The decision was made public in a US Food and Drug Administration (FDA) letter last week.
According to the agency the NIH Pharmaceutical Development Section (PDS) in Bethesda, Maryland permanently stopped making trial drugs in May.
The move was prompted by an inspection last year during which the FDA identified several current good manufacturing practice (cGMP) violations, including product contamination, failure to conduct production in defined areas and the lack of an environmental monitoring system.
The NIH - which is a US Government-backed research centre - suspended production at the PDS in June 2015 and hired consultants WorkingBuildings and Clinical IQ to assess operations.
New sterile injectables production unit
In addition to ceasing production at the PDS, the NIH has also decided to set up a new Intravenous Admixture Unit (IVAU) for the manufacture of sterile drugs for trials at the NIH Clinical Center.
The existing IVAU was also visited by the FDA during the inspection in May last year.
According to the agency, its team identified a number of cGMP violations, which included inadequate separation of aseptic areas, failure to clean using sporicidal agents and problems related to staff protective clothing.
In the new letter the FDA acknowledged that standards at the IVAU unit had improved, commending the NIH for new staff training programmes, improved cleaning protocols and facility changes implemented in collaboration with consultants.
Despite the improvements, the agency urged the NIH to move forward with its plan to move to an interim IVAU while work on an entirely new unit is ongoing.
“We encourage you to move into the interim IVAU as quickly as possible. You have indicated that you intend to move into the interim IVAU by October 31, 2016” the FDA said, adding that “if your target date is delayed for any reason, please notify us in writing with an explanation for that delay.”