Negotiating Quality Technical Agreements: Strategies for Non-Quality Professionals

In the CDMO selection process there are four critical documents that must be negotiated and executed by both the sponsor and CDMO.  In order of execution, these documents are:

1. Confidentiality Non-Disclosure Agreement
2. Quotation
3. Master Services Agreement (MSA) or Supply Agreement (SA)
4. Quality Technical Agreement (QTA)

Of these documents, the QTA is often the least prioritized by the procurement team.  Yet, in practice, the QTA will be the most useful document for development and clinical stage companies, because it provides a framework for operations and a road map for building quality systems.  For review and negotiation, fielding a cross-functional team that includes both Quality Assurance (QA) and relevant technical expertise is imperative for success.  Following the strategies and tips in this article, the QTA review provides an opportunity to:

• Benchmark and align quality objectives
• Establish a working relationship and communication policies with the CDMO
• Identify processes that may need to be formalized in the development of a quality system
• Refine the Quality Audit objectives and agenda
• Detail the operational approach to dispute resolution

QTA Objectives  

In a previous article, I detailed best practices for negotiating MSAs and SAs. I described the MSA as a document outlining the operational, legal, and financial framework for executing services or delivering product.  I noted that there are several sections within the MSA that defer to the QTA.  This article will continue the discussion from the perspective of the technical lead who will operate within the QTA framework by describing how the MSA and QTA work together and how to negotiate the QTA to meet the project objectives.

Although QTAs were originally introduced simply as quality agreements, I support the current trend that emphasizes the technical aspect in the title, since quality does not exist in a vacuum but is integral to the process and product it governs.  Recent 2016 updates to FDA guidance on quality agreements focus on commercial manufacturing, but an agreement should be executed for contracted activities involving any cGMP environment.  Because of this, agreements are commonly negotiated and executed during the CDMO selection process.  While well-established sponsors may insist on the use of their own MSA and/or QTA, for various reasons most companies will opt to start with the CDMO’s templates.  However, despite their widespread adoption and available FDA guidance, there is still a fair degree of variability among templates.

For the scientist or engineer working in a regulated environment, the QTA should address two basic questions:

1. Which party is responsible for activities associated with the anticipated scope of work?
2. What happens when something goes wrong?

Whereas the MSA is the domain of financial and legal interactions between parties, it overlaps with the QTA in operational areas.  In areas of overlap, the QTA provides more granularity, detail, and flexibility.  The MSA and QTA will often cross-reference each other and they both should be clear as to which one takes precedence.

Understanding the greater specificity and guidance in facilitating project execution, it becomes evident why the sponsor’s technical lead needs to provide input during negotiation or that the negotiation team should have deep, relevant experience in overseeing drug product development.  Let's look at some key areas in further detail and point out what to look for during review.

Responsibilities of Parties

The QTA defines the responsibilities (duties) of the CDMO and the sponsor for cGMP activities within the scope of work (SOW).  As the QTA has evolved since its first use among CDMOs, two common features have emerged: the list of named contacts from the sponsor and the vendor, which is intended to be updated as personnel change and/or as each organization updates its structure, and the responsibility matrix.  Whereas the MSA may generally identify deliverables, assumptions, and responsibilities for each party, the main feature of the QTA is the responsibility matrix, which is a categorized list of activities, assigning responsibility to either the sponsor and/or the CDMO for each line item.

Tips for reviewing a QTA: 

• If the CDMO will be executing work at multiple sites, the sponsor may have to execute a separate QTA for each site. 
• Rely on your quality and/or regulatory lead to comment on their relevant sections, e.g., compliance, audits, regulatory inspections, recalls, etc.  The QTA must be compliant with applicable regulations and guidelines, but don’t invest time in areas that are not in your wheelhouse.
• Weigh in heavily in areas that address technical issues and ensure the QTA covers all anticipated cGMP activities itemized in the SOW, e.g., deviations, materials handling, manufacturing, storage, testing, and specifications.  Tailor the project responsibilities by adding or deleting line items as needed.

For early-stage companies still developing quality systems and operational functions, there is a bonus learning opportunity.  The responsibility matrix identifies processes and procedures the sponsor should strongly consider formalizing in standard operating procedures (SOPs).  A few examples:

• The QTA identifies that both the CDMO and the sponsor are responsible for reviewing and approving specifications, protocols, reports, and batch records.  If they don’t already exist, the sponsor may want to formalize detailed processes for defining specifications, document review, and archiving based on the QTA sponsor requirement.
• The QTA identifies the sponsor as responsible for procurement of API and shipping it to the CDMO.  To address this line item, the sponsor may decide to instruct QA to set up a supplier audit process and operations to set up a procurement process and logistics policy.
• The QTA outlines a deviation review process and identifies the sponsor as responsible for determining the regulatory impact of critical/major incidents.  In response, the sponsor is compelled to develop detailed SOPs addressing actions resulting from deviations.
• The QTA assigns responsibility to both parties for oversight and resolution of deviations.  In response, a formal escalation procedure and dispute resolution process should be agreed upon between the sponsor and the CDMO.

The QTA review is also an opportunity to build a checklist of CDMO SOPs to review during the Quality Audit.  Extrapolating from this, consider the QTA a top-level SOP or quality plan that governs the responsibilities across both the sponsor and the vendor.  As a reviewer, resist the urge to formally define processes for the CDMO.  If they already have SOPs and internal policies in place, expect that CDMOs will resist creating unique processes or policies for each client, but feel free to share best practices if you uncover deficiencies.  Regardless, the responsibility matrix points out processes the CDMO should have formalized in auditable SOPs.

Interactions During A Quality Event

 One of the QTA's main functions is to provide guidance for CDMO/sponsor interactions during a quality event (QE).  QEs may encompass changes, deviations, nonconformances, incidents, complaints, etc., and each should be included as appropriate.  As disputes arise resulting from QEs, the QTA is the operational remedy that should effectively head off legal action prescribed in the MSA.  Why is this important?  Because an operational solution preserves and may strengthen a relationship, whereas the legal pathway opens the door to breach and termination.  Cross-check both documents (MSA and QTA) and negotiate with the CDMO to determine which document is best suited to deal with each possible QE.  When the answer is both, be clear that the MSA addresses the legal and financial aspects of QEs but rely on the QTA to address operational and quality processes.

During review and negotiation, hypothetically test the QTA against previous relevant experience to see if the responsibilities, line items, and processes play out and determine if the result is adequate.  In one clinical supplies scenario, I discovered that inventoried material at a CDMO was showing an incorrect expiry date and found that the supplies were in fact misbranded.  Using this hypothetical example against a QTA:

1. Does the current QTA provide an adequate and applicable definition of the QE?
2. Does it provide an adequate process for communicating the QE?
3. Does it outline an adequate process for resolving the QE and implementing corrective and preventive actions?

Definitions Are Essential for Clarity

No surprise: Definitions are essential to clarify and qualify key terms used within the QTA.  What constitutes a change?  When is a result, event, or outcome a deviation?  Make sure that key terms used in the document are properly defined.  Review each entry in the Definitions section of the QTA for accuracy and applicability.  For example, depending on the SOW, deviations may include out of specification (OOS) results, but they may also include operator error, noncompliance with a protocol, unanticipated changes, or unforeseen events, etc.  The definition should be clear on what constitutes a deviation in a GMP setting and a non-GMP setting, when appropriate.  When both parties agree that actions will be dependent on the severity of the QE, qualifiers need to also be defined.  Often, deviations or changes can be categorized as critical, major, minor, and other (e.g., "planned").  In this instance, each level should be defined in detail and accuracy for the project.

Communication Is Critical

Within the QTA, communication policies will be stated.  The format usually reads like this:  During a [specific QE], [party #1] will notify [party #2] by [communication method (e.g., email)] within [time frame].  During review, be consistent in the format.  If notification requires acknowledgement, agreement, or approval, be sure it is stated clearly.  Also ensure that relevant scenarios within the SOW are covered and acceptable to both parties.  Revisit the QTA when new SOWs are approved and the project progresses.

Technical knowledge and overall supply chain experience cannot be underestimated in dialogue with each CDMO.  In a recent negotiation, a CDMO argued that in order to maintain flexibility, minor changes deemed to have no product or regulatory impact did not have to be communicated or approved by the client.  We countered that the CDMO could not unilaterally determine what changes have impact nor be fully aware of a client’s regulatory commitments without client input.  This negotiation point highlighted how important clear and accurate definitions can be and which QEs should trigger communication.

After we offered real examples of technical changes that didn’t appear to have impact, but eventually led to product issues or regulatory filing requirements, we agreed on notification by the CDMO PM to the client technical lead during planned bi-weekly calls.  In the project plan, we also committed to having representatives on-site or available during critical operations and manufacturing campaigns to be informed of any QE in real time.  This is constructive negotiation using the tools available.

6 QTA Negotiation Best Practices For Procurement Or Technical Leads

1. Include a cross-functional review team for the QTA.
   1. Rely on QA to take the lead in the negotiation, ensuring that the document template meets the appropriate compliance requirements of relevant authorities.
   2. Review the QTA from the appropriate operations standpoint, e.g., drug substance, drug product, clinical packaging, commercial, etc.
2. Minimize your review time.  In a competitive bid selection process, only request the MSA and QTA templates for review once a primary and backup vendor have been selected from a field of multiple bidders.  Play QTAs against each other to find gaps and negotiation points.
3. Use the QTA responsibility matrix to evaluate the completeness of your SOP index, as well as the CDMO’s.  Confirm this during the Quality Audit.
4. Closely examine each definition and tailor the language to the project needs and requirements.  The Definitions section will be critical to how the agreement is applied.
5. Use previous real-world experiences to test the adequacy of the QTA.  Align the communication instructions with your PM expectations.  Pay close attention to deviations, changes, or activities that trigger communication between the CDMO and the sponsor. 
6. Cross-check references to the MSA within the QTA, and vice versa, to ensure consistency and completeness.

The QTA Fills A Gap

The QTA fills a gap in setting up a strong relationship between the CDMO and sponsor.  It creates a structured framework for how two separate quality systems will work together to govern cGMP activities within the SOW.  Its implementation continues to improve as the pharma industry builds experience and uses FDA guidance in real-world dispute resolution.  Because there still is no optimized template applicable for all situations, a science/technical perspective, in addition to QA input, is an indispensable requirement for reviewing and negotiating an effective, useful QTA.

About The Author

Ray Sison is VP of Pharmaceutical Outsourcing and Tech Transfer at xCell Strategic Consulting. He began consulting in 2011 after recognizing a need for expertise in pharmaceutical outsourcing among the discovery- and clinical-stage pharma companies he served as a business development representative for Patheon and MDS Pharma Services. Based on his experience, Sison provides insight to the CDMO’s business and operations, helping his clients negotiate and achieve better outcomes. Additionally, he has developed sound processes and templates to streamline CMO procurement to save time and cost. In this series of articles, as well as online webinars, he continues to share best practices and case studies, helping improve the outsourced business model. You can reach him at rsison@xcellstrategicconsulting.com or connect with him on LinkedIn.