We’ve all been there: the contract is signed, everyone celebrates, and now it’s time to get to work. The only problem is that there is a litany of questions left unanswered by the business contract. This is where a Quality Agreement comes into play. This article will serve to clarify when a Quality Agreement may be required and will summarize some of the key benefits that can be derived from such an agreement.

To begin with, we must first understand the underlying purpose of a Quality Agreement (also referred to herein as a Technical Agreement): a Quality Agreement clarifies the functional aspects of a business relationship. It will delineate, in significant detail, the responsibilities of quality, regulatory and production personnel within each company. It will enhance communication and should prevent projects from starting with the use of certain idioms such as, “I thought you were…,” “I’m not sure,” and “I dunno.”

Business agreements and Quality Agreements have dramatically different objectives and are used in very different ways. http://www.fda.gov/cber/gdlns/coopmfr.pdf provides some examples of how Quality Agreements and business agreements differ.

Regardless of the fact that the basic concept of a Quality Agreement seems to be as elusive as acquiring that free airline upgrade you have earned, Quality Agreements are actually not new to the industry. In fact, the first regulatory guidance, which specifies this type of agreement, seems to have been published by the UK MCA in 1991. Today, this guidance appears as the MCA Rules and Guidance for Pharmaceutical Manufactures and Distributors 1997, Article 12, Chapter 7. In this guidance, the MCA requires that a Technical Agreement be developed between the project sponsor and contractor. It also specifies the purpose of the agreement and what must be in the final document. The MCA guidance is well organized by area of responsibility. This guidance can be summarized as followed.

Program Sponsor must:

•	Assess that the contractor is competent.
•	Ensure that GMPs are followed.
•	Provide information necessary to produce the product.
•	Provide hazards associated with the product.
•	Ensure that the products received comply with the specifications and are released by the Qualified Person (QP).

Contractor must:
• Have adequate resources to carry out the work.
• Verify that all products or materials received are suitable for intended purpose.
• Not subcontract without sponsor’s prior evaluation and approval.
• Refrain from activity that could adversely affect the quality of the product.

Contract must:

•	Be written and specify the respective responsibilities of each party.
•	Be written by technically competent personnel.
•	Be in accordance with the marketing authorization.
•	Specify how the QP will release product to ensure compliance with marketing authorization.
•	Define responsibility by applicable discipline.
•	Define where samples are removed.
•	Ensure that records, samples and retains are accessible and available to the sponsor.
•	Allow for sponsor visits to the facilities.

In addition to products intended for sale in the UK, the FDA has published a draft guidance for Technical Agreements. This guidance titled Cooperative Manufacturing Arrangements for Licensed Biologics was published in August of 1999. This document can be found at http://www.fda.gov/cber/gdlns/coopmfr.pdf. It addresses a variety of arrangements (short/divided/shared/contract manufacturing) and suggests that the agreement include the following:

•	Identification and location of the contractor.
•	Delineation of responsibilities of each party.
•	Description of the product shipped to the contractor.
•	Description of the manner and conditions of shipment.
•	Description of the operations to be performed at the contract facility.
•	SOPs that are applicable to the contract.
•	Commitment that the contractor will inform the sponsor of proposed changes to facility and manufacturing process prior to implementation, “including introduction of additional marketed products and clinical materials processing operations.”
•	Commitment from the contractor to fully inform the sponsor of all errors and deviations
•	Description of how and when the contract facility will be periodically assessed by the sponsor for compliance to the license and GMPs.

Now that you have decided that a Quality Agreement is either a requirement or is just a fundamentally sound business practice, you need to construct the framework for the agreement. If not required to be a standalone agreement by regulation, one of the first challenges you will have to embrace is one of legal preference. You will need to confer with your attorney and review in detail the purpose of a Quality Agreement. In many ways, having a separate agreement is foreign to attorneys. If your product is not a biologic and is not to be sold in Europe, then you have some flexibility. However, it is still preferred that this be a standalone document that can act as a live document and can be frequently updated and distributed freely. Remember, when FDA arrives at the contract site one of the first questions asked will involve how the parties assign responsibilities, communicate and guarantee compliance with GMPs. Having a separate Quality Agreement allows the contractor to quickly present a response to the investigator in the form of the current Quality Agreement. Conversely, a business agreement is not something that would be shared with the FDA investigator.

Assuming that the Quality Agreement and commercial agreement are maintained as separate documents, it is a good idea to develop both as templates. The template should be carefully reviewed and verified for compliance, accuracy and screened for redundancy and conflicting language. It is important to remember that Quality Agreements are still contracts and should be submitted for legal review.

Anatomy of a Quality Agreement
Several key sections of a Quality Agreement are listed below. For the sake of brevity, this is not a comprehensive list.

What Not To Include: Just as important as what should be included in a Quality Agreement, there are a number of items that should not be addressed. Examples of some standard items that should be excluded are: general business terms and conditions, pricing and escalator clauses, forecasting, delivery terms, confidentiality obligations, liability limitations and the protocol for resolution of disputes. Since testing and release is a major section of the Quality Agreement, it should cross-reference the dispute resolution protocol in the commercial agreement but it should not define the ways in which a serious dispute is resolved. This is best left to the commercial agreement.

Allocation of Responsibilities: One of the simplest Quality Agreements ever used by this author was crafted by simply copying and pasting the requirements of 21CFR211, et. seq., into the agreement and then naming the company responsible for each task. While this did significantly increase the size of the Quality Agreement it was also one of the simplest to understand and to negotiate. Once the agreement was drafted, there was no misunderstanding as to the expectations and responsibilities of each party.

Communication: The success of any relationship is based on the quality and the frequency of communication. Each party should designate the persons responsible for communication between the companies. This section should include all relevant contact information and it should be updated as often as necessary. The agreement should also specify the expectations for the immediacy of communication regarding issues affecting product quality. This is very important considering that the contractor and sponsor will likely have differences of opinion. The sponsor will normally expect immediate notification. The contractor, however, will want to take the time to initiate an investigation and to validate the accuracy of the data before presenting it to the sponsor. Ensure that each party understands and accepts when notification will occur and how investigations will be handled.

Production Documentation: The agreement must specify the documents that will be supplied by the contractor. It should also specify whether the sponsor expects only executive summaries or copies of the full reports. The timeframe, method of transportation and duration of retention of any original documents should also be addressed.

Batch Numbering and Tracking: Inevitably, the contractor and sponsor will use different batch numbering systems. It is therefore critical that everyone understands what numbering will appear on in-process and final product. If the numbering system provides information beyond sequence of manufacture, then an explanation of the code should also be included.

Quite often a contractor will use an internal numbering system for in-process product but will then use the client’s system for final product. The agreement should indicate how and when the contractor will be notified of the batch numbers which will be assigned to a product.

Deviations: The implications of a deviation can run the gamut from very minor to catastrophic. Therefore, there are very few sections of the Quality Agreement that are more important than those which address deviations. In this section it is critical to define the systems and responsibilities for the reporting, follow-up trending and closing of deviations. The sponsor must clearly state the expectations for the communication of deviations since time may be of the essence and failure to report and take action promptly can result in product loss. Whether a sponsor must approve each deviation should also be clarified in this agreement.

It is also a good idea to provide a succinct list of examples of what are considered to be significant deviations. If properly developed this list can minimize discretion and ambiguity, which is critical when deviations occur at off-hours.

Visits, Audits and Inspections: There are many aspects of on-site visits which should be defined and understood at the onset of a program. For example, many sponsors now have a representative on-site at the contract location during key operations. The roles and responsibilities of this person should be defined. The frequency of visits, time required for notice of a visit, the number of visitors allowed on site at one time and the purpose of visits should all be defined. It is rare for a contractor to charge the sponsor for an audit but this should be clarified at the onset of the relationship.

The parties should also discuss inspections by FDA or comparable international agencies. The sponsor and contractor should understand how much participation the sponsor will have during a government audit of the sponsor’s product. Will the sponsor be allowed on site? If so, will they participate directly or indirectly? This must be defined, as it can be quite challenging for a contractor with a large number of contract products.

Sampling and Testing: The product batch records will define the type of samples to be removed and tested by the contractor but, just as important, both parties need to understand what testing may be performed by the sponsor and how the data will be used. Such issues as retention samples, shelf life surveillance and market release testing should all be discussed and mutually approved. Furthermore, if the sponsor sells the product to international distributors, there are often requirements that specify that the importer perform certain testing. The process for the qualification of third-party labs must be addressed to prevent the improper testing of product or more importantly the generation of rogue and invalid data.

Subcontracting: Each party must understand if the contractor has any intentions of assigning responsibility of any work to a third party (subcontractor). The sponsor should always be notified in advance of using a subcontractor. The project sponsor should always have the right to audit a subcontractor and must provide prior written authorization to use a subcontractor.

Complaints and Recall: Patient complaints are expected and will vary from issues ranging from personal preference to serious issues involving Med-Watch notification. Each party must clearly understand how complaints are received, communicated, investigated and reported. Certain complaints require immediate attention and the agreement should lay out how soon initial responses to serious complaints must be published.

Annual Product Review: This section will primarily address the sponsor’s expectations for data submission for the annual product report. The sponsor should specify, in great detail, what information is expected, the timeframe for submission and possibly the format for submission. If the contractor is to provide data in a specific format, the sponsor should develop a template. This will ensure that all information required is received. It will also guarantee that minimal time is spent on re-formatting information for the final report.

Final Approval: At a minimum, the individuals responsible for quality in each organization must approve the Quality Agreement. However, each party should also consider the benefits of having other key stakeholders, such as Operations, Legal Affairs and Business Development, approve the agreement. This will serve to enhance the importance of the document and reinforce the multi-faceted aspects involved in outsourcing.