Assuring Quality in the Global Supply Chain

Measuring risk in sourcing

By Helena Champion

The topic of quality has been in the news frequently, with headlines about counterfeit and dangerous products made in China and elsewhere and many FDA warning letters. Globalization’s promise of lowering costs by sourcing materials and services from countries with low labor rates has turned out to have quality and safety risks that take a great deal of effort and resources to mitigate. This article explores the risks of depending, without reliable verification, on remote suppliers to maintain the quality and safety of their supply chain and the materials we buy from them.

I believe that the scope of supplier audits needs to be widened beyond the traditional limits often imposed by the supplier on the basis of proprietary knowledge and should include all aspects of manufacturing, testing and quality related to the material in question. Based on my extensive involvement in the international quality arena, I shall outline an enhanced supplier qualification approach to assure acceptable quality.

The Heparin Tragedy

In early 2008 there were numerous adverse events, some fatal, associated with Baxter International’s heparin parenteral products and they voluntarily recalled nearly all their heparin products in the U.S.^1,2. It took an intensive investigation by Baxter and the FDA to determine that the heparin used in batches associated with the adverse events was contaminated by oversulfated chondroitin sulfate (OSCS). This heparin was supplied by Scientific Protein Laboratories, Changzhou, China. At least 80 people in the U.S. died from contaminated heparin products³. Covidien (Kendall) and B. Braun also voluntarily recalled prefilled syringes containing heparin^4,5 from SPL. Device makers Medtronic Inc. and Atrium Medical Corporation also announced voluntary recalls^6,7 of some lots manufactured with heparin contaminated with OSCS. There were similar recalls by other manufacturers of drug product made with Chinese-sourced heparin in Denmark, Italy, France, Germany and Japan. In total, the FDA said tainted heparin has been identified in 12 countries.

OSCS costs a fraction of the ingredient usually used in heparin, and producers may have used it to cut costs. OSCS could not be detected by the pharmacopeia test in use until 2008, since it mimics heparin in that test and hence was not detected before being used to make drug product and devices. As a result new, more specific pharmacopeia test methods have been adopted internationally for heparin.

Experiences in Other Industries

Experiences in other industries moving production and supply to low-cost suppliers have not been very different from the heparin experience. The Economist⁸ recently reviewed a book by Paul Midler, Poorly Made in China: An Inside Account of the Tactics Behind China’s Production Game⁹. Mr. Midler is fluent in Chinese and has consulted in China since 2001 for Western companies replacing factories in Europe and America with subcontracting relationships in China. His Western clients were delighted with how Chinese factories could do things so well, so fast and so cheaply, but they were also puzzled as to how this was possible. There was reason to question the low prices — he soon found that “quality fade” was common, as Chinese factories transformed what were, in fact profitless contracts into lucrative relationships.

According to Mr. Midler, the production cycle at Chinese factories is the opposite of the theoretical model of continuous improvement. Once the factory has managed to make the product to specifications, innovation inside the factory turns to cutting costs, often in undesirable ways. Packaging is cheapened, or chemical formulations are altered. In addition, he saw some large, modern Chinese factories outsource production to smaller facilities that were in a better position to ignore environmental controls and safety standards for products and workers. He also found that some Chinese factories gave favorable pricing for making innovative products from countries with strong intellectual property protection, but only because the factory could then sell counterfeit copies to buyers in other countries where patents and trademarks are ignored. While Mr. Midler’s book was based on a wide variety of products, his observations sadly have been borne out by recent tragedies in the pharmaceutical and food industries, as evidenced by the heparin, pet food and milk contamination problems in the last few years.

Who Really Made Your Materials And From What? You Might Be Shocked

The FDA inspected Baxter’s heparin supplier Changzhou Scientific Protein Laboratories and its April 2008 Warning Letter¹⁰ stated that Changzhou SPL did not adequately evaluate its suppliers of heparin crude materials, and did not test incoming crude materials properly or have appropriate specifications for them. The company accepted lots of crude material from a workshop vendor it had designated in its “pre-audit” as “unacceptable” and shipped Heparin Sodium USP made with material from this vendor to the U.S.

An April 2009 FDA Warning Letter¹¹ to Shanghai No. 1 Biochemical & Pharmaceutical Co. Ltd., another supplier of contaminated heparin, said the agency found SBPC was not manufacturing, and did not appear to have ever manufactured heparin for the U.S. market but had actually got it from two other facilities, neither listed in the SBPC Drug Master File (DMF).

Expert Auditors Could Have Saved the Day

The only way you can find out your supplier’s current Good Manufacturing Practices (cGMP) compliance status is to do an in-depth audit. Baxter International did not audit Changzhou SPL before starting to buy heparin from them in 2004, and did not audit them until September 2007, when it sent one person who spent one day in the plant, according to the Congressional investigator’s testimony to the House panel3. Most of the problems discovered by the FDA would have been discovered by experienced auditors, had a thorough, full-scale audit been performed before choosing this supplier, with regular followups.

The FDA Warning Letter to Changzhou SPL cited many serious cGMP deficiencies, including inadequate evaluation of the effectiveness of critical processing steps to remove impurities and failure to define or control critical process parameters. SPL did not have an impurity profile for its heparin or appropriate specifications for impurities and did not perform adequate tests to detect impurities. Test methods were not verified by SPL to ensure suitability under actual conditions of use, as required by cGMP’s and the ICH Q7A guidance (Good Manufacturing Practices for Active Pharmaceutical Ingredients). The equipment SPL used to manufacture heparin was in poor condition — tanks identified as clean had material adhering to the inside surfaces; the tanks were also scratched. The cleaning method used for these tanks was not qualified and there were no written procedures for cleaning equipment.

When the FDA inspected Qingdao Jiulong, the actual manufacturer of the heparin shipped by SBPC to the U.S., it found significant deviations from cGMP requirements and no appropriate systems and procedures to ensure the drugs manufactured met specifications for identity, strength, quality and purity¹². The Warning Letter¹² said that Qingdao Jiulong did not investigate the contaminated lots or identify the source or upstream sources of contamination or take corrective actions, even after the customer requested an investigation. The quality unit had no systems in place to prevent manufacture and distribution of heparin contaminated with OSCS or other hazardous contaminants and did not conduct annual product quality reviews as required by the FDA. These lots were supplied to SBPC over an extended period, spanning 2007 and 2008, for distribution under their name. The Heparin Sodium USP had also been supplied to SBPC by another producer, Qingdao Kangyuan, from approximately 2001 until 2006, without informing the FDA. The manufacturing process was transferred from Qingdao Kangyuan to Qingdao Jiulong, but no technology transfer procedures, protocols or reports were available. SBPC did not have laboratory testing records for the heparin it sent to the U.S. to show that each batch met specifications and it did not investigate the repeated OSCS contamination¹¹.

Tests Are Not Enough. Quality Must Be Built In

Western retailers and manufacturers may use outside testing laboratories to test products, but the tests used are, by their nature, more limited than the ways to circumvent them. For instance the standard Kjeldahl protein test, used for foods, measures total nitrogen, which is then multiplied by a factor to give percent protein. However the Kjeldahl test cannot distinguish between nitrogen found in food protein and nitrogen in toxic synthetic materials such as melamine. Thus melamine mimics protein and was deliberately added to diluted food products to enhance the apparent protein levels and make them appear similar to the pure food product. Melamine was added to wheat germ (diluted with cheaper grain materials) used for pet foods, resulting in many animal deaths in the U.S. Melamine was also added to diluted milk in China, hurting many children.

The risk of melamine contamination extends to materials used for drugs and the August 2009 FDA cGMP Guidance “Pharmaceutical Components at Risk for Melamine Contamination” requires that all drug product manufacturers determine whether the components they use are at-risk for melamine contamination and if they are at-risk, they need to test them for melamine before use.

Even if tests are made more specific, third party testing is certainly not enough to assure the quality of pharmaceuticals and especially biologics and biopharmaceuticals; it is not possible to test quality into a pharmaceutical product, because good quality must be built into the product by using appropriate materials and validated processes to ensure the product’s safety and efficacy. There is a risk that modification of even a single processing step can change the by-products or impurities in the final drug substance or API, hence the need for validation and extensive testing before a process can be changed. The tryptophan dietary supplement disaster¹³ over 20 years ago provides an example of the risks of changing a process without extensive testing to validate the new process — a manufacturer made a change to the process and did not anticipate that a very toxic impurity would result, which killed at least 37 people and permanently disabled more than 1,500 people in the U.S. Thus for many reasons, final testing is a confirmation of pharmaceutical product quality but is not enough on its own, without manufacturing records documenting that each batch of product was made according to the validated process and complied with in-process limits as well as final product specifications.

On Whom Can We Rely?

The existence of a U.S. affiliate or a U.S. Agent does not guarantee real knowledge of the supply chain or its integrity. Scientific Protein Laboratories, Chang-zhou is partially owned by Wisconsin-based Scientific Protein Laboratories, which was apparently unaware of issues. Amphastar (SBPC’s authorized U.S. Agent) made inaccurate statements on its behalf,¹¹ but one assumes it did so unknowingly. The “CGMP Certification,” dated March 19, 2004, stated “Amphastar Pharmaceuticals, Inc., on behalf of Shanghai No. 1 Biochemical & Pharma-ceutical Co., Ltd hereby declares that the information submitted with respect to Active Ingredient Heparin Sodium USP manufactured in its plant, SBPC, Minhang 1317 Jianchuan Road, Minhang District, Shanghai, China 200240, is in accordance with GMP and the methods described herein and that each lot of the manufactured product will conform to the specifications and test methods described in this Drug Master File.” The SBPC DMF specifically indicated, “All manufacturing, packaging and control of Heparin Sodium USP, as well as final drug substance and stability testing, are performed at: Minhang Branch of Shanghai No. 1 Biochemical & Pharma-ceutical Co., Ltd. 1317 Jianchuan Road Minhang District, Shanghai, China 200240.” Also the DMF stated, “No contract firms are involved in the manufacturing of the drug substance, Heparin Sodium USP, that is the subject of this Drug Master File. Additionally, no contract firms are involved in material, component, or stability testing requirements as filed in this Drug Master File.” One assumes Amphastar was only informed of the real manufacturer after the FDA scheduled an inspection of SBPC, since only a month before the inspection, Amphastar submitted a letter on behalf of SBPC identifying Qingdao Jiulong as an “alternate” manufacturing site of heparin sodium, when in fact it had been the sole manufacturer for years. Subsequent investigation revealed that the 19 lots of contaminated heparin stopped at the border in April 2008 by the FDA were made at the Qingdao Jiulong facility.

Dilution and Deceit To Make A Profit is as Old as the Hills!

Economic fraud is not new and nor is it confined to any one country or industry. More than a hundred years ago, merchants added lead oxide to paprika and cayenne pepper to enhance their red color and today some dishonest suppliers add toxic azo dyes to spices to enhance color. In the 1990’s Flavine International¹⁴, a NJ-based broker of bulk drugs, bought bulk gentamicin sulfate at low prices from unapproved sources in China. Flavine repackaged the bulk drug to resemble gentamicin sulfate manufactured by Long March Pharmaceutical Plant, an FDA-approved manufacturer in China, and sold the counterfeit drug substance to Fujisawa USA and ESI Lederle. There were a number of adverse events linked to drug product made with the counterfeit gentamicin, but apparently it was a tip-off from someone that led the FDA to investigate Flavine. Flavine, its owner and its vice president were fined and the owner got a two-year prison sentence. An FDA investigation revealed that the company’s illegal activities cost end-user companies more than $1.7 million in product losses¹⁴.

You Are Responsible for Your Supply Chain!

It has become obvious that companies in general need to know much more about their supply chains than in the past and that there are hazards in taking supplier information at face value. Pharmaceutical and medical device companies in particular need to ensure their products are made with approved materials from approved sources, and they need to include the costs of thorough and ongoing supplier qualification — typically higher for foreign locations — in their overall cost calculations.

Process and quality control is often deficient in situations where new suppliers compete primarily on the basis of low cost, as is typical in growing economies such as China and India. This can result in a greater risk of substandard product than with established, proven suppliers. China does not yet have regulations governing the quality of drug substances or active pharmaceutical ingredients — it only has regulations governing the quality of drug products. Thus the suppliers of contaminated heparin discussed in this article may not have broken any Chinese laws. This places even more emphasis on the need to ensure your supplier uses appropriate process and quality control to provide you with acceptable quality product and uses the approved upstream supply chain.

It is the responsibility of the sponsor (for drug or device manufacture or development) to ensure that the materials used in products are of acceptable quality, regardless of the geographical and logistical challenges in evaluating manufacturers and suppliers in remote countries. Supplier qualification needs to be performed for each material and supplier combination. In most cases this can only be reliably achieved by thorough in-depth audits and by insisting on comprehensive knowledge and monitoring of the supply chain, to ensure that quality standards are met and materials are indeed supplied by the approved suppliers and supply chain. These expectations are explicitly stated for pharmaceutical components at risk for melamine contamination in the August 2009 FDA cGMP Guidance, which says that manufacturers need to know and monitor their supply chain for any at-risk components, and they need to know the identity and role of the actual manufacturer of such components and any repackers and distributors who handle the components before receipt by the manufacturer. This goes beyond 21 CFR 211.184, which only requires documentation of the name and location of the prime manufacturer, if known.

You Can Source Safely If You Perform Comprehensive Supplier Qualification

Complex global supply chains are common for APIs and other materials and can be acceptable if due diligence is exercised. Gentamicin solution provides an example of a complex supply chain, with least 11 manufacturers in China, some of whom supply Western brokers directly and others who each supply one or more Chinese brokers, who in turn supply Western brokers¹⁵. There are acceptable Chinese sources for heparin and other APIs and many pharmaceutical companies deal with them. However, considering the high stakes in terms of patient safety and company reputation, as well as the enormous direct and indirect costs of product recalls, companies have to be far more vigilant in supplier and distributor qualification than in the past. The important thing is to exercise great care in supplier qualification. I propose five steps to achieve and maintain comprehensive supplier qualification.

Step 1 – Qualify In Depth

A company needs to perform a comprehensive, in-depth evaluation of a supplier for a particular material. API and component manufacturers often do not allow a customer to audit their operations in detail, to protect proprietary knowledge and confidentiality, but a superficial audit is no longer a viable approach. A customer needs to insist on a confidential in-depth audit of every part of the facility, operations and quality system relating to the material it wants to purchase, including manufacturing and testing details in the restricted part of the DMF not usually provided to U.S. drug product or device manufacturers. The hazards of ignorance cannot be compensated for by cost savings, and if an in-depth audit by a trusted auditor is not possible, then it probably makes sense not to deal with that supplier.

The information gathered during the supplier qualification should be used in performing a supplier risk assessment, which I discuss later in this article. This will aid the final decision as to whether the supplier is qualified.

Step 2 – Use experienced, technically expert auditors to perform on-site in depth audits — they change the game!

Thorough, in-depth audits need to be part of initial qualification of suppliers and distributors. Audits must be done by skilled, experienced auditors, technically expert and fluent in the local language, with enough time to look carefully at the firm’s operations and records. It is very unlikely that a supplier questionnaire or the quick one-day audit, which many companies perform in these days of cost cutting, will pick up the sorts of issues discussed here. It took two skilled FDA inspectors four or more days to inspect each of the three heparin suppliers discussed and their task was aided by knowledge that there was a contamination issue.

Step 3 – You or your agent need to identify and audit the upstream supply chain for critical materials!

In addition to regular thorough manufacturing facility audits, a company should actively ensure that it or its agents or brokers have very reliable, up-to-date knowledge and verification of the drug substance upstream supply chain, to ensure that materials really do come from approved sources. In many cases in the past, distributors and suppliers refused to provide information about their supply chain on the basis of confidentiality and the customer was obliged to accept the inability to verify, relying on trust. Consequently it was not usual for the customer to enquire very closely into a distributor or supplier’s upstream supply chain. But recent events have shown that lack of such due diligence could be akin to playing Russian roulette. The terrible effects on patients and the enormous costs of recalls and negative publicity underscore how cost-based decisions cannot be made without great care in distributor and supplier qualification. While confidentiality needs to be respected, the customer needs reliable, on-the-ground verification of the integrity of the supply chain. There are numerous ways, depending on the situation, that this can be done. If manufacturing and supply chain integrity cannot be verified regularly, the initial cost savings from a cheaper source cannot compensate for increased risk.

Step 4 – Trust but verify regularly!

After initially qualifying the supplier of an API or components and demonstrating that the supplier can consistently provide material that meets specifications, drug product and device manufacturers still need to regularly check supplier compliance through reliable means. Events have shown that reliance on trust is misplaced without up-to-date knowledge of the supplier and supply chain.

In response to recent problems and increased trade in pharmaceutical excipients and drug substances with China and India, the FDA is setting up offices in China and India to facilitate inspections of drug manufacturers and to help local authorities improve their regulatory capacity. The FDA plans to have four permanent inspectors in China by mid-2009. While this will be helpful, the FDA only inspects periodically and the onus will still be on the sponsor to carefully qualify and audit their suppliers and regularly review their quality performance as well as their upstream supply chains.

Step 5 – Management responsibility to understand and mitigate supplier risk

Senior management should be informed and updated regularly as to the security and integrity of critical supply chains. Companies should regularly perform formal, structured supplier risk assessments for materials they purchase. I have compiled a Supplier Risk Scoring Tool, shown in Table 1 on the next page, to illustrate how to evaluate risk for a particular material and supplier combination, using information gathered during supplier qualification and by ongoing monitoring of the supplier. It in-cludes such factors as GMP compliance and whether supply chain integrity can be verified regularly; the actual factors and criteria can be varied depending on the situation. Assigning numerical risk scores is subject to best judgment, so structure should be provided, as illustrated in Table 2, which shows an example of criteria for scoring. Using this tool, an overall risk score of over two would signal that a material from a particular supplier requires more surveillance than for materials with lower risk scores.

A score of four or more would indicate an undesirable source. I recommend that evaluation of risk be done by senior operations, purchasing and quality people in partnership, since the risks are related to both supply chain and supplier quality factors. The resultant description of the types and estimated severity of the risks should be then presented to senior management.

Table 2: An example of criteria for assigning risk scores for a material and supplier
1.Extent of your experience with the material and the supplier	1=a material you buy regularly from a qualified supplier you found to be reliable
	2=a material you have bought before, from an infrequent supplier
	3=a new material from a regular reliable supplier
	4=a new material from an infrequent supplier
	5=a new material from a supplier you don’t know

In some cases, even with the extra effort and cost of thorough audits and supply chain verification in foreign locations, there will be advantages to sourcing materials globally and in other cases not. “Back From China,” an article in Chemical & Engineering News¹⁶, recently suggested manufacturing of pharmaceutical chemicals and related goods is starting to trickle back to the U.S., partly due to quality problems and also since unexpected costs make it more expensive than initial estimates. One example is bulk steroid production at Pfizer. More than two years ago, Pfizer CentreSource (PCS), the third-party business organization within Pfizer Global Manufacturing, embarked on a plan to move selected bulk steroid production from Kalamazoo, MI, to two Asian firms, China’s Shanghai Pharmaceutical Group and Taiwan’s ScinoPharm. However as the projects progressed, it became apparent that more investment in facilities and processes would be needed and the projects would take longer than planned, so PCS decided to maintain production activities in Kalamazoo. This change in strategy actually worked to PCS’ benefit. For example, the business unit worked very closely with Kalamazoo site chemists and engineers to improve the testosterone API process, resulting in gains in available capacity, product cost, and the elimination of a hazardous chemical reagent. This new greener process has been fully validated and introduced commercially in the marketplace.

There is no doubt that it takes a great deal of effort to ensure that there are no significant issues when starting out with an unknown supplier and to ensure that supply chain integrity remains intact going forward. It may be cheaper overall to stay with existing suppliers, but they also have to be monitored carefully. There are probably more good suppliers than bad — during many years of leading audits, I have observed many GMP issues but few GMP dealbreakers. I have only seen fraud once, at a testing laboratory in the Western hemisphere, in a situation where I was not expecting it. My company stopped using that contractor. Thus while one strives for a productive partnership with trusted contractors and suppliers, one must always be alert and audits and supply chain evaluation should be regular, thorough and impartial.

The best suppliers will accept the new reality of increased transparency, and brokers and distributors who can establish and guarantee the level of quality assurance associated with more rigorous auditing and supply chain verification will be invaluable. To reduce the burden on suppliers and customers of frequent auditing and supply chain verification, it would be helpful to use an audit-sharing service for common APIs, materials and services. Rx-360 is a promising new international pharmaceutical supply chain consortium¹⁷ being developed by volunteers from the pharmaceutical and biotech industry and their suppliers, with the intention of improving the performance of supply chains and sharing supplier audits. There is a third party GMP auditing program which shares audits of excipients, provided by International Pharmaceutical Excipients Auditing, Inc. (IPEA, a subsidiary of IPEC) and the Parenteral Drug Association PDA TR32 audit repository service is for software. Companies can use these programs to augment their supplier qualification efforts and help achieve and maintain quality efficiently.

Helena Champion is principal consultant of Winchester, MA-based Drug Quality Assurance, LLC.

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References

1. Baxter Press Release January 25, 2008, http://www.baxter.com/ about_baxter/news_room/news_releases/2008/index.html
2. Baxter Press Release, February 28, 2008, http://www.baxter.com/ about_baxter/news_room/news_releases/2008/index.html
3. New York Times article by Gardiner Harris,April 30, 2008
4. Covidien Press Release March 28, 2008, http://investor.covidien.com
5. B. Braun Medical Inc. Press Release, March 21, 2008 http:/www.bbraunusa.com
6. Medtronic Press Release May 7, 2008, http://wwwp.medtronic.com/Newsroom/NewsReleases
7. Atrium Medical Corporation Press Release May 11, 2008,http://www.pharmacy.ca.gov/forms/recall_hydraglide.pdf
8. The Economist (Volume 391 number 8631), May 16, 2009, pp. 89 – 90.
9. Paul Midler, “Poorly Made in China: An Inside Account of the Tactics Behind China’s Production Game”, (2009) published by Wiley.
10. Warning Letter to Changzhou SPL Company, Ltd, WL 320-08-01, April 21, 2008, Food and Drug Administration, Center for Drug Evaluation and Research.
11. Warning Letter to Shanghai No. 1 Biochemical & Pharmaceutical Co. Ltd., WL 320-09-01, April 14, 2009, Food and Drug Administration, Center for Drug Evaluation and Research, Division of Manufacturing and Product Quality, Office of Compliance.
12. Warning Letter to Qingdao Jiulong Biopharmaceuticals Co. Ltd., WL 320-09-02, April 14, 2009, Food and Drug Administration, Center for Drug Evaluation and Research, Division of Manufacturing and Product Quality, Office of Compliance.
13. Mayeno, A.N. and Gleich, G.J., Eosinophilia-myalgia syndrome and tryptophan production: a cautionary tale, Trends Biotechnol. 1994 Sep;12(9):346-52.
14. FDA Consumer magazine, January-February 1998, Investigators’ Reports.
15. Stein Lokstad, “Perspective: Combating Weaknesses in the Pharmaceutical Supply Chain”, PDA Letter (Volume XLIV, Issue #8) September 2008, pp 26-28.
16. Chemical & Engineering News (Volume 87, Number 17) April 27, 2009, pp 16-17.
17. Rx-360: http://www.rx-360.org/Home/tabid/38/Default.aspx