From The Editor | October 1, 2012

What Should You Do When Your CMO Gets Bad News From The FDA?

By Wayne Koberstein, contributing editor, Life Science Leader

Thousands for prevention may be worth millions for a cure if a chain of 483s leads to warning letters and even shutdown of a vital product supplier.

Sometimes the tip of the iceberg symbolizes the doomed ship itself — vast danger below, misjudged from above. A procession of seemingly small problems in the engine room belies overlooked structural faults that suddenly overwhelm the ship’s integrity and send it to the bottom. Until the last moment, the captain on the bridge sails on at full steam, unaware of any danger large or small. Whose fault is it then? The engineer’s for not informing the captain, or the captain’s for not demanding to be informed?

Likewise, when your CMO is suddenly overwhelmed by a severe FDA warning letter, and it decides the problems are too expensive to fix and closes the only plant making your product, which one of you caused the situation? In a strict regulatory sense, you did. “The drug sponsor will always be and should be held more responsible than the CMO. Ultimately, the sponsor is the one responsible for patients’ safety — and the one who will get sued if adverse events lead to lawsuits,” says Dr. Brian James, Ph.D., VP of operations, Rondaxe.

We spoke with James because of his experience with both sides of the pharma-company/CMO relationship, formerly managing outsourcing of key intermediates at Bristol-Myers Squibb and now overseeing independent manufacturing audits for pharma and CMO clients. His insights form the backbone of this article as a guide to dealing with potential disruptions — and sometimes significant interruption — in product supply when your CMO develops problems noted by FDA inspectors in Form 483s and warning letters.

Examining the various situations and worst-case scenarios companies may face — such as Ben Venue’s shutdown of Doxil production for Janssen — James outlines ways to determine the best course of action when the CMO faces regulatory problems. He suggests how you can define and mitigate the risks and evaluate the potential costs associated with switching suppliers. But his most important advice may be directed at pharma-company CEOs and other top management, who, he says, must learn to recognize manufacturing quality as a strategic issue of risk management, warranting their personal involvement and support.

Most production errors found in FDA inspections are minor, James says, so they can quickly be addressed and fixed, often before the inspector leaves the plant. Bigger problems emerge or become more obvious when errors pile up beyond the two or three items typically noted in 483s. But the origins of large faults in a production line can lie in small or even overlooked errors.

“In audits, when the CMO managers tell me proudly that their last inspection produced no 483s, I say the inspector must have missed something,” recalls James. “Usually I find several minor items that were overlooked. A good auditor stays a step ahead of the regulators by taking an even tougher approach, pointing out problems that could grow more serious if ignored.”

Before getting into what you should do after a problem occurs, James emphasizes what you should do before it happens. “Prevention is always the best course, and the best thing a sponsor can do is audit the facility regularly and have a good quality agreement. You really need to focus on the CMO Quality unit’s standard operating procedures. Change control and reporting to sponsor are also very important.” Prevention of CMO-related regulatory problems is a chain of observations and preparations that extend from the beginning to the end of the supply chain. If you wish to avoid regulatory problems, not just react to them, you will not wait for them to occur but make it your business to know your CMO inside and out.

CMOs naturally have a duty to keep their pharma clients informed of problems, as well as a broad interest in doing so. After all, their business depends on satisfying customers; 483s are public, and a fair number of the problems they herald may be expected to come home to roost, possibly harming the CMO’s reputation. (Find 483s at Unfortunately, however, because some CMOs are not always candid, you cannot count on being informed in every case unless you insist on it. Commonly, because 483s and warning letters are specific to a given product, another company using the same CMO for other products may not see them. Even if your contract with the CMO stipulates that it share all 483s and warning letters it receives, take steps to ensure that happens.

Sometimes, a CMO inadvertently fails to inform the sponsor — as when it makes a change for one client but does not realize the change affects another client. “There has to be a good change control system in place,” says James. “That’s very critical. The CMO project managers need to know who they should inform about such changes. I don’t think there is anybody who has a really good system for that, at least not that I’ve come across yet.”

For ongoing prevention, James says regular communication between you and your CMO has no substitute. In the best cases he has seen, the responsible managers on both sides hold weekly or biweekly teleconferences to go over everything from process development to production schedules. During early runs, the companies have someone on site to supervise and report back any issues that might arise.

Even with the best communication, however, he says that analytical tests can complicate matters, mainly by delaying problem identification and sometimes limiting candor. Too often, he says, the CMO fails to follow through with the client, believing it has fixed a problem and doesn’t need to share it. Analytical data may also be something your CMO resists sharing for proprietary or technology-transfer reasons.

To some extent, new Web-based systems like SharePoint help overcome communication blocks between CMOs and their clients. Both parties can post and share documents on a secure website, conquering time-zone differences and other displacements between multiple locations spread around the world.

The ultimate technological solution may start on the shop floor, however. The FDA supports universal adoption of quality by design (QbD) among all pharma manufacturers — partly because the transparency of QbD systems could illuminate many of the now hidden or ambiguous signs of quality problems in production and prevent the need for most 483s and warning letters. James agrees: “Not only is QbD important, it is an absolute necessity. I know one company that has basically inflicted QbD on every one of its manufacturers over the past three years. As a result, its last drug-product validation went incredibly smoothly. QbD is a life-cycle validation approach that the agency is pushing forward. It is the wave of the future, and if the CMOs don’t get on board with QbD, they will get left behind.”

Ironically, as with most measures of prevention, you may never know for certain that your efforts succeeded. Only failure produces solid evidence of a measure’s degree of effectiveness: success means nothing happens. So lack of evidence offers no proof of concept. But what would you rather have — the certainty of failure or the uncertainty of success?

The answer depends on cost. What is the cost of CMO-related regulatory problems? “A lot of the cost will depend on what stage of development you’re in,” James says. “For example, we had a client that had their only CMO back out of the project just as the initial clinical materials were to be prepared.” For many small companies, the cost of the resulting clinical delay would likely exceed available funds, even if their clinical development could otherwise continue past the disruption.

“All of a sudden, your manufacturer is gone. And it’s literally cost you nine months of your development timeline to go through the entire process, validating a new supplier for quality, and then transferring the process and getting the new group up to speed — just to be where you were nine months ago,” James says.

Supplier shutdown can also have fatal consequences for a small company beyond the financial factors. Say the company is in the middle of a Phase 3 trial when it suddenly loses its supplier. No amount of money can restart the trial after a six-month delay to resource the compound; patients have progressed and many will no longer qualify.

For a product already on the market, the costs of plant closure and loss of supply may greatly outweigh the expense of landing a new supplier. “Certainly, there is cost in identifying and transferring the process to a new supplier at that point, but those costs are nothing compared to the cost of roughly six months of peak sales,” James says.

Usually, he says, there will be some lead time after finding out a supplier will not be able to supply — the period between the 483 and the warning letter or closure — in which you can transfer production to your other supplier, if you have one, and as long as you’re not losing the primary supplier. The problem is that, if the market is shorted on an approved drug, patients will have to move to another therapy if available and you will permanently lose some of your market share, potentially costing you millions.

In either case, the liability is probably less than that of a classaction lawsuit if a compromised product gets out to the market. For example, James says, “Baxter’s problems with heparin will be expensive — possibly tens of millions.”

Backup production seems the obvious way to prevent supply disruptions, of course. But it may only be possible for the largest companies, and even difficult in some cases for them, according to James. Having backup suppliers in Phase 1 or 2 is impractical for any product that requires process development, which usually continues through those stages. Unfortunately, he says, that is exactly where many small companies go wrong — choosing a supplier that may not be equipped to complete the process development, as James described. “Some of these small companies, if they make the wrong decision, they’re out of business.”

That means picking the right supplier initially is one of the most critical strategic decisions a small company makes. Of course, the stakes are even higher for a start-up with a highly novel molecule to characterize, produce, and develop. James recommends being a “pest” — interacting constantly with your CMO — if that’s what it takes, along with good luck, to avoid a catastrophic loss of supply when your company is so vulnerable.

For products in Phase 3 with good commercial potential, James says having more than a single supplier is absolutely essential. Ideally, the company will validate a second CMO with the product’s NDA or as soon after NDA approval as possible, even if the volume is split as much as 80/20 between it and the primary supplier. Beyond the backup potential, secondary suppliers also make commercial sense, says James. “What happens if the product takes off and your sales are three times what you were expecting in projected volume?”

Backups for the CMOs themselves may prove still more important, he observes. In an example from his pharma outsourcing days, he describes how his company lost three big CMOs for a key product when the raw-materials supplier they all shared suddenly went out of business. “At least dig into their supply and understand your hidden risk.”

your CMO may still get into regulatory trouble, starting with a surge in 483s and ending in the worst case with a production shutdown. What then? Most would agree with James’s advice, at least in theory: “The most important thing to do when your CMO gets a list of 483s is to take it seriously and deal with it,” he says. “The CMO will have to develop and implement a corrective action plan. That plan should be laid in conjunction with the affected sponsor(s) and their manufacturing consultants or auditors. Most of the problems can be easily corrected — not to say cheaply. But the main thing is to head it off before you get a warning letter.”

Remediation projects usually involve preapproval inspection (PAI) audits of the production facilities, which are usually even tougher than FDA inspections, according to James. “Sponsors unfortunately want to see the bright side and will sometimes miss details, and unless the company is a giant pharma, it probably doesn’t do a lot of audits. It is not uncommon for a biotech/ mid-size company to send in one or two people for one to two days, and you can’t really catch everything in that short period.”

A set of basic steps to follow in most 483 and warning-letter events appears in the sidebar, “Your To-Do List.” The steps follow from the experience of James and others, including Janssen, all of whom faced serious consequences with CMO-related problems. Two other sidebars, “The Trouble With Doxil” and “Does The CMO Apple Fall Far From The Branded- Parent Tree?,” draw specific lessons from how those companies and their suppliers dealt with the crises.

James summarizes the options you must consider: “If it does come to the point where either your supplier is exiting or if you decide to leave them, that’s when it gets expensive and that’s why you see a company sticking with a supplier longer than it should have, perhaps, in retrospect. If you’re lucky enough to have a secondary supplier, hopefully you can move on with it quickly. But if not, you have to weigh the cost and delay of switching to another one versus the prospect of waiting for your current supplier to fix the problems. Even if you move to a backup supplier, you need to bring in another backup supplier to back them up, as well as a backup for any suppliers of raw materials and so on needed for production.”

Still, says James, prevention always costs less than a cure — and for the pharma company, prevention of CMO regulatory problems begins at the top. CEOs too often delegate quality management to the Quality group and never get involved in CMO issues — thus setting themselves up for nasty surprises. But top-management involvement is essential to support budgeting for adequate auditing and monitoring beyond the narrower scope of QA teams. Message for the CEOs: If you don’t understand why you should spend money on prevention, you need to learn about the risks of being unprepared.

Your To-Do List

The following is a checklist of the basic steps you — your company and management — should take when a CMO you depend on receives an FDA Form 483 or warning letter.

FORM 483s

  1. Make sure you are fully informed and involved in coordinating with your CMO in the response to any 483. For fixing major problems, draw up an action plan together.
  2. If the FDA inspector notes only a few minor errors, the CMO may fix them immediately and report the changes, but should still inform you.
  3. If the errors are more serious or numerous for immediate repair, the 483 recipient should respond with a letter to the FDA outlining the action plan for fixing them.
  4. If you don’t already have a backup supplier, move quickly to obtain one; you may have some lead time should more serious problems develop.
  5. If lacking, set up ongoing communications between your company and the CMO team responsible for your product, involving frequent assessment meetings and daily postings on a secure Web-based system such as SharePoint.
  6. Trust but verify. Invest in independent auditing of CMO facilities to ensure production quality and compliance.



  1. Realize that warning letters arrive only when 483s are ignored — or when they fail to identify deeper problems. If you haven’t read the signs already, get with your CMO and go into full alert.
  2. As with 483s, coordinate with the CMO to develop an action plan.
  3. Request another FDA inspection after the problems are fixed.
  4. If the CMO cannot afford or is unwilling to fix the problems, weigh the cost of underwriting the repairs versus potential lost sales or the costs of obtaining additional supply.
  5. If you already have a second supplier, prepare to shift as much production as needed and as possible to it.
  6. Prepare communications and, if necessary because of supply shutdown, a rationing program for affected patients and others such as physicians and payers.


You, the sponsor, must put a high priority on manufacturing quality and be involved with your CMO’s efforts to maintain and improve it!

The Trouble With Doxil
(Originally published in “Unity In More Than Name” (Janssen Biotech), Life Science Leader, March 2012.)

One of Janssen Biotech’s key oncology products is Doxil (doxorubicin HCl liposome injection), which made headlines in 2011 when Boehringer Ingelheim’s (BI) Ben Venue Laboratories (BVL) unit, the contract manufacturer (CMO) with sole responsibility for making the product, suddenly announced it could no longer do so. President Rob Bazemore speaks about his company’s response to the crisis, its support for affected patients, and the lessons learned:

BAZEMORE: Like most companies, we will always rely on strategic partnerships with CMOs, because some of these products that we make are extremely complex, difficult products to make. For ten years now, we’ve had the partnership with BVL without a single issue of quality or missing shipments or any other problem. Here are some lessons I have learned about what to do when a crisis occurs:

  • Communicate quickly and frequently with the FDA, physicians, and patients to make sure they understand the issue and its potential impact. Seek out the FDA to help you create solutions. Provide whatever resources you can, even if it means sending your own company people to the contract manufacturer to help resolve the issue as quickly as possible.
  • Probably the most important lesson is to be ready to do some extraordinary things, as we’ve done with Doxil. We put together a program that helped us to quickly identify patients who were on the drug and who should be prioritized for receiving the drug when we had it. It prevented product hoarding and price gouging. If we had just put the available drug in the market on a monthly basis, there was no certainty that the patients who got the drug one month would be the same patients who got the drug the next month.

To this day, although we could have done some things better, our response has stood the test of time, and I believe it will be a best practice example of how to handle situations like this when you can’t completely supply the market with drug.

Does The CMO Apple Fall Far From The Branded-Parent Tree?
By Rob Wright

What do you do when you see the list of 483s from the FDA and the branded parent of your CMO partner is on the list? Expertise and best practices can pass from parent to child as can faults and weaknesses. It’s like the old adage, the apple does not fall far from the tree. But does it apply when working with a CMO division of a branded parent company? The answer is a resounding maybe.

Many household names in the pharmaceutical industry have CMO divisions: Pfizer, Baxter, GSK, Boehringer Ingelheim, Hospira, Abbott, and others. According to industry consultancy PharmSource, there are approximately 70 excess-capacity CMOs in the fill-finish category alone. As outsourcing of pharmaceutical and biopharma manufacturing is on the rise, it may become quite common for your CMO’s parent to get bad news from the FDA. The big question is, “How does that impact your project?” For example, in 2010, Hospira (NYSE: HSP), a $4.1 billion dollar company known for manufacturing injectable drugs and infusion technologies, received a warning letter from the FDA in connection with an inspection of the company’s pharmaceutical manufacturing facilities located in Clayton and Rocky Mount, NC. Follow-up inspections by the FDA in 2011 resulted in the Rocky Mount facility receiving additional 483 observations. While 483s are quite common, they all demand a high level of attention from the industry.

Being a Fortune 1000 company, Hospira, as of December 31, 2011, operates 12 manufacturing facilities around the globe, and offers a variety of products and services. In addition to manufacturing approximately 200 generic injectable drugs, IV sets, and infusion pumps, Hospira offers contract manufacturing services through its subsidiary, One2One, which provides formulation development, filling, and finishing of injectable drugs. If you are a pharmaceutical or biotech company who secured Hospira’s One2One as your CMO, seeing news about Hospira receiving 483s and launching product recalls may tempt you to shop for a different CMO or pull out all together. Doing so, without due diligence, could be a costly mistake.

According to its website, One2One works with several manufacturing facilities, such as McPherson, KS, or Liscate, Italy, which, according to FDA data, were not under warning letters during this time period. Given Hospira’s size, you might imagine the company has excess manufacturing capacity at those plants and that One2One probably utilizes some of this excess capacity. You would be correct. This still does not mean that your product is not at risk. Trust, but verify.

Companies which have experienced similar scenarios advise the following. First, be sure to differentiate between parent company problems, in this case Hospira, and your own CMO’s performance (e.g. One2One). Second, communicate openly and honestly your concerns with your CMO partner. If you vetted your CMO properly during the process of creating a quality agreement, there should be a level of trust between established organizations. Now, verify. Conduct your own quality and risk assessments based on factual performance. Conduct inspections at relevant plants/lines to ensure your CMO is in compliance.

Finally, thoroughly consider vendor-switching costs, such as knowledge and tech transfer, lost productivity, and contract termination fees. Deloitte conducted a 2012 global outsourcing and insourcing survey covering all industry sectors. The single biggest factor in the decision to terminate a contract was perceived overall quality of service. Major business disruptions were reported by 5% of respondents, while 59% reported minor business disruptions. More than half of the respondents (54%) reported transitioning vendors to last between 90 to 180 days. Consider all of these factors, and do not base your decision on emotion. Trust, but verify.