Outsourcing: Look at the Long Term Risks vs. Benefits

June 19, 2008
The Heparin case provides an excellent opportunity to use risk analysis, as defined in ICH Q9,to look at the costs of outsourcing manufacturing to China.

There have been a number of recent, tragic episodes related to products that have been imported from countries noted for outsourcing. The major reason for outsourcing is financial.

There is extreme pressure on pharmaceutical manufacturers to lower costs or, at least, slow the increases of retail prices. The quickest way to slow cost increases is to perform a number of manufacturing functions in countries where overhead is lower. The major cost in any project is labor. In order to have an extremely low labor expense, one must work with a developing country, such as China.

The environment in China and other developing nations is changing rapidly, but overall is still one characterized by less education, less sanitary conditions, and lack of experience with the working conditions that have become the norm in the U.S. and Europe. Similar conditions prevailed in the U.S. and Europe in the late nineteenth and early twentieth centuries. They predated labor unions, the five-day work week, safety issues (OSHA ), decent wages, health benefits, job training, overtime pay, vacations and the like.

Like the conditions of the workers who made them, the products were not always safe. Science had not advanced, nor was there legal pressure to perform product safety (of efficacy) testing. U.S. and European candy manufacturers, for instance, commonly used metal salts to impart colors to candy for children. It was only the use of ethylene glycol as a medium for a sulfa drug, which caused many deaths, that drove Congress to act.

Since there was no precedent defining “goodness of product,” the first Pure Food and Drug Act of 1906 (the Wiley Act) was enacted [2] to address product safety: “That it shall be unlawful for any article of food or drug which is adulterated or misbranded, within the meaning of this Act; and any person who shall violate any of the provisions of this section shall be guilty of a misdemeanor, and for each offense shall, upon conviction thereof, be fined not to exceed five hundred dollars or shall be sentenced to one year’s imprisonment, or both such fine and imprisonment, in the discretion of the court, and for each subsequent offense and conviction thereof shall be fined not less than one thousand dollars or sentenced to one year’s imprisonment, or both such fine and imprisonment, in the discretion of the court.”

“In case of drugs: First. If, when a drug is sold under or by a name recognized in the United States Pharmacopoeia or National Formulary, it differs from the standard of strength, quality, or purity, as determined by the test laid down in the USP or National Formulary official at the time of investigation: Provided, That no drug defined in the USP or National Formulary shall be deemed to be adulterated under this provision if the standard of strength, quality, or purity be plainly stated upon the bottle, box, or other container thereof although the standard may differ from that determined by the test laid down in the USP or National Formulary. Second. If its strength or purity falls below the professed standard or quality under which it is sold.

The Drug Efficacy Study Implementation (DESI ) was a program begun by the Food and Drug Administration (FDA) in the 1960s after the requirement that all drugs be efficacious as well as safe.

The DESI program was intended to classify all pre-1962 drugs that were already on the market as either effective, ineffective, or needing further study. The DESI program was a consequence of the Kefauver- Harris Drug Control Act. The U.S. Kefauver-Harris Amendment or Drug Efficacy Amendment of 1962 was a response to the Thalidomide tragedy As far as safety of products, U.S. and European manufacturers The Heparin case provides an excellent opportunity to use risk analysis, as defined in ICH Q9,to look at the costs of outsourcing manufacturing to C hina.learned slowly and needed legislative prodding to reform.

It was only a few years ago that FD&C Red #2 was banned, followed quickly by a number of commonly used chemical colorants. Chloroform was used as a solvent and sweetener in pediatric cough medicines and children’s fluoroscopes were common in shoe stores to allow children’s shoes to be fitted “properly.” [3] Matters were even more complicated with toxic chemicals and (now) controlled substances.

Calomel, a mercury salt, was dispensed for headaches through the 1950s and Paregoric, an opium-based drug, was sold for the use on children’s gums during teething. Clearly, the country’s safety record didn’t become perfect with the passage of a bill in 1906! The Delaney Amendment was a provision in the later US Food, Drug, and Cosmetic Act (1958) [4]. It stated that “no food additive shall be deemed safe after it is found to induce cancer when ingested by human beings or animals, at any dose level. Such an additive therefore must not be used.” It seemed that every week a number of “generally regarded as safe” or GRAS substances were found via methods such as the Ames test [5-8] to be carcinogenic or mutagenic. The “novelty” wore off once the industry made such testing routine and fewer and fewer substances were allowed to be made for consumption.

Later, the “any level” part was moderated. If it were determined that the level was much lower than “trigger” levels and exposure material was for limited duration (not chronic dosing), exceptions, on a risk/ value basis, were made. Progress was slow, but continuous, from 1906 to today. Drug manufacturers no longer simply accept active pharmaceutical ingredients (API) or excipients without testing or, after vendor validation, a certificate of analysis. However, there is a loophole in this approach that a (dishonest) person could drive a truck through: most of the tests assume honesty. In addition, a large number of USP, ASTM, EP, BP and other compendial tests are inferential. For example, consider lactose.

USP has a series of wet tests: e.g., when boiled with copper oxide, lactose forms a red solution, showing that it is a reducing sugar. In addition to an infrared spectrum (which resembles almost any sugar), there are optical rotatory tests, loss on drying, heavy metals,. The sum total of these should add up to chemically safe lactose. In the case of a drug substance such as heparin, many tests are performance based. This is fine as long as the supplier is honest and following cGMP (current Good Manufacturing Practices). Since the industry in Europe and North America has progressed so far, we overlook or forget that the developing world has not made similar progress.

In light of the mistakes and abuses that caused the 1906 Act to be made law it is not surprising that a country, such as China, struggling to enter the 21st century is having “growing pains. It is trying to accomplish in 20 years what we (barely) managed in 125. As has been seen with heparin, safeguards only work when all parties are playing on a level field. For example, when a drug company outsources from its plant in New York to a supplier in Alabama, there is seldom a problem. The state governments of both states are beholden to FDA and Federal and state laws.

As a consequence, in lieu of actual vendor validation, a company may choose to perform some USP tests on incoming materials as a quick confirmation of ID. However, many compendial tests date back many decades and were intended to 1) assure the neighborhood druggist that he did, indeed, purchase aspirin and 2) it is of the correct potency. These older tests were not designed to test for counterfeits, or simple adulteration. It might be argued that making manufacturing processes more efficient would be a better plan than exporting current inefficient processes around the world. Will having inexperienced labor work with older methodology make the products better as well as less expensive?

Will sending proprietary methods to outsourcing companies in countries known for counterfeiting lead to more counterfeits that look like actual products? Please write in with your opinion.


ICH Harmonised Tripartite Guideline, “QUALITY RISK MANAGEMENT Q9”, Current Step 4 version , dated 9 November 2005 Pure Food and Drug Act of 1906, United States Statutes at Large (59th Cong., Sess. I, Chap. 3915, p. 768-772)

Buster Brown shoes, Elizabeth, N.J, c. 1955; author’s personal experience

US Food, Drug, and Cosmetic Act, 1958

Ames, Bruce N., Gurney, E.G., et al (“Carcinogens as Frameshift Mutagens: Metabolites and Derivatives of 2-acetylaminofluorene and other Aromatic Amine Carcinogens”. PNAS 69: 3128-2132, 1973.

Ames, Bruce N., Lee, et al, “An Improved Bacterial Test System for the Detection and Classification of Mutagens and Carcinogens”. PNAS 70: 782-6, 1973.

McCann, J., Spingarn, N. et al “Detection of Carcinogens as Mutagens: Bacterial Tester Strains with R Factor Plasmids”. PNAS 72: 979-83, 1975.

Ames, Bruce N., Durston, W.E., et al, “Carcinogens are Mutagens: A Simple Test System Combining Liver Homogenates for Activation and Bacteria for Detection”. PNAS 70: 2281-5, 1975.

About the Author

Emil W. | Emil W. Ciurczak