Guest Column | August 7, 2019

Does A Phase 1 Virtual Biopharma Company Need A cGMP Quality System?

By Pamela Smith and Diane McGuire


Virtual pharmaceutical/biotech companies — those who outsource 100 percent of their manufacturing and testing activities — often receive conflicting advice regarding the need to establish an internal cGMP quality system. Either they’re told “you need an extensive set of cGMP standard operating procedures (SOPs)” or “you don’t need any cGMP SOPs at all.” As a result, we often run into situations at either end of the spectrum, such as a Phase 1 virtual manufacturers with dozens of cGMP SOPs, or a Phase 3 virtual manufacturer with no quality unit whatsoever!

Which advice is correct? We have searched far and wide for articles addressing this question but largely come up empty handed, so we decided to synthesize information from applicable laws, regulations, and guidance into a series of articles designed to help virtual manufacturers understand their quality assurance responsibilities. This first article in the series is written for virtual pharmas/biotechs manufacturing and executing Phase 1 clinical trials in the U.S.

Terminology And Concepts

In this article, we will use the term “sponsor” synonymously with “virtual manufacturer” and “Investigational New Drug (IND) holder.” Following are explanations of other important terms and concepts that we will build upon in the article:

  • GMP controls and source data: By definition, if a sponsor outsources manufacturing and testing of a drug product, they are outsourcing the controls for most cGMP operations and the resulting source cGMP records. The sponsor has a limited ability to direct or affect the execution of activities subject to cGMP (other than contract terms and going elsewhere for services). The sponsor’s fundamental cGMP risk in the outsourcing model is ensuring the contract manufacturing facility has the appropriate controls to ensure compliance to cGMP. 
  • Statutory cGMP: Statutory cGMP is made up of laws passed by Congress, primarily provided in the Food Drug And Cosmetic Act.1 Phase 1 drug products and active pharmaceutical ingredients (APIs) are subject to statutory cGMPs (as is all clinical phase and commercial manufacturing).
  • Regulatory cGMP: Per the above statutes, FDA was tasked with creating the regulatory cGMP’s, codified in Title 21 of the Code of Federal Register (CFR) Parts 210 and 211.2 Phase 1 manufacturing and testing is exempt from compliance with regulatory cGMP but not statutory cGMP. Additional cGMP regulations exist for human cells, tissues, and cellular and tissue-based products and biologics; however, this article is scoped to focus on “general” GMPs. Note that 21 CFR 210/211 is scoped to drug product not API.
  • Phase 1 cGMP: In lieu of [Part 210/211] regulations, FDA’s July 2008 Phase 1 guidance3 presents FDA’s thinking on how to comply with the statutory cGMP law. A Phase 1 cGMP quality system ensures compliance to the statutory cGMPs. It is implicitly defined, per the Phase 1 guidance, as Adherence to CGMP during manufacture of Phase 1 investigational drugs occurs mostly through: (1)Well-defined, written procedures; (2)Adequately controlled equipment and manufacturing environment; and (3) Accurately and consistently recorded data from manufacturing (including testing)…{or acceptable alternatives.}

Statutory/Regulatory Considerations

Tables 1 and 2 present Phase 1-relevant excerpts and associated discussion of general statutes and regulations/guidance. Additional regulations/statutes may apply, depending on drug characteristics (e.g., controlled drug substance, biologics, child resistances, etc.), but are beyond the scope of this article.

Table 1: U.S. Statutes (Laws) Applicable to Phase 1 Sponsors

Statute (Law)

Discussion for Phase 1 Sponsor

21 U.S. Code §355 New Drugs 4

No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application filed…

(1) The Secretary shall promulgate regulations for exempting from the operation of the foregoing subsections of this section drugs intended solely for investigational … [Sponsor’s IND] contain[s] such information about the drug … including… (B) adequate information on the chemistry and manufacturing of the drug, controls available for the drug

The sponsor is the legal entity that holds the marketing application exemption (IND) to allow a drug to enter into interstate commerce.

The sponsor must ensure the IND has adequate chemistry, manufacturing, and controls (CMC) information to ensure the safety of the drug.

21 U.S. Code §331 Prohibited acts 5

The following acts and the causing thereof are prohibited:

(a) The introduction or delivery for introduction into interstate commerce of any food, drug, device, tobacco product, or cosmetic that is adulterated or misbranded.


The sponsor, as the entity that introduces the drug into interstate commerce, is prohibited from introducing adulterated drug.

21 U.S.C. 351 Adulterated Drugs… 6

[(a)(2)(B]) A drug…shall be deemed to be adulterated…if it is a drug and the methods used in, or the facilities or controls used for, its manufacture, processing, packing, or holding do not conform to or are not operated or administered in conformity with current good manufacturing to assure that such drug meets the requirements of this chapter as to safety and has the identity and strength, and meets the quality and purity characteristics, which it purports or is represented to possess…

…For purposes of paragraph (a)(2)(B), the term ‘current good manufacturing practice’ includes the implementation of oversight and controls over the manufacture of drugs to ensure quality, including managing the risk of and establishing the safety of raw materials, materials used in the manufacturing of drugs, and finished drug products.


The manufacture of Phase 1 drugs must occur under statutory cGMPs.

Each lot used in the clinic must be concordant with the registration, including the safety information generated on that drug.



The sponsor must have controls and oversight in place for the manufacture of drugs and to ensure the safety of raw materials throughout the supply chain.



Table 2: Regulations and Guidance Applicable To Phase 1 Sponsors


Discussion for Phase 1 Sponsor

21 CFR Part 200.10 Contract facilities (including consulting laboratories) utilized as extramural facilities by pharmaceutical manufacturers 7

…(b) The Food and Drug Administration is aware that many manufacturers of pharmaceutical products utilize extramural independent contract facilities, such as testing laboratories, contract packers or labelers, and custom grinders, and regards extramural facilities as an extension of the manufacturer's own facility.

The FDA considers the sponsor to be the manufacturer, and the contract facilities are an “extension” of that manufacturer.

21 CFR Part 210.2 8

…(b) If a person engages in only some operations subject to the regulations… and not in others, that person need only comply with those regulations applicable to the operations in which he or she is engaged.


(c) An investigational drug for use in a Phase 1 study, as described in 312.21(a) of this chapter, is subject to the statutory requirements set forth in 21 U.S.C. 351(a)(2)(B). The production of such drug is exempt from compliance with the regulations in part 211 of this chapter…


The sponsor needs to comply with cGMPs applicable to their activities (but does not need to comply with regulations they do not perform).


Phase 1 investigational drugs are exempt from complying with 21 CFR part 211.

21 CFR Part 312 Investigational New Drug Application 9
“Sponsors are responsible for … maintaining an effective IND with respect to the investigations, … in each phase of the investigation sufficient information is required to be submitted to assure the proper identification, quality, purity, and strength of the investigational drug…

Examples of information requiring an [IND] information amendment include: (1) New toxicology, chemistry, or other technical information…”

The sponsor is responsible for ensuring CMC changes are within the scope of the IND or the IND is amended.

Guidance for Industry CGMP for Phase 1 Investigational Drugs, July 2008 3

“Manufacturers of APIs should implement CGMP appropriate to the stage of clinical development and consider the recommendations described in this guidance for the manufacture of APIs used in Phase 1 investigational drugs.”

The sponsor needs to ensure that the FDA’s expectation of Phase 1-appropriate cGMPs (as embodied in this guidance) are in place.

While the focus of the Phase 1 guidance and CFR 210/211 is specific to drug product, the sponsor should consider the guidance to assess phase-appropriate quality in API manufacturing.

Federal Register Vol. 73, No. 136 Tuesday, July 15, 2008 (Preamble to Ph1 Exemption) Comments 17 and 13 10

“CGMP consists of steps that a manufacturer takes to ensure the safety and quality of the investigational drug. This information is submitted to FDA in the IND. Through FDA’s IND authority, FDA has the ability to take appropriate actions to address manufacturing issues if there is a safety risk to subjects…”


“Therefore, a financially strapped company may choose to use a less expensive approach other than the one recommended in a guidance, but the alternative approach must comply with the relevant statutes and regulations in assuring patient safety, and the company would be prudent to consult FDA before using the alternative approach.”

The Phase 1 guidance lays out the FDA’s thoughts on how Phase 1 cGMP should be implemented and emphasizes the impact of cGMPs on safety — by definition the purpose of Phase 1 trials. The FDA uses the IND content as the primary tool to ensure that a drug is compliant to the statutory requirements. The FDA decides to allow trials to proceed, places trials on clinical hold, or terminates trials if the IND’s CMC information points to a potential safety issue.


Alternative approaches other than those in the Phase 1 guidance should be carefully considered and vetted with the FDA.

Federal Register Vol. 73, No. 136 Tuesday, July 15, 2008 (Preamble to Ph1 Exemption) Comment 24 10

“…release of material by an untrained person violates United States CGMP…[the Ph1 Guidance] indicates that, under very limited circumstances and where justified, only a person trained in CGMP and quality control functions should be given the dual responsibility of manufacture and release.”

Because the sponsor releases/introduces the drug into interstate commerce (the final GMP release affirming quality), release by the sponsor must be completed by a person trained in cGMP and quality control (whether or not that person has a quality title).


Takeaways From The Laws/Regulations/Guidance

The Phase 1 sponsor, along with others in the supply chain, are required to ensure activities governed by statutory cGMP requirements are in compliance. However, the sponsor’s role in GMP operations is primarily an oversight function. The following activities, described in either the Phase 1 guidance or the statutory cGMPs, are generally completed by the sponsor due to technical difficulties or significant risk in outsourcing to a contract manufacturer/test laboratory:

  • Qualification of API or non-standard excipients
  • Cradle-to-grave traceability of materials used in the process, tracking of information and, a process to support an investigation or stock withdrawal (recall)
  • Coordination of linked activities — an example would be an investigation into whether a contract laboratory’s assay failure is the result of a manufacturing site issue
  • Situations where the sponsor is maintaining or at least initiating a required/source cGMP record — examples would include drug product quality complaint processing and transportation between contract sites
  • Analyses of stability data to support shelf life determination and shipping/storage specifications
  • Analyses to ensure that a specific lot is concordant with the registration and manufacturing/testing changes, deviations, irregularities are documented and do not invalidate prior, reported safety/toxicology results

There is no U.S. law, regulation, or guidance that requires a Phase 1 sponsor or even a Phase 1 manufacturer to have written procedures (and thus a “written” quality system), if they have “alternatives” to ensure compliance with any cGMP activities they perform. (We are unaware of any viable “alternatives” to documented procedures but would welcome reader feedback if they have any ideas.)

The Phase 1 guidance is over a decade old. Recent guidance and regulatory focus cover a variety of topics including practices dealing with data integrity, risk management, quality agreements, etc. One guidance that seems particularly relevant is the 2016 Guidance on Quality Agreements.11 This has a specific caveat that the guidance is recommended but not required for investigational products. That said, we strongly recommend Phase 1 sponsors have quality agreements in place with their contract manufacturer.

The Dangers Of Noncompliance

What risk does a sponsor assume if it does not ensure that a documented quality system of procedures (or alternatives) is in place for the sponsor-assigned cGMP activities? Essentially, this question is asking, “what are the consequences of not following the law?” Not to be flippant, but if the sponsor is lucky, the IND is accepted, the trial goes well, and there are no consequences. However, if the sponsor is not so lucky, the consequences can be severe:

  • If the absence of written procedures (or alternatives) are detectable in the IND, the trial could be placed on a clinical hold, delaying/suspending the trial.
  • The clinical trial could fail to meet endpoints due to indeterminable manufacturing issues from cGMPs not being followed.
  • If the material was manufactured in a compromised manner and there are unexpected serious adverse events, the absence of written procedures (or alternatives) might be a discussion topic in potential civil liability cases.

Determining The Appropriate Amount Of Written Quality Procedures

At a minimum, how many cGMP procedures should a Phase 1 sponsor have? The FDA’s suggested controls for Phase 1 are intended to be flexible based on risk. There is no easy, cookbook answer, and specific procedures are not listed because they can take many forms. However:

  • It is difficult to imagine a scenario where a sponsor would not need a written procedure that describes how the sponsor assesses contractor and supply chain cGMP compliance risk (i.e., vendor qualification).
  • Some set of written procedures would help ensure that each lot released for clinical use has been appropriately evaluated.
  • A set of written procedures for any non-outsourced cGMP activities would be required (see above list).

On the other hand, a Sponsor can have too much of a good thing. The following general principles apply and are not specific to Phase 1:

  • Prevention is preferable to after-the-fact detection of problems. The best place for a procedure that focuses on prevention is in physical/temporal proximity to where the risk would be realized, in most cases the manufacturing site. Unless the risk can only be mitigated through a sponsor procedure, cGMP procedures should be implemented at the contractor sites.
  • The cost of implementing controls is always loss of agility: the more controls, the less agility. Sometimes lost agility is valuable (manufacturing instructions), but in other cases controls add constraints without reducing risk — and divert resources from other critical activities. With each proposed written procedure, the sponsor should understand the risk reduction that will be achieved and balance that against agility lost.


Although the sponsor’s primary cGMP responsibility is oversight (ensure that the drug product is manufactured in compliance with the law [statutory cGMPs]), there is a set of legally required cGMP activities that are difficult to outsource and may be performed by the sponsor. Written procedures that describe the controls facilitate the consistent performance of those activities.

Going back to one of the two situations we described in the opening paragraph, 30 cGMP SOPs are likely overkill for compliance with legal requirements for Phase 1 manufacturing. In our next article, we will tackle the scenario of a Phase 3 virtual manufacturer with no quality unit or cGMP SOPs.

The authors would like to thank Max McGuire for reviewing this article and providing insightful comments and helpful suggestions.


  1. Federal Food, Drug, and Cosmetic Act, 21 U.S. Code Chapter 9
  2. Current Good Manufacturing Practice in Manufacturing Processing, Packing, or Holding of Drugs, CFR Part 210 and Current Good Manufacturing Practice for Finished Pharmaceuticals, 21 CFR Part 211
  3. Guidance for Industry CGMP for Phase 1 Investigational Drugs, (July 2008)
  4. New Drugs, 21 U.S. Code §355 (2010)
  5. Prohibited acts, 21 U.S. Code §331 (2011)
  6. Adulterated drugs and devices, 21 U.S. Code §351 (1998)
  7. Contract facilities (including consulting laboratories) utilized as extramural facilities by pharmaceutical manufacturers), 21 CFR Part §200.10
  8. Applicability of current good manufacturing practice regulations, 21 CFR §210.2 (April 1, 2018)
  9. Investigational New Drug Application, 21 CFR §312 (April 1, 2018)
  10. Current Good Manufacturing Practice and Investigational New Drugs Intended for Use in Clinical Trials. Federal Register Volume 73, Issue 136, 40454-40463,, (July 15, 2008)
  11. Contract Manufacturing Arrangements for Drugs: Quality Agreements Guidance for Industry,, (November 2016)

About The Authors:

Pamela Smith is a chemical engineer/computer scientist with more than 30 years of experience in information technology in regulated industries and government agencies. She provides consulting services to life science organizations by leveraging transformational information systems technology to improve GxP processes. From 1996 to 2011, Smith was a principal at Johns Hopkins University Applied Physics Laboratory, where she oversaw 200 staff members in diverse projects. For the last eight years, she has been supporting life science companies in quality assurance, knowledge management, systems validation, and process development through her consultancy, PharmIntellect Consulting Inc. She can be reached at

Diane McGuire is a pharmaceutical product manufacturing and quality management expert. She advises clients on technical issues related to drug manufacturing and quality control, and on strategies for achieving regulatory approval and maintaining compliance with manufacturing requirements. Previously, she was VP of technical operations and quality at Oscient Pharmaceuticals, where she worked from 2002 to 2010. Prior to Oscient, McGuire held various management-level positions at Alkermes and Eli Lilly, including plant manager, manager of operations strategy, and outsourcing and supply chain head. She has developed both small and large molecules in fill/finish and API production. She can be reached at