How Relevant are 483s in Terms of Compliance Perception?

Chemical Information Services, November 2012

In terms of differentiating from competitors through marketing, CROs and CMOs serving pharmaceutical and biopharmaceutical outsourcing markets need to recognize that data shows there’s a fundamental difference between black and white regulatory compliance and the regulatory perceptions that might influence outsourcing decisions.

In the heavily regulated pharmaceutical and biopharmaceutical development industry, compliance is part of the fabric of outsourcing relationships. Some contract companies consider compliance as such a purely fundamental component of a dependable service offering that they don’t overplay it, as they regard it as assumed unless the record indicates otherwise. Other companies see it as one of the few factors where differentiating competitive advantage can be claimed.

Nice Insight data from three quarterly industry surveys, which canvas pharma and biotech executives in outsourcing-facing roles, adds some weight to the former view as in two of the three polls it places regulatory compliance fifth out of the six top outsourcing decision-making drivers. It consistently ranks below quality and reliability as the leaders among these drivers.

What Is the Issue Referred to as a 483?

The US FDA (Food and Drug Administration) is authorized to inspect any facility manufacturing a pharmaceutical or biopharmaceutical drug or any component thereof under the Federal Food, Drug and Cosmetic Act. The Agency has jurisdiction only in the United States, but foreign inspections occur as the supply chain for pharmaceuticals extends far beyond the boundaries of the US and it has the authority to restrict importation. So while there’s no legal authority for foreign inspections, they are common practice.

Following inspection, if concerns arose during the audit, the FDA field representative issues “Form FDA 483” (Notice of Inspectional Observations) to the facility. This is used to document and communicate concerns discovered during the meticulous inspection – potentially listing deviations from Good Manufacturing Practices. The contents of the 483 comprise inspectional observations but do not represent a final Agency determination regarding compliance. The FDA encourages resolution of issues through informal mechanisms prior to the issuance of a 483. After issuance, the manufacturer can use a formal two-tiered dispute resolution process.

The company operating a facility that receives a 483 should respond to the FDA addressing each item within 15 working days. They must acknowledge their responsibility and either provide a timeline for correction or request further clarification of what the FDA requires. A response is not compulsory but a good response can help the company avoid receiving a warning letter, or stronger sanctions including withholding of product approval or even a plant shutdown. Experts consider that this response should be comprehensive, well reasoned and thoroughly documented – addressing every observation – and should absolutely be timely within the 15-day window.

So the original intent of the 483 prevails in it being a conduit for prompt notification of problems, presenting the facility in question with an opportunity for quick correction and improvement. However, typical industry reactions to the issuance of a 483 usually border on paranoia — with the concern that it is likened to a kiss of death for any recipient. This can manifest as fear of capitulation within the company and opportunistic anticipation among competitors, like sharks circling at the sensing of blood.

The reality is that like any problem, if managed and addressed in the right way, it can result in little or no long-term damage or impact for the company. Issuance of a 483 could be regarded in some way as a potential barometer of regulatory performance but a company may resolve the concerns quickly and professionally with no tangible impacts or dangers. Despite prevailing paranoia that a 483 will harm regulatory perception long-term, Nice Insight industry data in fact suggests this is not the case.

In the heavily regulated pharmaceutical and biopharmaceutical development industry, compliance is part of the fabric of outsourcing relationships.

The data is gathered from over 2,600 responses from outsourcing-facing pharma and biotech executives via a quarterly survey. And it shows that there are companies that have been issued 483s who maintain very high customer perception scores. Patheon is a good example  having been issued a 483 in 2005 for a facility in Puerto Rico it had acquired only the year before, which was producing antibiotic powder under a contract for Abbott Laboratories. The problems were said to pre-date Patheon’s acquisition and this is inevitably quite likely the case – and no doubt in instances for other companies with the carousel of divesting and acquisitions in pharmaceutical manufacturing.

However, Patheon moved quickly to address the FDA’s observations, and resumed production at the facility after a voluntary suspension once qualification of new equipment and validation of processes was established in accordance with a plan developed in response to the FDA. Communications with the FDA regarding preparation for re-inspection and also management of the inevitable unwelcome publicity surrounding the situation were forthright and clear.

Patheon announced concern in 2005 that earnings may be negatively impacted but in fact this didn’t prove to be the case when fourth quarter figures were published. More importantly, when we look at Patheon’s customer perception score in the Q2 2011 Nice Insight survey data, it is among the strongest of the 400 companies covered at 75. This is not a big surprise for one of the leading CMOs in terms of revenue. And if you focus the customer perception purely on regulatory compliance, their score remains high at 74.

As a result of the industry-wide traits regarding the subject of regulatory compliance, many CROs and CMOs use Form FDA 483 – or more specifically the absence of any being issued – as the benchmark when promoting their regulatory compliance record to prospective partners. Yet as we’ve seen, a 483 isn’t necessarily make-or-break in terms of perceptions amongst the key audience.

Not only that, but among the 400 CROs and CMOs featured in the Nice Insight survey, less than 1% registered on the FDA website as having been issued a 483 in the last five years. So in this respect, promoting an absence of 483s in reality simply places a company at parity with an extremely high proportion of competitors that can also state that they’ve had none.

The truth is that there are many elements that make up regulatory perceptions and CROs and CMOs would do well to consider this in differentiating themselves. Pharma companies are often quoted as saying that regulatory performance is more of an expectation rather than a potential differentiator, so it is in fact more part of the due diligence process, which aligns with its lower ranking among decision-making drivers.


With Quality and Reliability ranking higher in importance to outsourcing executives, this is indicative that the pharma and biotech companies are interested in the unique culture that their potential CRO or CMO partner can bring. Having no 483s is fundamentally good but CROs and CMOs would be wise to focus on the relationship building that stems from customer audits.

A 483 can certainly present short-term problems with the reputation of a company and invite opportunity for rivals but if the company is seen to address it in the right way, and the publicity surrounding the situation evolves into a positive story of rectification, the impact can be mitigated. Quelling the immediate concerns of existing partners with projects in place is perhaps the most pressing concern, to prevent the likelihood of them reviewing alternative options. Communications, marketing and relationship management are critical in how companies let adverse news affect them long-term.


Nigel Walker

Mr. Walker is the founder and managing director of That’s Nice LLC, a research-driven marketing agency with 20 years dedicated to life sciences. Nigel harnesses the strategic capabilities of Nice Insight, the research arm of That’s Nice, to help companies communicate science-based visions to grow their businesses. Mr. Walker earned a bachelor’s degree in graphic design with honors from London College.