Mastering the Master Service Agreement (MSA)

Supply Chain Management for Homeopathy, Part 4 of 4

By Tim Clarot, Industry Consultant

The final element of a good supply chain structure is the Master Service Agreement. The MSA is a contract between the responsible parties describing the terms and conditions of the relationship. It is primarily a financial document; however, it should also be structured to include key elements of the supply chain quality systems. The Quality Agreement identified supply chain tasks and assigned responsibilities; the MSA will outline specific expectations and requirements. When the documents are properly harmonized, the work product will provide the groundwork for a partnership that results in few surprises and can effectively respond to unexpected issues.

The MSA is not a repeat of the quality agreement but should support and supplement it with contractual language and specific expectations. Some examples:

  • Inspection and Audit—owner shall have the right, during normal business hours, to inspect the facilities where the products are being manufactured, assembled, packaged, labeled and packed and where materials used to manufacture, assemble, package, label and pack the products are handled or stored, and to observe all processes specific to the product.
  • Quality Control and Assurance—the manufacturer shall perform all sampling and testing of the product as required by the specification. All summaries and test results are available to the owner. The manufacturer will provide a certificate of analysis and CGMP compliance for each lot of product.
  • Warranties and Representations—the CMO warrants that at the time of delivery of the product to the owner, it is free of defects in materials and workmanship and strictly conforms to the product specification.
  • Regulatory Compliance--all equipment and procedures used in CMO’s facility are compliant with all applicable provisions of the Federal Food, Drug and Cosmetic Act and all other applicable state and local regulations.
  • Nonconforming Products—there are two important aspects of this area (1) financial and (2) regulatory. A well-written, specific specification will help to minimize contention over who will bear the cost for out-of-specification (OOS) product. Development of an OOS process that is effective and compliant requires up-front consideration by both CMO and owner. As the owner you will need to consider:
    • Do you want to be notified by the CMO regarding all OOS related to your product?
    • Do you want to be involved with the investigation?
    • Do want to review the investigation only upon its completion?

If the CMO completes a thorough investigation and root cause analysis, any of the above scenarios would be acceptable. The compliance all hinges on the investigation and analysis. A note of caution—it is not acceptable to test an ingredient or product into compliance; this is not about retesting. Without specific evidence that a method was incorrect, further testing should not be done—OOS investigation is not about averages or discounting a result without probable cause.

  • Recall—this is the area of vulnerability for the owner. Regardless of the most favorable financial terms and conditions for the owner, there are aspects of a recall that cannot be remedied by funds. Beyond whatever compensation that might be recovered, the loss of goodwill and brand image are priceless and impossible to recapture in a contract. It will also be difficult to get a CMO to agree to such terms. Therefore, before making the final decision on a CMO the owner must ensure and verify (1) that the CMO is financially sound (2) that the firm has a sound regulatory history and well-established quality systems and (3) that the MSA covers all costs associated with a product recall. Attempt to negotiate “total cost without limitation” language in the MSA but also recognize that there will probably be a significant amount of pushback from the CMO. At that point it comes down to degrees and the risk level you are comfortable in assuming.

In summary, the MSA is a contract between you and a CMO. It should contain all the terms and conditions necessary for a routine business relationship with supplemental quality requirements. It is also critical that it covers the extraordinary events that might occur. To ensure that the document is enforceable and provides for possible contingencies, it should be reviewed by counsel.


Author: Tim Clarot is a consultant for Church & Dwight, where he was formerly Senior Vice President of R&D and Product Quality. With 40 years’ experience working directly with federal, state, and local regulators, Tim specializes in the regulatory framework of food (including dietary supplements), medical devices, and drugs (homeopathic and allopathic), both in the United States and internationally. He has also chaired company-sponsored scientific and medical advisory boards. He has served on AAHP’s Legal and Regulatory Committee since 2015 and on the Board of Directors since 2018. He can be reached at