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Opinion Article | Open Access | Published ?

Hidden Costs in Supply Chain Compliance

Colin Newbould, PHSS Management Commitee | EJPPS | 253, (2020) | Cite this article | Download this PDF Paper

In a short series of articles intended to explore hidden and duplicated costs within the supply chain this article looks at some of the Qualified Person legal requirements needed to support licence variations

The Pharmaceutical industry has a vast array of suppliers and the final construct which enables the finished medicinal product to be provided to the patient may involve many organisations who may otherwise be considered competitors. Examples include, contract manufacturing organisation(s) (CMOs) who offer the capability of undertaking the part or full range of services needed to complete an end to end process of manufacture, pack, test but due to choices of the Marketing Authorisation Holder (MAH) may be asked to undertake discrete steps of this process. Intellectual property restrictions may also apply which can restrict and complicate how information and communication is transferred between parties.

The reasons and justifications for splitting up the services the CMOs offer may be based on several reasons which could range from turnaround times, delivery, managing complexity, not to mention regulatory compliance. Cost may be a significant factor in these choices. Other considerations maybe for the reason of keeping backup supply chains as part of a risk management contingency plan. Therefore, the MAH may choose several CMOs to work in complex ways to ensure smooth guaranteed supplies of finished products to their final destinations.

In an industry where regulatory compliance is a given, the choices left to the MAH when building a supply chain tend to be based more simply on agility and cost; where agility covers turnaround time and market supply.

It can sometimes be in the fringes of these competitive states or borders where QPs find themselves battling to receive information. Perceived confidentiality is often used to defend not releasing relevant information which is often dressed up under the guise of being stated as it is the intellectual property of “CMO X” or not in accordance with their procedures of “CMO X”, where “X” is a CMO in the supply chain.

Very often the MAH owns this information which “X” chooses not to share. One of the most common examples of information which is considered sensitive is the active pharmaceutical ingredient (API) audit report, the corresponding CAPA and the audit acceptance needed by the final certifying site. It is worth reminding the reader that the QP is making a personal declaration under a professional code of conduct to which the legal statement requires the following;

“The final site at which certification is registered is required to submit a QP declaration for the API – see reference. PART D: QP declaration of GMP compliance. I declare that:

QP Responsibility

· I am a QP with specific responsibility for GMP compliance of the active substance manufactured at the sites listed in Part A and I am authorised to make this declaration."

“The audit report(s) and all the other documentation relating to this declaration of GMP compliance of the active substance manufacturer(s) will be made available for inspection by the competent authorities, if requested.”

From the related guidance document Guidance for the template for the qualified person’s declaration concerning GMP compliance of active substance manufacture “The QP declaration template”:

2. The basis of the QP declaration


For human and veterinary medicinal products, the QP declaration should be based upon an audit of the active substance manufacturers. It is established good practice that the audit should be conducted at the manufacturing site i.e. an on-site audit

Audits should be by or on behalf of the MIAH, by suitably trained and experienced person(s), who may be a third party contractor

As already stated the CMO responsible for the manufacturing step will most likely have completed the API audit. Typically, unless the CMO undertakes the audit solely for their benefit, this is something which is charged directly to the MAH as an audit cost.

Unless the manufacturing site is also the certifying site, it is still commonly observed that the manufacturing CMOs are not willing to share the full details of the API audit to the final certifying QP. As it can be observed from the legal requirements “The audit report(s) and all the other documentation relating to this declaration of GMP compliance of the active substance manufacturer(s) will be made available for inspection by the competent authorities, if requested”; it often means in the absence of this cooperation the final certifying QP is compromised. To avoid this sometimes a second audit of the API site becomes necessary with these duplicated audit costs passed through onto the MAH… and with duplicated costs comes duplicated time for the API site, and two sets of CAPA

It is worth stating for the record that if the MAH has been charged for the original audit by a CMO then the intellectual property is owned by the MAH and therefore can be freely shared subject to standard rules of confidentiality.

The frustration which this restriction of information and potential duplication of audit resources causes increased costs for medicinal product supply. There can also be a negative impact from the API manufacturing sites as they become less accessible due to the unnecessary repeated audits. Inevitably any information delay will result in the final QP not being able to provide an adequate declaration which may delay variations and product launches.

Of course, this is a simplified view of the world. One of the most frustrating aspect about this observation is that it has been a legal requirement to meet the API declaration for many years and yet we still there are continual examples where CMOs withhold information which is claimed as their intellectual property preventing, delaying, causing cost duplication and potentially cancelling new agile supply chains being developed. More should be done with this consideration in mind with the legalese people in CDAs to allow provision of the sharing of such information to aid the QP.


Author Information

Colin Newbould

PHSS Management Commitee

Southern Group Laboratories


Established over 95 years ago to manufacture and supply prepared culture media to the UK health service SOUTHERN GROUP LABORATORY (SGL) is now an independently owned media manufacturer that offers an extensive range of pre-poured bottled media, plated media, stains, reagents, and media for specialist applications across all sectors conducting Microbiology.


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