Contract Analysis


Here you will find answers to the following questions:

  • Which analyses may be outsourced and to what extent?
  • What are the legal requirements?
  • Which testing laboratory is suitable?
  • What form must a liability limitation contract take?
  • What errors frequently occur during collaboration?

1 Introduction

Outsourcing is "in". ...and the pharmaceutical industry, a long-time beneficiary of a world based on the division of labour is no exception. Vast latent economic potentials can be utilised through outsourcing. For many businesses in the pharmaceutical industry, the external assignment of quality control investigations is now simply inevitable.

Annex 16 of the EU GMP Guideline, chapter C.6.16 Annex 16 Final Version: Certification by a Qualified Person and Batch Release, states: "Manufacture, including quality control testing, of a batch of medicinal products takes place in stages which may be conducted at different sites and by different manufacturers."

Contractual regulations have become established, e. g. in the form of liability limitation contracts oriented towards guidelines for manufacturing and control investigations carried out during the manufacturing contract (PH 3/76, May 1976, published as Appendix II b to the Declaration of pharmaceutical inspection convention (PIC) basic regulations and guidelines, 22nd March 1985 (BAnz. No. 98 a)). An example of a contract manufacturing agreement has been included in chapter 17.A Contract manufacture.

2 Legal basis

There is no doubt that it is in the interests of quality assurance and progress to outsource specific tests to specialised facilities that are equipped with (for example) complex, modern devices and also have the necessary qualified personnel at their disposal.

A decisive aspect in deciding whether or not external testing of medicinal products is permissible is the potential for improvement of medicinal product safety through high-quality testing at facilities that have been developed to carry out specific control tests and are, from the point of view of personnel and equipment, superior to average pharmaceutical businesses.

Comprehensive outsourcing of the analysis of manufactured medicinal products in such a case is not permissible as suitable rooms for the issue of manufacturing authorisation as well as analysis facilities would not be available.

The business authorised to carry out a partial analysis thus becomes to all intents and purposes an extension of the contract giver's operations. It is also subject to supervision by the authorities. The responsibility of the manufacturing facility's head of quality control for externally-implemented analyses nonetheless remains unaffected.

If a medicinal product is analysed by one company on behalf of another, a written contract must exist between the contract giver and contract acceptor that clearly defines the tasks and responsibilities of both parties. According to this agreement, the contract acceptor may not pass on any work awarded to him under the terms of the contract to third parties without first obtaining the written consent of the contract giver. The contract giver must make sure (e.g. by carrying out audits) that the contract acceptor undertakes proper analysis of the medicinal product in accordance with the testing procedure.

Examples of pharmaceutical quality control investigations that could be outsourced
  • Sterility testing
  • Microbiological quality testing
  • Microbiological and biological valuations (vitamins, heparins, antibiotics,
  • Limulus amoebocyte lysate (LAL) testing to identify endotoxins
  • Rabbit test to identify pyrogens
  • Abnormal toxicity tests
  • Investigations using radioactive substances
  • GC-MS analysis
  • Stability studies

3 Selection of a suitable external testing laboratory

The questions listed in figure 17.B-1 should be worked through when carrying out a suitability test for an external testing laboratory. The professional competence of the laboratory can also be gauged by its level of active participation in committees and organisations as well as scientific contributions made and involvement in projects where an expert opinion was given.

Figure 17.B-1 Criteria for the selection of an external laboratory

Criteria for the selection of an external laboratory

Mandatory suitability criteria:

  • Are suitable rooms and facilities available for contract analysis?
  • Are GMP standards observed during work at the laboratory (e.g. does it have an independent quality assurance unit)?

Desirable suitability criteria:

  • Does the external laboratory have a sufficient number of experienced and qualified academic personnel (e.g. pharmacists, vets, chemists, food chemists, biologists)?
  • Has the laboratory been accredited in accordance with ISO/IEC 17025?
  • Do FDA approvals exist or have other positive experiences with the FDA been noted?
  • Does the external laboratory regularly and successfully take part in suitable interlaboratory tests?
  • Is there an authorised counter-checking expert?

4 Sequence of external contracting

1. Request to external laboratory

  • Range of services
  • Certifications/accreditations
  • GMP status
  • Site Master File available?
  • Internet presence
  • Other available information

2. Specific request for services

  • Type of service provided by laboratory
  • Harmonisation of methods (must generally be carried out before a specific offer can be made)
  • Delivery dates and quantities
  • Pricing

3. If required, preliminary audit or written preliminary qualification, e. g. based on written accessible audit reports

4. Modality of lab-to-lab transfers / determination of analytical methodology

5. Liability limitation contract

  • standardised contract from external laboratory or
  • standardised contract from pharmaceutical manufacturer

Figure 17.B-2 Sequence of contracting

Sequence of contracting

  • check general suitability
  • specific request for services
  • Preliminary audit, if required.
  • Specify transfer of methods
  • Liability limitation contract

5 Liability limitation contract

A written contract between the contract giver and contract acceptor that defines the responsibilities must exist.

The following basic principles have proven useful in this regard:

  • No combination of commercial contracts with liability limitation contract in accordance with medicinal product legislation.
  • All specifications that are subject to regular amendments such as the list of preparations and methods for checking as well as responsible persons and contact persons should be separated and freely interchangeable appendices to the contract used instead. (Benefit: dispenses with the need for both sides to regularly carry out time-consuming signing for formal legal reasons. A simple, regular notification of the accumulated changes is sufficient. If required, acknowledgement of receipt notes can be exchanged.)
  • Clearly define the obligations of the contract acceptor and contract giver, also by creating separate paragraphs in each case, for example.

The following points relating to the liability limitation contract must be taken into consideration:

1. General duty of disclosure of external laboratory to the relevant authorities

2. Confirmation that suitable rooms and equipment are available to carry out the contract analyses

3. Designation of supervising authorities according to applicable regulations

  • Responsible authorities
  • Authorities responsible for the monitoring of narcotic substances and raw materials
  • Authorities responsible for enforcement of infection protection legislation
  • Authorities responsible for monitoring compliance with Primary Drinking Water Regulations
  • Authorities responsible for monitoring compliance with animal protection legislation
  • Authorities responsible for the monitoring of GLP basic principles, as required
  • Accreditation organisation

4. Confirmation that medicinal products are checked for the necessary quality in accordance with recognised pharmaceutical regulations, e. g. by referring to the EU GMP Guideline as the basis for testing and documentation. In this regard, the following information has proven to be useful: Unless otherwise arranged, testing is to be carried out according to the relevant current version of the European Pharmacopoeia regulations.

5. The final responsibility rests with the head of quality control (Qualified Person) of the contract giver and cannot be changed under the terms of the contract under any circumstances.

6. Statements on questions of liability (see chapter 6.2 Questions of liability)

7. Assurance that work awarded to the contract acceptor under the terms of the contract will not be subcontracted to third parties without the written consent of the contract giver.

8. Information on documentation of the contract analyses (the analysis of starting materials and each medicinal product batch is to be fully documented). Sample documentation is to be provided in an appendix as required (optional).

9. List of persons responsible for all technical questions (appendix)

10. Information on the storage (periods) of documents and test samples

11. Audit rights for the contract giver (normally following advance notification and during normal hours of business) and relevant supervisory authorities (see Chapter 7.14 of EU GMP Guideline). As an option, contract manufacturers acting on behalf of contract givers may also be granted indirect rights to carry out audits for their customers.

12. Handling of test procedures (see chapter 6.1 Test procedure - who is responsible for what?)

13. Additional duties of contract acceptor to provide information, e. g. in the event of deviations from the specifications (OOS procedure)

14. Duty of contract giver to provide information on approval-compliant data for test implementation purposes as well as special safety instructions for hazardous materials, e. g. zytostatics (safety data sheets, waste disposal information)

A compact sample contract for the outsourcing of testing during contract manufacturing that to date has also been accepted by authorities has been inserted from Page 6 onwards.

5.1 Sample contract for contract analysis


for testing of finished medicinal products by contract analysis

*if applicable, can be extended to include raw materials, intermediate products, etc.

between ...... company N.N. - hereafter referred to as contract giver -

and the

...... contract laboratory ......

Section 1

The contract acceptor has informed the relevant authorities of the task undertaken and is authorised to carry out external testing of medicinal products by proxy (see Appendix 2). The contract acceptor is subject to monitoring by .....relevant medicinal product supervisory authorities......(medicinal product testing), by the health authorities (handling of pathogens in accordance with infection protection legislation, investigation centre in accordance with Primary Drinking Water Regulations) and veterinary authorities (livestock farming) for district....N.N......, and accreditation according to ISO/IEC 17025; other accreditors, if required. The contract acceptor meets the prerequisites of Chapter 6 and 7 of the EC good manufacturing practice guideline for medicinal products (GMP regulations, see copy of GMP certificate in appendix, ....if available and/or issued by the relevant authorities .....). The qualifications of staff working in the laboratory/ltest animal holding area are listed in Appendix 2.

The contract acceptor appoints the persons named in Appendix N.N. as contact persons for all technical questions. The qualification of the contact person/company management for the contract acceptor is shown in Appendix N.N.

The contract giver appoints the persons named in Appendix N.N. as contact persons for all technical and organisational questions.

Section 2

The contract giver hereby awards the testing of the quality of the finished medical products and pharmaceutical raw materials listed in Appendix N.N. according to the specifications in this appendix to the contract acceptor.

Section 3

The contract acceptor agrees to exercise due care when processing the orders and carry these out promptly, depending on the technical requirements. The contract period is subject to a separate written agreement; unless specified otherwise, this starts when the order is received or on the date the test sample is received, if later. All analyses must be carried out - unless agreed otherwise in writing - in accordance with the specifications of the European Pharmacopoeia (relevant current version).

If the contract giver requires the analysis to be carried out according to its own instructions, it is also responsible for ensuring that the control methods specified correspond with the appropriate level of scientific knowledge and are suitable for the purposes of quality evaluation. All specifications must be made available to the contract acceptor in writing.

The contract giver is to receive written test reports in which the results must be documented. The contract giver is responsible for sending suitable test samples - possibly following consultation with the contract acceptor. Risk transfers to the contract acceptor upon receipt of transmittals at the laboratory. Work assigned to the contract acceptor may not be subcontracted to third parties without the consent of the contract giver.

The contract acceptor is not obliged to store/retain the test sample. Surplus test samples must however be retained for ....weeks for possible subsequent tests. The documentation must be retained for at least 10 years.

Section 4

The QM representative or head of quality control carries the final responsibility on behalf of the contract giver for ensuring that the specifications and test procedures of products tested during contract analysis are suitable in every respect and that the provisions for storage and transport during transfer to the contract acceptor are observed.

In order to fulfil his responsibilities to an appropriate extent, the contract giver is entitled to visit the laboratory of the contract acceptor - also on a regular basis, if required - during the analysis of his product. It must be possible to arrange these kind of visits by prior arrangement with the contract acceptor at any other time.

Section 5

Both contract acceptor and contract giver agree to handle specialist knowledge disclosed by both parties in the strictest of confidence - this particularly applies for test procedures that are not generally accessible. Necessary inspections by the supervisory authorities are not subject to these limitations.

Neither party to the contract may continue to use specialist knowledge disclosed by the other party during fulfilment of its contractual obligations following completion of the contract without first obtaining the consent of the other party. The contract giver is excluded from this provision with respect to the development of methods ordered by himself.

Section 6

This contract comes into force when signed by the contractual parties. It shall remain in force for an unlimited period and its termination is subject to a 3-month period of notice.

Changes and additions to this contract must be agreed by both parties and must be made in writing.

The contract acceptor's general terms and conditions of business shall otherwise apply.
If individual provisions of this contract become ineffective, the remaining provisions shall remain valid; ineffective provisions must be replaced by suitable effective ones.

Location, date Location, date

Signature of the contract giver Signature of the contract acceptorr


Appendix 1 (responsible persons)

1. Executive member of staff at contract acceptor responsible for technical-organisational questions:

(Name, first name, function, phone, fax, e-mail, specimen signature, paraphs if necessary)

2. Executive member of staff at contract giver responsible for technical-organisational questions:

(Name, first name, function, phone, fax, e-mail, specimen signature, paraphs if necessary)

Appendix 2 (list of products for external analysis and required test methods:)

Products: Listing + supplement "as well as additional raw materials, intermediate and final products, as required"

Test methods: Listing*
* unless otherwise specified, the relevant current versions apply

Appendix (brief CVs of responsible persons, if required)
Appendix (GMP certificate, if available)
Appendix (comparison of responsibilities, if required)
Appendix (sample documents, if required)

6 Questions that emerge in practise

6.1 Test procedure - who is responsible for what?

In practise, meaningful test procedures are regularly not available or do not correspond with the pharmacopoeias.

Test procedures must generally be compiled in writing prior to the analysis and must also provide information on sampling. These must correspond with the application or registration documents. The pharmaceutical manufacturer either owns the marketing authorisation himself or is acting as the contract manufacturer on behalf of the owner of a marketing authorisation. From a legal point of view therefore, the contract giver clearly has that greater proximity to and sphere of influence over approval or registration. During the contract award process, the test procedures that have been coordinated with the application file for marketing authorisation must be handed over by the contract giver.

The author of one legal observation pointed out that, in formal legal terms, the reference to a pharmacopoeia regulation can be recognised as an adequate test procedure. This of course does not relieve the contract giver from the obligation of regulatory conformity and (re)validation. Contractually, the problem can be solved by arranging for the tests to be carried out according to the specific requirements of the contract giver. If these do not exist, the contract acceptor may provide a suggestion for a method (If no other arrangement has been made, analysis is carried out according to the relevant current version of the European Pharmacopoeia.). Legal specialists even recommend that a deadline is specified in such a case. If the contract giver does not object to this time limit, fictional agreement (Zustimmungsfiktion) - German terminus technicus - can be assumed by implication. It goes without saying that strictly speaking, this procedure only applies for a limited number of procedures that do not indicate a validation.

6.2 Questions of liability

Apart from legal liability, the following options have proven to be suitable for the requirements of the pharmaceutical industry. These take the special situation of the contract laboratory into account as it cannot be connected to the pool of pharmaceutical insurers Liability limitation in favour of the contract acceptor is therefore dealt with here:

1. Liability limitation according to amount (partial waiver of recourse)
In this case, the extent of liability in the event of damages arising from pharmaceutical liability (see federal state law) resulting from defects in the service rendered by the contract laboratory is limited to the total sum insured under the terms of the company liability insurance. This partial waiver of recourse requires the consent of the contract giver's pharmaceutical insurer in every case.

2. Liability limitation based on fault
In this case, it can be arranged that the contract giver is only liable if the deficient service rendered is due to deliberate and/or grossly negligent acts. For simple negligence therefore, no recourse can be requested. In every case, liability exclusion for deliberate and/or grossly negligent acts is not legally permissible. The contract giver's pharmaceutical insurer must also accept this where it is a consequence of a partial waiver of recourse.

3. Full waiver of recourse
In this case, in the event of damages the contract giver fully waives any assertion of claims against the contract laboratory. In the liability limitation contract, the contract giver expressly declares a waiver of recourse. The pharmaceutical insurer must of course agree to such an arrangement.

4. Limitation of liability to direct deficiencies
The contract acceptor can limit his liability to the repetition of analyses free of charge where a claim for damages is made due to deficient services rendered. With this option, the consent of the pharmaceutical insurer is also required.

The liability options listed here can be partially combined. Due to ongoing changes in liability law, the relevant provisions in liability limitation contract should be formulated and regularly reviewed by legal experts.

6.3 Test certificates containing evaluations

It is of course in the interests of the pharmaceutical contract giver that usable testing data are received as evaluations are frequently required.

For some pharmacopoeia tests, this is easily achieved, e.g. sterility testing or pyrogens testing. In the case of the pyrogen testing however, it must be ensured through networking of data that permissible retesting in suspected cases is also taken into account when calculating the final values.

For other jobs - such as the microbial purity testing - it is imperative that the contract laboratory receives clear specifications or guidelines. These frequently are at variance with the recommendations of the pharmacopoeia that by definition are in fact intended for finished medicinal products. In these cases, if the contract laboratory were to release batches previously evaluated as being non-conformant, this could result in claims for damages and would additionally require a great deal of time and effort.

It is therefore recommended that evaluations are only authorised for unambiguous analyses. Ultimately, this does not affect the responsibility of the contract giver's head of quality control.

6.4 Typical errors

Typical errors that occur when working with a contract laboratory are:

By contract giver
  • application file for marketing authorisation has not been updated or sent
  • no change control procedure
  • no validation ordered
  • no plausibility checks
  • poor documentation (no "history")
  • specifications not clear
  • no OOS regulations
  • several contract acceptors
  • no integration in the QA system
By contract acceptor
  • application file for marketing authorisation is unknown
  • no change control procedure
  • missing validation
  • are not analysed specifications
  • no OOS regulations
  • orders that are too small adversely affect quality
  • no compatible QA system