Pharma Due Diligence Should Emphasize GMPs, Compliance

Dec. 2, 2004
Most pharmaceutical companies today focus on financial due diligence, at the expense of quality and compliance
By Peter Weiland, President, QCT SolutionsAfter almost 30 years in the pharmaceutical industry, I’ve enjoyed watching the evolving dynamics of quality and compliance assessments, particularly where due diligence is concerned. We all know what due diligence is, but let me offer the simple textbook definition: Due diligence is the formalized process of defining a potential business’ suitability.Having a formalized process implies that the acquiring company has done its homework in defining a check list of business necessities. Business balance sheets, assets, buildings and any business related entities should be well scrutinized -- preferably by credible accounting firms.Although financial issues are important, I’ve found that the bean counters tend to dominate most pharma due diligence projects. Financial due diligence analysis can go on for several months, as waves of analysts, marketing and sales personnel, and key financial players spend countless hours behind closed doors. In stark contrast, the so-called GMP assessment due diligence analysis may take only 1-2 days."...quality and assessment
professionals need to take more of
a bean counter approach
to due diligence for compliance."
Today, with the FDA’s Risk Based 21st Century approach, very little guidance has been provided regarding due-diligence risk in pharmaceutical acquisitions. It’s safe to say that many firms do not have particularly well defined and formalized programs for understanding what underlying risks may be present during the due-diligence process. Undoubtedly, the human factor is often overlooked as a key underlying risk.In an era marked by hostile takeovers, innumerable mergers and acquisitions, staffing is a critical issue that doesn’t often receive the attention it deserves -- at least not where compliance is concerned. Staff are carefully considered from a financial standpoint, with buy out packages, benefit consolidation and the like, but no real emphasis appears to be placed on how personnel may contribute to quality problems in the manufacturing and testing issues of drugs.Not all employees are happy with mergers. And as a result, they may take a “get even with management” attitude, take short cuts or simply show that they don’t care. This is especially true for facilities that have changed hands frequently. Although the facts behind the Chiron Fluvirin facility case have not all come to light, one might ask how Chiron dealt with the number of prior turnaround sales for the facilities it bought, and their known GMP deficiencies. One might also ask FDA what its approach was for continued inspection of a facility that had multiple owners, and how it was addressing underlying issues, from a regulatory perspective.Having worked with FDA, I honestly believe the Agency expects any new business owner to assume the compliance responsibilities of the organization it acquires, so any prior GMP deficiencies and underlying factors become part of the purchase package. Perhaps, in the future, the Agency could provide more guidance on risk as it pertains to acquired facilities.Ultimately, though, due diligence is the buyer’s responsibility. I believe that quality and assessment professionals need to take more of a bean counter approach to due diligence for compliance. One cannot simply spend a few days at a facility and expect to draw sound conclusions, especially in cases where GMP deficiencies may have been transferred from owner to owner.There must be a critical review for past GMP violations, CAPA initiatives, personnel interviews. This review may not be an easy task, given human resource and company policies, but it is essential. The review must include direct observation of processes as well as a look at the quality systems that prevail. There is no doubt that multiple changes in management in short periods of time result in vulnerabilities that any acquiring company should be well aware of.For Mr. Weiland’s complete article, including a checklist of pre-inspection tasks, see January’s edition of Pharmaceutical Manufacturing.About the AuthorPeter Weiland is president of QCT Solutions, LLC ( and has more than 29 years of experience providing quality, compliance and training solutions for the pharmaceutical industry. He is a nationally recognized presenter and trainer. He is both CQE and CQA and is an ASQ QMS Lead Assessor. He has an MS in chemistry from Atlanta University.