problems with FDA-Regulated Suppliers Contract Clauses Audits Surveillance between audits Teamwork at the Buyer FDA Counsel.com

24. 24 Preventing & Mitigating Problems... Contract Clauses Buyer’s right to audit vendor (and vendor’s key suppliers) without notice at any reasonable time during operations vendor to cooperate fully with audit access to records and personnel to be spelled out FDA Counsel.com

25. 25 Preventing & Mitigating Problems … Contract Clauses … advance notice of changes in vendor’s processing -- KEY -- so buyer can assess what regulatory action it must take to keep its approval/submission current

26. 26 Preventing & Mitigating Problems... Contract Clauses... Vendor to cooperate, at no additional expense, with Buyer’s needs to take action to continue to comply with FDA requirements (e.g., vendor to provide data to support filing of supplements to make changes to approved applications) FDA Counsel.com

27. 27 Preventing & Mitigating Problems … Contract Clauses... Vendor’s relations with FDA... Provide copies of 483’s, EIRs prompt notice to buyer of initiation of FDA inspections prompt transmission/notice to buyer of any FDA regulatory correspondence or other regulatory action FDA Counsel.com

28. 28 Preventing & Mitigating Problems... Contract Clauses... Timely notice of other problems encountered by vendor in its manufacturing process timely notice of any adverse reactions or complaints reported to vendor FDA Counsel.com

29. 29 Preventing & Mitigating Problems … Contract Clauses... Contractually articulated duty to comply with FDA laws/regulations general specific -- examples providing certificates of analysis testing to be done FDA Counsel.com

30. 30 Preventing & Mitigating Problems... Contract Clauses... Recalls -- duty to of vendor to cooperate with recalls initiated by buyer (if applicable) representations, warranties, etc. about state of past and present compliance with FDA legal/regulatory reqs. Indemnification duty from vendor to buyer in event of breach of any FDA-related reps or warranties FDA Counsel.com

31. 31 Preventing & Mitigating Problems … Audits -- the key to compliance No notice (ideal world?) Conduct like an FDA inspection Audit team -- should be interdisciplinary in training -- Operations, QA, RA, QC should have an SOP for conducting FDA Counsel.com

32. 32 Preventing & Mitigating Problems... Audits... Written follow-up -- give them a “483” essential get substantive replies from vendor What to stress -- systems specific to your product/service being provided to you by vendor current FDA “hot buttons” FDA Counsel.com

33. 33 Preventing & Mitigating Problems... Audits... Re-audit promptly to confirm corrections General Documents to review chronology of interactions with FDA and other regulatory agencies (e.g., EMEA, HPB, if applicable) all regulatory correspondence/filings between vendor and FDA FDA Counsel.com

34. 34 Preventing & Mitigating Problems … Audits... General Documents to review … minutes of meetings/phone calls with FDA company’s FDA’s (get via FOI if vendor doesn’t have) Tip -- don’t rely just on what the company gives you; seek independent sources of related documents (e.g., under FOI) FDA Counsel.com

35. 35 Preventing & Mitigating Problems... “Surveillance” between audits -- keeping an eye on your vendors Why? “Knowlege is Good” (Faber College motto; Animal House, 1978) -- to be in the best position to anticipate problems To be able to initiate dialogue with vendor as soon as possible after being alerted to a regulatory issue FDA Counsel.com

36. 36 Preventing & Mitigating Problems … “Surveillance” between audits -- keeping an eye on your vendors … How? Read the trade and general press Keep track of FDA warning letters (subscribe to FDA e-mail notification services) FOI requests -- direct to FDA or via a third- party service FDA Counsel.com

37. 37 Preventing & Mitigating Problems... Teamwork at the Buyer My old General Counsel’s nightmare -- “here’s the supply contract, we need to sign it today, can you look it over for any legal issues...?” My reply: “Did you run it by RA, QA, QC?” FDA Counsel.com

38. 38 Specific Procurement Problems Imported Components FDA powers to stop questionable imports is much greater than for identical problem presented by a domestic manufacturer Reason -- § 801 of the Federal Food, Drug, and Cosmetic Act gives FDA power to block an import if the product “appears” to be adulterated or misbranded Action can occur without physical examination Example -- bulk APIs going through the New York District Office in past half year have all been detained pending proof they are not counterfeit, adulterated or misbranded -- without physical examination. FDA Counsel.com

39. 39 Specific Problems... Imported Components... Foreign suppliers are harder to sue Tryptophan -- Showa Denko allegedly dodged responsibility for medical syndrome due to being off-shore Sulzer -- foreign parent company allegedly refuses to provide any financial support to its subsidiary (ruptured breast implants) Unusual events impacting supplies -- FDA will try to work with you; examples Phillips Petroleum Plant explosion -- sole source for Marlex -- decreased availability of container/closure systems FDA Counsel.com

40. 40 Specific Problems... Clinical Studies if you’re the sponsor, need deep “down stream” audit systems and contract controls relative to: CRO’s Investigators -- don’t forget to check the FDA list of disqualified investigators IRB’s -- a critical focus today of concerns -- can invalidate data -- PROBLEM -- you may not have a contractual relationship -- insist upon one FDA Counsel.com

41. 41 Specific Problems... API’s (Active Pharmaceutical Ingredients) many are foreign sourced -- thus less frequently inspected by FDA -- puts audit onus on you still subject to all FDA rules -- while API makers technically do not have to meet GMP, there is a fairly stringent ICH guidance make sure contract has API maker notify you of changes to process, etc. that need to be in the DMF and that FDA has been notified FDA Counsel.com

42. 42 Specific Problems... Labels/Labeling label errors are prime cause of recalls your printer must have clear, written procedures on handling of labels, especially if not dedicated to you exclusively intake controls have to be well-documented, trained and validated change control procedures -- even for changes not being submitted for FDA approval -- are essential FDA Counsel.com

43. 43 Questions? Call, e-mail, fax or write: Michael A. Swit, Esq. Law Offices of Michael A. Swit 539 Samuel Ct., Suite 229 Encinitas, California 92024 760-815-4762 ♦ 760-454-2979 (fax) mswit@fdacounsel.com http://www.fdacounsel.com FDA Counsel.com